Wednesday, December 31, 2008

Goodbye 2008

What a year! The stock market tanked from the first day of trading in 2008 and continue through to December with small correction in between. I have not expected the severity of the sub-prime in far away America to affect the rest of the world so much. The whole world was flush with cash and easy credit pushing commodities, properties, stocks, inflation, etc to extreme levels.

The Financial Tsunami hit everybody hard including myself. Most of the stock holdings that I hold lost more than 50% of its value with some I dare not even look at the price. What a shame! I have come to believe in holding good blue chip stocks and collect yearly dividends and not to care about the price of the stock. I was absolutely wrong and damn wrong.

I have bought some of the stocks when the market recovers from SARS at very good prices, never would I imagine them coming down below my entry prices. The profits just vanished into thin air. I am feeling the pain like everybody else because of poor judgement, I have been telling people to get out of the stock market after the Olympic games. I felt the Chinese economic growth and feel good factor would be the engine to drive the world market ahead till the Olympic.

Most Fengshui practitioner are rather bearish in their outlook for 2009 with one predicting the STI Index plunging to 1200 pts sometime in August. That's what most analysts are predicting too, nothing new. I don't believe in all this bullshit from any of the so call Fengshui masters, my partner in another business consulted one years ago when we shifted office, the company that he manages lost big time. It would be more meaningful to donate those high consultation fees to charity.

2008 is a watershed year for me as I return to profitability in Futures Trading after being lost for more than 2 years in the wilderness. The return to the trading arcade is the turning point in my trading career as I begin to see the light at the end of the tunnel. Trading is my passion and I look forward to each new day as a challenge to beat the market. I enjoy and derive great satisfaction at the end of a 10 hour long trading day.

Making money is obviously the main driving force, those who don't believe money is important, really don't know where to shop. My mother used to tell us in our younger days when we were rather poor that she would rather die with a full stomach than an empty one (In Cantonese dialect).

Money is the root of all evil
Money is not everything
Money can't buy LOVE
Money can't buy HAPPINESS
Money can't buy HEALTH

I never believe in any of the above as an excuse for my incompetence, that's why I work hard for my money.

Friday, December 26, 2008

Million Dollar Traders

These are the cream of the Elite Traders whose trading profit exceeded more than a Million Bucks a year, consistently. Most of these traders I know are young, only in their 30s and 40s.

What make them stand out from the rest?

They have extra-ordinary courage to take risk in their trading. Most are scalpers and day traders who will square off their position by the end of the day so as to avoid carrying the risk overnight. They are extremely sharp in spotting trades with high probability of making a profit and executing them fearlessly. It is this trait that I really admire them.

What's their edge?

SPEED This is one of the most important factor contributing to the success of most of these traders. Having a fast Internet lease line connection, powerful computers, fast and stable trading platform make a lot of difference to these traders. That milli second advantage is what all these traders need to beat others to a trade. Having this speed superiority will enhance the confidence of a trader which is an important emotional and psychological aspect of a trader's mindset.

The real estate close to the Chicago Mercantile Exchange (CME) is very expensive because most broking houses and traders entrench themselves near to the exchange so that the Internet lease line connection is shorter and thus faster for the execution of trades.

COST Most of these Million Dollar traders are high volume traders with an average volume of at least 1,000 to 5,000 trades a day. They are very nibble and versatile, scratching or cutting their losses very fast once they feel that a trade will not work out. Thus the transaction cost would be a very important component to their profitability. Average commission amount to a few thousand dollars a day.

All professional traders join the various exchanges such as SGX or CME as members to get preferential commission, with scratch trade rebates and volume rebates an additional bonuses. It is with the lower commission that they are able to trade without hesitation and worry about the cost of transaction.

GUTS This is what separate the Big Boys from the Small Men. This exceptional quality is what the Million Dollar Traders process. The willingness to take risk with that slight edge in their favour together with the speedy and efficient execution make trading really competitive for the rest the traders, sigh!

Sunday, December 21, 2008

Psychology of Trading

Why are we not performing up to expectation for this special account? I am a bit shy to acknowledge our shortcoming and vulnerability as a human, a trader. One of the major problem we are facing is the FEAR factor, especially when it involve losing money other than our own. Losing money in trading is quite common, we are immune to it but yet we feel very uncomfortable losing money for this special account.

Traditionally, trading condition is more difficult in December due to the holiday mood and book closure. I don't believe in giving excuses, we need to tune ourselves mentally to the new challenges ahead, put in more effort and focus in our trading.

Sunday, December 14, 2008

What Happen?

Hey, what is happening to our special account?

We have not been performing up to expectation, had done only 3 trades so far for the past 9 trading days with 2 of them having been stopped out. Yeah, small losses, good money management, but, bottom line is we are in the RED! That's unacceptable!

I would consider Robert and myself the Elite Traders in our field of expertise. So, what's the problem? One of the major problem is the lack of focus and not enough effort put in, spending too little time to trade this account. We need to make adjustment.

I have decided to split the account into 2, with Robert handling S$200k and myself S$250k with effect from January 2009. This will ensure individual accountability, performance and freedom. We will continue to consult each other regularly with regards to trading techniques, high probability trades and will be jointly responsible for the overall account.

Read in the newspaper about Bernard Madoff, a former chairman of the Nasdaq Stock Market, accused of US$50 billion fraud despite building a trading powerhouse that had prospered for more than four decades. His hedge funds oversaw some US$17 billion, attracting investors with the promise of high returns with low fees.

One of the funds reported having US$7.3 billion in assets claimed to have paid more than 11 per cent per year through its 15 year track record despite the generally low-yielding investment strategies he described to his clients. He had lost money on his trades and paid investors with money that wasn't there, a "Ponzi Scheme" offering unusually high returns, with early investors paid off with money from later investors.

What a shock, in term of scope and duration, Nick Leeson the rogue trader that bankrupt British Bank, Baring with US$1 Billion losses in derivatives trading would be having the last laugh.

Saturday, December 6, 2008


"$28,000 profits in 1 day!"

"I started trading with 2,200 and my profits are showing $33,000 in 4 months"

"I have turned US$27,000 into US$183,000 in 2 months"

"How to make $1,500 per day in this downtrend market in 10 minutes"

"Make 20-50% returns every month"

These advertisements appear in our newspaper regularly, inviting you to their free seminar. They are out to con the gullible into believing that it's so easy to make money by just attending a few days intensive course that cost a few thousand dollars.

It's impossible to achieve that kind of results consistently in such a short period of time. The result might just be paper trading or a one time affair and eventually start losing money. I believe out of 100 students, probably more than 95 of them will lose money.

If these mentors or so call guru are so good, they won't be teaching others how to trade. With the type of ridiculous return advertised, they would be many times better than George Soros or Warren Buffett. Temasek and GIC should let them manage the accounts!

I came across a testimonial by a friend about doubling his money in forex trading after attending one of the course. I called to congratulate his achievement and asked how many times more did he manage to make from his initial investment. I was surprise to hear that he had quit trading and gone into some other business for reasons that he did not wish to share, probably out of shame.

If my friend indeed make money, I don't think he would have quit trading. How can you trust those testimonies in the advertisement? Make $1,500 per day in 10 minutes or $28,000 in 1 day? There is a fool born every second!

Wednesday, December 3, 2008

Open Ceremony

We started trading today in a quiet market. The volume in the Simsci was light with less than 6,000 lots traded. We were stopped out in our first trade and incurred some losses. Daily account balance will be posted the next day at the other blog, leverage results.

December will be a quiet month due to the holiday season and year end book closing. With the death of many hedge funds and ongoing financial meltdown, most retail customers were also burnt and staying out of the market. Those left behind are the really good professional traders pitting their skill against each other. The best survive!