Shrewd Money Part IV

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Second International Workshop on Intelligent Finance (IWIF-II) 6.- 8. July 2007, Chengdu, China Intelligent Finance Component IV – Financial Strategic Analysis Prof Dr PAN Heping, Director of PRC, IIFP, SIIF & SSFI Prediction Research Center (PRC) University of Electronic Science &Technology of China ( UESTC ) International Institute for Financial Prediction (IIFP), Finance Research Center of China Southwestern University of Finance & Economics (SWUFE) Swingtum Institute of Intelligent Finance (SIIF) Swingtum School of Financial Investment (SSFI) Room 340/306 Yifu Building, Chengdu 610054, China Phone : +8628-83208728, Mobile : 13908085966 Email: panhp@uestc.edu.cn, h.pan@iifp.net URL Chinese : www.swingtum.com.cn URL English : www.swingtum.com

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Second International Workshop on Intelligent Finance (IWIF-II) 6.- 8. July 2007, Chengdu, China Intelligent Finance Component IV – Financial Strategic Analysis 潘和平 (博士、教授、长江学者) 电子科技大学预测� �究中心主任 西南财经大学中国金融� �究中心国际金融预测� �究所所长 形势冲智能金融� �究院院长 & 形势冲金融投资学� �� �长 成都市建设北路二段四号逸夫楼 340/306 电话: 028-83208728, 手机: 13908085966 电子邮件 : panhp@uestc.edu.cn, h.pan@iifp.net 中文网站: www. 形势冲 .com, www.swingtum.com.cn 英文网站: www.swingtum.com

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Contents A Masterpiece of A Strategic Trader Financial Strategic Analysis (FSA) – Why? Destinations and Contents of FSA The Four Levels of Financial Market Analysis The Four Levels of Trader Transformation The Master Trader The Mechanical Trader The Subjective Trader The Intuitive Trader Swingtum Trading Principles (Appendix: Analogies from the Art of War) www.swingtum.com/initiate/IWIF

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1. A Masterpiece by A Strategic Trader - John Templeton Shorting NASDAQ with a trigger – before the end of bolt up period www.swingtum.com/organize/IWIF

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www.swingtum.com/establish/IWIF

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A True Story about John Templeton, told by Mark Tier (2004, 2006) Throughout 1999 until 13 March 2000, website stocks zoomed to irrationally abnormal states. Numerous esteem speculators, understanding these stocks were uncontrollably exaggerated, shorted them as far as possible up. This incorporated some amazing cash chiefs. Having shorted even a bit too soon before the pinnacle could bring about boundless misfortunes. E.g. Julian Robertson in the long run couldn't bear the torment any more and quit in sicken, closing down his reserve totally. (Soros assumed some excruciating misfortune as well). Notwithstanding, John Templeton, at the young age of 87 , made a splendid and colossally beneficial raid once again into the stockmarket. www.swingtum.com/establish/IWIF

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Three months before the NASDAQ topped, he found a "trigger" that permitted him to start a standout amongst the most innovative short offering methodologies ever contrived. The financial speculators and insiders who coasted these web organizations were normally confined from offering their stock until six months or a year after the organization had opened up to the world. Templeton's knowledge was to utilize the end of this bolt up period as his trigger. He deliberately started short positions in 84 diverse website organizations 11 days before the bolt up period for every stock terminated. year and a half later, he'd added $86 million to his riches. www.swingtum.com/organize/IWIF

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During the Internet air pocket and hostile to air pocket Fundamental Investors missed Technical Traders lost But Strategic Speculators profited - Integrate Fundamental, Technical and Strategic Analysis (like John Templeton) www.swingtum.com/establish/IWIF

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2. Monetary Strategic Analysis (FSA) – Why? With a specific end goal to pick up and continue increasing outright positive and nontrivial returns of interest in the worldwide budgetary markets, it is insufficient just to have - hypothetical learning (money related financial aspects), - scientific models (quantitative back), and - observational philosophies (central and specialized examination). We require something all the more, something extremely basic, something which requires attitude, strength, and coordination. There are Limitations of Economic, Fundamental, Technical Analysis: Economic Analysis is for the most part about the macroeconomic variables, yet absence of a thorough photo of the macroeconomic patterns, cycles, capital conveyance and cash streams on the worldwide, national and local levels. Major Analysis is generally about the organization particular money related elements, however absence of a far reaching photo of the organization circumstance in the market, in the divisions, and in its own life cycle, including the circumstance of vital speculators with respect to the next share holders. Specialized Analysis is for the most part about the market costs and volumes, however absence of an extensive photo of the worldwide or far reaching dispersion of key speculators and their goals moderately to alternate financial specialists. www.swingtum.com/establish/IWIF

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3. Destinations and Contents of FSA Global Macro Economical Situation and Intent Analysis Global large scale sparing patterns, cycles, seasonalities, and probabilistic projection of politico-monetary occasions, circumstances and vital purposes of governments, multi-national organizations, and so forth Global Macro Financial Situation and Intent Analysis Global full scale money related market patterns, cycles, seasonalities and probabilistic projection of budgetary occasions, circumstances and key aims of universal venture assets, conceivable or creating money related air pockets and against rises and additionally advertise crashes, and so on. Advertise Specific Situation and Intent Analysis For a particular market of premium, are there market producers? Who are the minority of key speculators? Where are their capital allotments? Where is the market cost in its essential pattern – accummulation, lifting, appropriation or dumping? Where are the optional and minor patterns – bull or bear slanting, or extend exchanging, or breaking out of instability or range? What are the vital financial specialists supposing on, wanting to do, or planning to execute? In what manner will the retail speculators respond to conceivable situations? www.swingtum.com/initiate/IWIF

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4. The Four Levels of Financial Market Analysis Strategic Analysis Size Gap Mind Analysis Psychological Gap Technical Analysis Market Reality Gap Fundamental Analysis (counting Macro-& Micro-financial aspects) www.swingtum.com/organize/IWIF

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Fundamental Analysis (FA) is normally practical approach, which looks most logical, however there is a market hole from essentials to costs where there are all human speculators/brokers deciphering the basics and the costs in to a great degree nonlinear ways. In any case, the main shortcoming of FA is not to figure different brokers as factors, so there is a market reality hole between what ought to be and what is really. Specialized Analysis (TA) fills in this market reality hole by contemplating the market movement and value examples and full scale phenomenological conduct examples of market members. TA is far better than an unadulterated FA as it keeps the merchant concentrated on what the market is doing now in connection to what it has done previously, rather than concentrating on what the market ought to do construct exclusively with respect to what is coherent and sensible as directed by a financial hypothesis or model. Be that as it may, TA has missed a basic point: it doesn't calculate your own particular conditions as factors, so it makes a mental hole between your forecast utilizing TA sponsored by FA and your real exchanging. www.swingtum.com/establish/IWIF

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The Shift to Mental Analysis (MA) Masters of Trading Psychology – Mental Analysis: Van K. Tharp (1998): Trade your Way to Financial Freedom McGraw Hill. Van K. Tharp and Brian June (2000): Financial Freedom through Electronic Day Trading. McGraw Hill. Stamp Douglas (2000): Trading in the Zone – ace the market with certainty, teach and a triumphant state of mind. New York Institute of Finance. Larry Williams (1999): Long-Term Secretes to Short-Term Trading. Wiley. Alexander Elder (1993): Trading for A Living: Psychology, Trading Tactics and Money Management. Wiley. Oliver Velez & Greg Capra (2000): Tools and Tactics for the Master Day Trader. McGraw Hill. www.swingtum.com/found/IWIF

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The Final Gateway through reliably productive exchanging to your money related opportunity is Mental Analysis (MA). The point of MA is to give you a chance to build up a conservative arrangement of perspectives of reliably gainful broker, which we call the ace merchant's mentality. The ace merchant's attitude comprises of convictions about the market and exchanging, convictions about yourself, your certainty, your conviction, your lighthearted separation and your helpfulness. www.swingtum.com/found/IWIF

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5. The Four Levels of Trader Transformation Strategic Trader Intuitive Trader Subjective Trader Mechanical Trader www.swingtum.com/found/IWIF

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5. The Four Levels of Trader Transformation There are sacred standards on every level A larger amount ought to never abuse the standards of its lower levels Strategic Trader Intuitive Trader Subjective Trader Mechanical Trader www.swingtum.com/establish/IWIF

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A reliably beneficial dealer is a characteristic individual, who hits the dance floor with the market calmly with numerous little contacts yet without hard clashes. There are three levels a merchant needs to move up to a key ace dealer through self change which by and large takes 10 years or more before turning into an ace broker. The primary level is mechanical broker with target convictions, unbiased disposition, and mechanical strategies. The second level is subjective dealer with his developing arrangement of profitable systems. The third level is natural merchant who exchanges joyful with his instinct and impulse without ponder examination. www.swingtum.com/initiate/IWIF .:tsl

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