Saturday, September 19, 2009

Yum Yum Trade

"The coward calls the brave man rash, the rash man calls him a coward" - Aristotle

Many ask me what's a 'YUM' trade and to quote examples. Yum trades occur mostly in chaotic market when we don't know exactly what's happening, the price movement defies logic, big surge up and down for unknown reasons. I love this type of market movements, it create lots of opportunities for the brave.

Two very big Yum trades occurred this month on the SGX contracts, one on the 9/9/09 (Taiwan contract) and the other on 18/9/09 (Simsci contract).

On 9/9/09, the Taiwan contract opened at around 2692 and started moving upwards, another trader sitting besides me who specialise in the Tw contract told me the resistant was around 2715. I checked my charts and yes, it should be a strong resistant at that level.

I shorted 1 lot at 2720 and immediately cut loss 10 ticks away, market paused for a while at 2740 and I thought it's easing off, so shorted again at 2738 and again have to cut loss immediately 15 ticks away, really fast and furious.

What happened? The cash market has not open yet, what's the news in Taiwan that we don't know about? Why are they buying up the futures? Is Algo at work, pushing up the market to catch the shorties? Lots of questions float in my mind.

Market hit 2795 and started retracing down and fearing the market will come off, shorted 2 lots at 2786. Imagine my shock when it U-turn immediately upwards, what type of ass luck is that! Three losses in a row! I was angry, trying to justify holding the 2 lots and refusing to cut loss. Shit! big mistake, it broke big figure 2800 and another wave of senseless short covering came in.

I was speechless looking at the market and staring at my overall losses of 150 ticks in less than 10 minutes with only a very small position. The limit up is very close by, what should I do? I dared not average further fearing for the worst, with a small position, the damage would not hurt me, I consoled myself.

I had no guts! Fear overcame me.

Taiwan is far away from Singapore, I don't know what's happening on the ground there, what type of news will affect the market. But, I always have this feeling that the market is heavily manipulated by the KMT and their cronies. It's a great contract for speculators with good volume and daily range.

The market continues pushing up to a high of almost 2850 and started to descend furiously, not adding on any position just in case it pull back up again. Came back down to 2790 in less than a minute, undecided whether to cut the position with a small loss, no, hold it.

A bad move not to cut with a small loss, the market moved swiftly back up to 2820 again, holy shit! Then started coming off to 2780s and swung back up again to 2800. What the "f#@K"! I was frustrated not getting out of my position a second time.

The third time it came back down, I got out my position at 2783 with overall losses of around 20 ticks. I was happy, but it turn to frustration again when the market dive down to 2760. What a stupid idiot I am! In less than an hour the market crashed all the way back down to a low of 2680, below the opening price.

I had missed the 'YUM' trades because Anger and Fear had overtaken me. I was a coward not to take on bigger position and more risk. The market went up 160 ticks within 10 minutes and crashed all the way down 170 ticks later, so much opportunities yet I had not capitalise on it.

"Bravery is the capacity to perform properly even when scared half to death" - Omar Bradley

Met other traders during the break and learnt that most scalpers were badly caught on the way up. It's bloodbath even for the disciplined. Payback time!

Yesterday, the YUM trades occurred in the SIMSCI contract after the cash market closed. The market started selling off for no apparent reason, I bought some at 3189 and 3185 since most major markets were stable and holding well.

The market came off swiftly after hitting some stops. Bought further at 3163 and managed to cut only 1 lot at 3158 before the market dropped like a bomb, prices disappeared from my ladder. Some massive stops must have been triggered. Holding 5 lots and saw my losses at more than 600 ticks in just seconds.

Scrolled down and saw the prices trading down furiously, managed to buy 3 lots at 3024 and tried chasing the market at 3026 and 3052, all missed. Next level tried buying 3 lots at 3136 and managed to get hold of 2 lots, didn't even realise the big figure had changed again, holding total 10 lots.

It was so fast that I didn't even realise that I bought so low at 3024, my eyes and hand couldn't even cope with the wild swing because within seconds I was buying more than a 100 ticks up. There was no time to think, just clicking away at lightning speed trying to get some Yum trades. Managed to get all out at average price of 3163 seconds later, luckily still managed to make some good money.

I scalped the SIMSCI now and know the contract well enough to average on such a situation, though I missed buying more contracts at the bottom. I had traded conservatively in comparison to my margin thus able to stare at FEAR right in the face.

There will be a lot of speculation on why the market was sold down with few minutes left to closing. Any news will be too late even for us as the market crashed within seconds.

In the world of dirty finance, did any body leak out those massive stop orders? Was it a deliberate attempt to trigger those stops? Was it just normal market action with orders coming in to square off their positions ahead of the long weekend? Why didn't they do it before the cash market close? Was it Algo?

Phone calls started coming in after the market closed, mostly "Did you YUM the market?", "What happened?" I told them I was Yummed and got my hair all wet even though I'm almost bald.

Other traders started to talk about their fear such as assassination attempt on our leaders or some terrorist attack. Thus they froze and just starred at the screen without any action.

Recalling sometime in the early 1980s when PM Lee Kuan Yew was hospitalised, the news sent the STI crashing down. I was working in the bank and witnessed the massive sell down of the stock market, with clients in panic mode calling us to unload their stock holdings.

Another incident was during election time in Taiwan when the then president Chen Shui Bian was shot. It sent the TW contract spiralling down during the T+1 session to limit down. That was real scary if you were caught holding any long position.

The special account is in limbo, still holding 3 Topix/Nikkei spread when it crashed all the way down to a low of -1080. Unbelievable, that's why I underperformed. The profit to date is S$9,435.00

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