Saturday, October 31, 2009


"Life belongs to the living, and he who lives must be prepared for changes" - Johann Wolfgang Von Goethe

It's great to see my cousin making money for the past 3 consecutive days, controlling his losses well and great improvement in riding the profits. It's been really stressful for him since he started trading at the beginning of the month, losing almost daily. This scenario is quite common to a new trader.

Being totally new to futures trading, it's quite an uphill task for him to learn so many things in such a short period of time. I can sense his frustration, anger and the feeling of hopelessness in himself.

I need to do quite a lot of damage control to his emotional well being, encourage and instill a positive mental attitude in the face of adversity.

Mentoring someone new is much easier, they are keen to learn, willing to listen with no emotional baggage. Most important, they are willing to change.

Many old birds that came to see how I traded, I would say are rather stubborn if they are not making money. They still like the way they look at their charts, layout and strategies.

My questions to them "Are you making money looking at so many tiny charts with so many indicators?", "Why don't you change and test other trading platforms?", "If you are not making money, why are you still looking at the same charts?"

Their answer "I'm comfortable with my charts, I like to look at these indicators and TT trading platform is expensive.", "I'm not stubborn!"

"TT is giving 1 month free trial, why don't you try it out" was my reply. "Free! you don't have to pay."

It's so difficult to convince them to change.

Profit in the special account went back to S$10,230.00 while still holding the 4 Topix/Nikkei spread. Not able to focus on this account for the past few months. Trading has been tough.

Sunday, October 25, 2009

Market Sense

We have 5 senses and some claimed to have 6 senses but to be successful traders, we need Market Sense.

I have been trading on the floor for 20 years without charts, didn't know how to operate the Bloomberg or Reuters machines for news or charts. In fact, many of those successful floor traders were like me, blur like sotong when it comes to technicalities of trading.

What we have is Market Sense or a good gut feel of the market rhythm, the players and a deep understanding of the nature of the contract. There are only 2 directions for the market, it's either up or down, what's so difficult?

Being very self motivated, I read a number of books on charting and the various strategies, but I couldn't apply them successfully in my trading. I have problem remembering all those chart patterns, waves or numbers and felt price action is so random that I lost faith in them.

Converting to electronic trading has been really tough for some of the floor traders, many failed and leave the industry. I was forced again to revisit charting as a tool to my trading. I failed miserably and struggled for more than 2 years looking for the holy grail in chart patterns.

Price action is really random, as what Mark Douglas wrote in his book "Trading in the ZONE", the no. 1 principles of trading "ANYTHING CAN HAPPEN". Whenever a chart pattern fails, the technicians called it "false signal" or "false break" and it happens probably 50% of the time!

Charting is just a small part in the overall factor of a successful trader. Over emphasis in this area is what separates the amateurs from the professionals.

I tried trading the SIMSCI during the T+1 at home for the past few nights. I started tracking the market at about 8.15 pm before the data, news release and US market opening at 9.30 pm Singapore time.

I used a laptop with a wireless Internet connection to trade giving up the most important edge in my trading, speed in execution. Luckily for SGX contracts, I lose out only in milliseconds because the TT platform is still extremely fast.

I opened up the trading ladder for SIMSCI, Taiwan and the S&P as a guide with no room for any charts. I watched the movement of the S&P and put in my orders in SIMSCI hoping for some Yum trades, trading 1 contract at a time due to the thin volume.

I made a few hundred dollars each night for 2 to 3 hours work. No Charts! Was it luck or skill? I made money every night, will it last?

I don't normally trade at night so that I can have a good rest plus all my screens are in the trading arcade.

I think I have good market sense for the contract I am very familiar with.

Saturday, October 24, 2009

How stubborn can you be?

"Life is a gift of nature; but beautiful living is the gift of wisdom" - Greek Adage

I was away last weekend to KL, Malaysia to attend my wife's cousin's wedding dinner, and didn't have the time to update this weekly blog. I drove up with my wife's family in a 5 vehicle convoy and stayed in a hotel in Mid Valley before returning on Monday.

Can't imagine myself shopping and walking the whole Sunday inside such a huge shopping complex in Malaysia! I felt safe inside, that's my utmost concern for my family after hearing so much about daylight robberies and snatch theft on motorbikes.

The drive was smooth both ways without any police block for speeding, what a relief! Many times in the past, I needed to put 2 M$50/- bill in my passport for the traffic police to settle the case after some bargaining. Extra income for these law enforcers! I could see the greed in their eyes and the radiant smile on their faces when they returned the passport back to me and urged me to drive carefully.

My cousin joined me this month as a full time trader after more than 10 years in the electronic sector. He spoke to me in January about having not much prospect in his job, frustration and contemplating switching career to be a trader. As usual,I encouraged him to go for it, giving himself a chance, an opportunity in his life and to prove his critics wrong.

I lent him all my trading books so that he could prepare himself with some knowledge of the challenges ahead. I'm not sure whether he had completed them. He cleared some leave to watch and learn how I traded, so simple, so easy!

He planned and prepared himself mentally for 9 months. Full of confidence that he could make money from the word go. Of course, the result turned out the other way round, as what I would have expected.

My brother, a former floor trader joined me last July after my success in switching to electronic trading. The most intelligent in my family, I thought it would be easy meat for him as he traded the Forex after the floor closed.

Robert and I taught him our strategies in trading Index futures which I would say is rather different from the interest rate futures he traded on the floor. Nevertheless, with his background and knowledge, I didn't think it should be a big problem for him since we were there to guide him.

I was damn wrong as the months went, his account depreciated slowly, at least he knew some form of money management. In my opinion, he was not disciplined and a bit lazy. My parents were concerned and I was worried for him.

He did not lose money in trading, it's the expenses that were killing him, the booth fee and the trading platform fee. He couldn't make enough profit to cover those expenses. And, how about living expenses?

So, what went wrong?

Whenever I glanced and looked at his position, I knew whether he was making money or holding on to some bad position. He was surprised. I told him that with my experience and understanding of his trading style, looking at the number of position he was holding indicate he was in deep shit and fighting the market.

"I told you to cut your losses when wrong and don't average on bad trades, why are you doing it again and again, I told you a hundred times, a thousand times, yet you are still doing it.", seems a little bit harsh and exaggerated, painful for me but meant good for him.

"What can you to do if you can't make it as a trader? Taxi driver? Hawker?"

I thought he would not make it, but he really is a fighter, sold his house, cleared his debts, got more screens and continued to struggle on. I could see the will power and determination in him to succeed. He had not many choices.

How stubborn you want to be? Until it is very painful before we learn not to be stubborn, admit our mistakes, take the losses and move on, the market is there everyday for us!

After more than a year of trading, I can see my brother making a u-turn and start to have positive cash flow recently and very consistent profit everyday. He now speaks with confidence. He has finally overcome his own obstacle and finding his edge in trading. I am really happy for him.

Being stubborn does not pay. I am ashamed to admit my own stubbornness too, holding on to my Topix/Nikkei spread. I have been influenced by my Guru not to cut the losses, holding on to it together and fight on with bruises all over the body. This is not my normal trading style. Though I can afford the losses, it's just not worth it.

It's a wake up call.

I have a friend who once worked for a fund management firm, he told me there were 7 staff, 2 admins, 2 traders and 3 compliance officers to make sure the 2 traders toe the line for every trade. Stop losses will be executed without fail to ensure traders stick to the rules with eyes like a hawk, watching over their every move. I suppose they didn't want another Nick Leeson to appear here again in Singapore.

That's how discipline is being enforced, no room for complacency.

Did not trade much for the past 2 weeks for this special account. Still holding 4 Topix/Nikkei spread and losses to date is S$2,031.00. What a disaster! Need a lot of soul searching.

Saturday, October 10, 2009

Algorithmic Trading

"The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather a lack in will" - Vince Lombardi.

Went to attend a talk on Algorithmic Trading organised by AFACT last night. I am glad that Mr. Alan Donoghue from Nyenburgh, an algorithmic trading firm is willing to share his expertise with us. Together with vendors RTS and TT, we were given a brief education on Algo trading and how we too can be Algo traders.

Since we can't beat them, join them!

Algos have been accused of wrecking havoc to the profitability of many scalpers recently as more firms are jumping on the bandwagon to have a piece of the cake. Many traders felt the Algos are a threat to their livelihood and responsible for their dismal performance.

These algos are in fact narrowing down the spreads whenever there is any inefficiency in the pricing taking away the yum trades from the scalpers. They are providing more liquidity into the market and a boom to retail customers.

Non trending market condition in a narrow range with dropping volume is always difficult for traders to make money. It has got nothing to do with algos. Traders need to keep changing their strategies to deal with the different market conditions.

Scalpers are losing their edge in term of execution speed to the algos but with more algos, they will be fighting each other too and I believe not all algos make money.
Education has made investors more savy and traders smarter thus making competition really tough.

There is no level playing field in this world, we just need to live with it, come to term with it, be more imaginative and more innovative in finding our edge.

"You cannot depend on your eyes when your imagination is out of focus" - Mark Twain.

I have many friends who are trading from home, definitely losing out in term of speed, yet some of them are making a comfortable living. I salute them.

"The secret of success is to know something noboby else knows" - Aristotle Onassis.

Profit for the special account to date is S$9,840.00.

Sunday, October 4, 2009

Dare to live your dream

"While there has been considerable investment in hardware, the key is still the individual - his training, courage and commitment" PM Lee Hsien Loong.

In a recent talk to some of the students during the review session of Tom's (YCK) class, I asked them "Who wants to be a professional trader?" Only two of the students timidly raised their hands shyly indicating their interest.

These students had taken the proactive step to go for training on the various charting strategies from one of the most knowledgeable trader on the subject. Are the students willing to put in the commitment? Do they have the courage to take up the challenge? Do they dare to live their dream and make it happen?

I like to read Dr Lee Wei Ling's articles on the Sunday Times and today she wrote about "Turning dreams into reality". "Singapore was built by a group of determined men who worked hard to realise their vision". I am extremely proud to be a Singaporean and very thankful to these "gentlemen".

"Fortune favours only those who grab the opportunities life offers. If the future has rough patches, we should simply accept that as a fact of life, and continue to make the best out of things."

Majority of the successful traders (old birds) I know don't come from well to do families, they struggled with determination and worked hard to realise their dream. There are also many new birds who are doing very well after a few years in trading, I was told some of them are now big size traders in the electronic platform.

What makes them so successful? How are they able to withstand the stress of having a few hundred outright position? Imagine the risk and think about their rewards. It's none other than having the COURAGE to trade what they believe in.

Still holding 3 long Topix/Nikkei spread in the special account, profit to date is S$8,814.00.