Saturday, December 25, 2010

Merry Christmas!

Merry Christmas to all.

I have decided to return here to post my blog.

It's been a long break from writing, what else can I share about trading?

"Top performers spend more hours rigorously praticing their craft" - David Brooks

I have visited Shanghai recently with my brother and brother-in-law to find out more about the potential of the Chinese Futures market. Though the market is closed to foreigners, many are using relatives or friends there to open account for trading the futures market. There are many loopholes for doing business in China, just find it.

There are some local traders who are already there after the launch of the Shanghai Index, CSI300 contract, it's a new frontier, new opportunities for those who are willing to take the risk.

For experienced traders like us, it's much easier for us to find the edge especially with no Algos present there as yet.

The margin for trading is extremely high compared to other Exchanges, I was told that minimum opening account is RMB 500,000/- and that allow only 2 open contracts of the CSI300. The comm is high too and these measures are to discourage excessive speculation.

There is a limit of putting 500 contract orders (need to verify) for any given day, so that fake orders will be eliminated, getting rid of those big bullies unless it's geniune order. I think this is very good so that traders cannot manipulate the market by creating a false impression of huge orders coming in but disappear immediately.

It's a much level playing field for all traders if everybody will to pay the same clearing fees unlike Exchanges that offer huge volume rebates to high frequency traders.

One of the challenges trading in China is obviously the language, the platforms are mostly in Mandarin and offer only 1 price level. The maximum is up to depth of 5 levels and need to pay extra for that feature. There is no ladder which we can click with the mouse to enter orders. The traders there use the keyboard to enter into a position which they demonstrate how fast they can execute an order. Still slow compared to our platform.

We met up with an investor who offered us capital to station in china to trade the various Chinese products. They expect high returns and are willing to take high risk as well. There are plenty of rich Chinese now who have made a lot of money in all sorts of speculation, especially property. They are talking about doubling their money every 2/3 years.

I told him I'm sorry, I can't promise him those type of returns, I'm in the business of risk management, not excessive speculation. He can find someone who can promise such high returns by just throwing a stone in Shanghai, plenty of them, but promise and actual performance is two different matter and how long can that trader last.

My brother is willing to take up the challenge if the fund is at least S$10 million to fully concentrate on trading or else it's not worth his effort. He is comfortable now, in fact one of the most consistently profitable trader, just a few losing days this year, a very good track record. What a change from a year ago when I was so worried for him not making it as a trader. He is a mature trader now but trading for someone else is a different ball game again.


Balasubramanian said...

Nice to see your blog again. Just wondering is CSI300 is similar to SGX Xinhua A50 ? If so, does it make sense to trade SGX A50 ? Bala

Fat88Trader said...

No, they are 2 different products with one consising of 300 stocks (I think so) while the other is 50 stocks, but I was told the correlation is more than 90%

The SGX A50 is a very small contract for the man in the street, thus the comm compared to the rest is high. The contract size is about US$9,200/- while the Simsci is S$75,000/-, Tw is US$31,000/- and NK 2225 is about 25 million Yen.

You will pay more comm for trading all the mini contracts.

Tick size for the A50 is US$5/-.