Saturday, November 28, 2009

Another Yum Trade!

"Anger dwells only in the bossom of fools" - Albert Einstein

I missed the yum trade in the SGX December Taiwan contract on Friday, a Singapore holiday, Hari Raya Haji. I was concentrating on the Futures Yen contract that went crazy, up almost 300 ticks from overnight, and forgot about the Taiwan opening. I was frustrated for missing this Haji "ang pow", though it was not a contract that I focused on.

The December Taiwan was sold down almost 80 ticks after opening for no apparent reason before rising immediately up almost to the opening level. I didn't know what happened. I guessed the order filler must have keyed in the wrong big figure, a very costly mistake for the company. A few hundred lots traded down, can't imagine the losses!

This type of yum trade happens once in a blue moon, only for those who are alert, hardworking and know something about calendar spread. It was almost risk free trade with the November contract bidded heavily, of course most traders would not have expected this to happen.

There were a few in the trading arcade that managed to get "ang pows", two of them hardly trade the Taiwan contract but everyday just wait for the durian to drop especially during the opening of the various contracts and rollover period. One made more than 400 ticks and the other I was really surprised, never heard him trading the Taiwan and yet managed to Yum 140 ticks for just few minutes work. Really put me to shame.

The survival instinct of these traders are commendable, they deserved it because they are hardworking and know what is their edge. They are like the cheetahs waiting patiently for their prey. So, are you the hunter or the prey? Maybe just a spectator waiting for things to happen.

I was frustrated for missing the Yum trade and began to trade with anger, blaming myself for not being alert. This emotional behaviour is detrimental to the mental state of health for a trader. I tried very hard to control it but still ended up trading so many different contracts, Yen, S&P, Nikkei, Taiwan and later Simsci at the same time.

Did I make money for the day? NO! I was lucky to break even, but what a waste of time.

My good friend gave notice to pull out from the special account to invest in a Japanese restaurant since I have not been performing for the past 6 months. I feel bad about it for not able to reach my target and under performing the stock market. I have been too conservative to take risk.

Performance for the year since we started in December 2008 is S$30,809.00, a 6.8% return per annum, way below my target of 12% return.

From December, what is left will be my own fund of S$200,000.00 to trade, mostly outright position and spread trading. It will be interesting to see whether I can overcome the "FEAR" factor and have a more systematic approach to trading.

Saturday, November 21, 2009

Trading from home

My GPMG in the office versus my AR15 at home.

"When everything seems to be going against you, remember that the airplane takes off against the wind, not with it." - Henry Ford

Spent the last 5 days trading from home with just 3 screens and wireless Internet to test out whether I can be profitable trading from home losing out my most important edge, "SPEED".

No doubt, I can feel the difference in execution speed, especially on a wireless notebook, the ping is slow, a great disadvantage if I scalp in a fast moving market. With the TT trading platform, I would consider it relatively fast, probably I only traded the local SGX contracts.

It's more relaxed trading from home, saves on travelling cost and time without having to pay additional booth fees in the arcade. Cost saving is around $900/- a month. But, I will miss all my buddies in the arcade, the camaraderie and jokes.

Bottom line, can I make money?

I have failed to make money 4 years ago trading from home after the closure of the pit, though I didn't lose money, monthly expenses were draining my savings very rapidly like an open tap. I couldn't find my head (Hokkien phrase), went around in a circle getting more desperate by the day.

I went into some business venture and traded on a part time basis, thus no focus and concentration. I flopped in both losing more precious capital.

Being a scalper and spreader all my trading life, I am a very short term trader, hardly able to convert to a part time day trader in between meetings and overseas business travel. I didn't even know what's my edge in trading, didn't realise having an edge is so important.

After decisively cutting losses on my business venture, I went back to trading full time as a trader in the arcade. With the help of some of my close friends who enlightened me on the "tricks" of trading. I then look at trading in a different perspective.

Finally, I made a few thousand bucks for the week trading cautiously and conservatively despite losing my edge in speed. I have matured as a trader.

No trading for the special account.

Sunday, November 15, 2009

Is Trading that Difficult?

One of my good friend, a fellow trader posted in his facebook, "Trading is the most stressful occupation in the world". Whenever I meet him, he is full of smile and vitality, trades the market opening at the arcade for about 2 to 3 hours daily, whether win or lose, he disappears like David Copperfield.

I hardly see him in the afternoon, so what's so stressful? Probably after trading, he goes to the bank, withdraws his profits in cash and spent the rest of the time ironing the notes at home and worries about where to keep them (LOL).

He just bought a new apartment. Is he not making good money and laughing all the way to the bank? What he is doing is probably the dream of 99% of the traders including me.

I remembered during those early days on the floor, we were both trading the Nikkei contract. Whenever the market goes against him, he would turn around and start cutting his losses extremely fast and hard pushing the prices up or down. Sometimes having the same position as him can be really a pain in the neck.

In the beginning I would go against him to average further since he was selling or buying at prices that can be 5 to 20 ticks away in a not too liquid market. I lost more money going against him as I have to cut further away. He told me "I'm just relieving stress", and thanked me for carrying his baby.

I dared not trade against him after a few attempt to support the market once I knew he was cutting losses. It's kamikaze!

After converting to electronic trading, he revealed that it's common for him to lose a few months in a row before recovering and asked whether I can withstand the drawdown and the emotional roller coaster.

What's his secret?

He is a momentum trader averaging on his good trades without fear and square off all positions immediately once the market turn with just a click of the button, no questions asked or anything to regret. He leverages on his speed and plenty of guts, that's his edge, another of those super trader.

He spent lots of money in motivational programmes, attending seminars like Anthony Robins, Robert Kiyosaki etc and attending various courses every year.

He recently attended a series of courses where the total package comes up to about S$11,000/-. I'm really amazed by this guy. I asked why he spent so much money attending all these courses. "Many attended the course, from CEOs to salesmen, that's the shortcut to knowledge, by learning from those who are successful, time is money" he replied.

My friend deserved to be successful, and his thirst for knowledge is insatiable.

Profit to date for the special account is S$10,749.00

Saturday, November 7, 2009

Traders are not born

"You cannot teach a man anything; you can only help him find it within himself" - Galileo

I have yet to come across a trader who makes money straight away, so for those who are still struggling, don't be discouraged, keep on learning and applying what you have learnt with the discipline that is needed.

Cutting loss is difficult, riding profit is even worse because of our natural human emotions of hope and fear. Once a trader is able to overcome these two very simple emotional theory but extremely difficult in term of execution, he is half way there.

I remembered an incident many years ago, while I was still trading in the pit, a fellow trader came up and handed me a trading card to execute some trades on his behalf, "Cut for me", and walked away immediately without turning back.

I could see the sadness in his eyes and felt the pain he was going through. Just too painful for him to execute the trades himself. He had taken too long to admit his mistake and the pain threshold overshot his mental state of mind to handle the situation emotionally.

He needed time to cool down. I caught up with him later to console him and learnt that just one bad trade wiped off a few months of his profit.

That sounded familiar to me, it happened to me a few times when I first started out as a trader, I was very experienced in that kind of excruciating pain, a sense of hopelessness, dejection, self doubt and wondered whether I was suitable to be a trader.

What can I do? Being a frog in a well, I didn't have many options with my limited education. With perseverance and determination, it took me one painful year to break even, to learn how to trade and avoid costly mistakes. I finally graduated from the school of hard knock.

Unlike traders now, we had little choice in the contracts available for us to trade in those days. There wasn't any courses available that teach us how to trade, either swim or sink.

The cost of trading has gone up tremendously making it difficult for new traders to take up the challenge. Traders are now educated, competition is tough and worst of all, Algos muscling in for a piece of the cake. We now have to compete with emotionless machines! But, these machines are still operated by humans and so they still do make mistakes! That's where I will be waiting for them, some Ah Q positive mentality.

New traders are very lucky now with SGX taking pro-active steps in providing subsidised education in trading and showing more concern for their welfare. It's just a matter of time that they mature in their trading, how long will depend on the individual trader. I'm not so smart, that's why it took me one year and even longer when I convert to electronic trading.

Profit for our special account went back up to S$13,630.00, like a yo-yo up and down, I'm just not happy with it. Still holding 2 Topix/Nikkei spread.