Sunday, February 27, 2011

Another Week of Selling

Unbelievable, another week of ferocious selling in the Simsci especially on Thursday afternoon. Funds are getting out and events in the Middle East cause Oil prices to soar again above the US$100/- level. The shorts take this opportunity to squeeze those who are long, it's real painful to be holding long positions in equity, some even panic.

The market recovered half the losses for the week on Friday, Funds came in to cover their shorts and for those who have been shaken out of their long position the previous few days, will only stare and watch the market creeping up slowly without getting back into position.

Is such a correction good for us to enter into a short position? The trend is heading South and correction of 50% for the week. Who can predict where the market is going tomorrow? I need to be enlighten.

Still, being a scalper, just stick to what I'm doing best and try not to predict the market, don't try to be too smart. Let the market tell me how I should react to it's movement, whether it's Tango, Cha Cha or Waltz, just follow.

Sunday, February 20, 2011

Why Still Losing Money?

A former trader who joined me in December has performed like a roller coaster and now back to square one from where he started. I wrote an email to him in my earlier post but it doesn't seems to get into his head that something is wrong with the way he trades.

This trader has been struggling since the floor closed in 2005 but never give up losing quite a fair sum and digging deeply into his savings. I admire his stamina.

As usual, I asked him, "How much would you like to make a month?" He told me his objective is to make S$3k to S$5k a month. He would be happy and satisfied given that he has not been making money for so many years. I was surprised at the low target since this amount is what he can easily make in one day on the floor.

The floor days are over, many floor traders have given up trading, losing out the edge to the Algos, even many existing traders are finding it increasingly difficult to make a decent profit. New breed of traders are taking over, it's a renewal process, change is inevitable and when a trader don't adapt, losses will force him out of the game.

Why is it so difficult to make even S$3k/5k a month? Even for an old bird? Just $200 a day consistently, 10 Simsci ticks or 5 Nikkei ticks. This trader with 20 years of trading experiences, having made a small fortune from trading, knowing his technicals yet still unable to make it after 5 years.

Something must be wrong somewhere for a well educated overseas graduate who is hardworking and determined. He is not short of trading knowledge, so why?

Can I use the word STUBBORN? Nobody would be willing to admit having a stubborn personality, there would be all type of excuses and explanations to justify their actions.

This trader has chosen not to reply my email advice, too lazy to analyse what went wrong, believing that he is trading right and his strategies should work out. I tried to pull him out from falling into the drain but he chose to jump in instead.

He had 5 straight losing days last week and I can sense some desperation in him when he visited me at the arcade. He needed a break.

He lost in December, recovered the losses and made money in January, then blew them away in February. So, 3 months without income, that's the same story for most traders who are not making it. Expenses will kill them with anxiety setting in leading slowly to depression.

I told the trader to go back to basic, check his trading journal on his performace in January why he performed well for the month (he told me he kept one, hopefully, though I have my doubts). How is he able to record the journal with so many trades, he basically didn't even plan his trades.

Of course, looking at his daily trading statements, I have already sound the alarm bell to him before he slide down into losing territory, I knew something was not right with the way he trades.

His trading volume increases tremendously scalping form home without increasing his profitability. He trades a few different contracts including overseas contracts like DAX, S&P, Currency futures, Nikkei, Tw and the core Simsci. I didn't like the small profits that he makes with the increased comm, a recipe for disaster waiting to happen. He lost his focus.

It does not make sense for a trader trying to make S$200 while the comm adds up to more than $300 a day. It's totally not logical, obviously he's trying to make more, his impatience is his greatest weakness, he is just not ready yet to increase his size.

Scalping is not for someone trading from home, when a trader's profit per trade is small, he is definitely on the wrong track, success rate will be low in the long term.

This trader told me that he increases his trading size after the good performance in January, didn't average on bad trades but being stopped out most of the time. Explanations again that I find it hard to accept but nevertheless, he's trading his own money and only answerable to himself. It must be small profit target but big stop loss levels.

I have emphasie many times to go for good quality trades, just one or two trades a day to make that $200, be patient to wait for that rabbit, it's boring, it's tough but can be achievable. That's the objective for a beginner, accumulate and build up the base, the foundation neccesary before increasing the size.

Sunday, February 13, 2011

5 Days of Selling in the Simsci

I was too busy to update the blog for the past 2 weeks, so many things to do during the Chinese New Year, no wonder some Chinese hate the CNY. But it's our culture to celebrate with numerous feast, visiting relatives and friends that we may meet only once a year, as well as reciprocate by inviting them to our house.

There are plenty of preparation such as spring cleaning up the house and decorating it, making cookies, shopping for new clothes, stocking up the house with soft drinks and food.

The Simsci slide the whole week with market closing lower everyday despite the S&P surging up almost everyday hitting pre-crisis high before the Lehman collapse.

Many Simsci traders were caught by the relentless selling from Day 1 to Day 5 of the suppose prosperous Rabbit Year. Almost all analyst have predicted a roaring start for the Singapore stock market this year and they were so wrong.

The Big boys are still the one controlling the market with their funds withdrawing from Emerging markets and returning back to the Develop markets.

I was caught too for being not objective enough, our economy is sound, we have fantastic growth and the local companies are well managed with many reporting profits within expectation. I'm still puzzled by the selling for 5 days, couldn't believe it, that's why I lost money.

I was angry for not capitalizing on the downward move, good volatility and yet not able to make money. My trading volume increases tremendously, my losses are mostly commissions.

Thursday, February 3, 2011

Wednesday, February 2, 2011

Looking for Good Traders

During lunch, I met a fellow trader who is a pioneer in the Futures Trading industry, my senior who have dished out countless advices to newbies including me. He is one of the most successful floor trader as well as electronic trader and a very well respected options trader.

He is looking to recruit and groom a few traders who have some experience in Futures trading. So, I asked him, "what criteria are you looking for?"

Without hesitation, he replied, "Only one criteria, he must be a person of integrity with some trading experience."

Yes, floor traders like us are men of our words, we honour what we said.

He will personally train the new traders and probation will be for six months.

It's a rare opportunity to learn from one of the best trader in Singapore.

Members of AFACT and students of SGX Academy who are interested can let me know.