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.

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.

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.

Forex Trading, easy money?

"Look before you Leap" - English proverb.

I have received a SMS recently, "Want to make monthly passive income from Auto forex trading? We do not charge management fee and don't have to buy any software. Interested, please come to our talk". So, how they survive?

I don't know who this chap is, obviously trying to earn some comm. from soliciting funds to invest in some Auto Forex trading system that promise reasonable returns without highlighting the tremendous risk involved. BEWARE!

I have invested some money with fx:1 academy 3 years back to test out their so called Automated trading that promised good passive income with impressive back testing track record. I was conned into being their scapegoat and my account lost more than 50% before I decided to close it. Very ashamed to reveal it here, but just for my friends to be aware of the risk.

I have never seen a day of profit, it's downhill all the way right from the beginning. Since it was a small investment, I didn't pay particular attention to it until one of their trainers called to apologise about a huge sudden draw down due to some adverse news during the night. Of course all the bull shit explanations about missing stops in the Forex market, etc, etc.

The company made money from churning the account through an automated trading system deploying various strategies. The Forex Broker gave the company a cut from the spread between the bid and ask price every time a trade is done. It's a money tree for them, I don't mind if they are able to make money for me, but that's not the case, it's win win for them and losses only for me.

This company markets their courses and automated programme through some sort of MLM plan where most of the top money earners are in fact salesmen and not traders.

A friend visited me recently and revealed paying S$3,800/- to the same company for a course on Forex trading learning only one strategy, he emphasised. He did not trade after the course, as he was unsure of the charting and trading platform. Another victim of some sleek marketing on how easy to make money trading forex by just spending 2 hours a day. It suited him perfectly since he is working full time.

Profit for the special account again drop to S$5,821.00. Still holding long 3 Topix/Nikkei spread.

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

Greed - Big mouthfuls often choke

"Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction" - Fromm Erich

In today's Sunday Times front page "Help lawyers cope with changes" - Law Minister K. Shanmugam. These top dogs are too well protected over the years, are among the most talented of the population and yet they need help.

I try to avoid seeking the service of lawyers, I can see the greed in their eyes when they talk to me, "Yes, what can I do to help you, my fee is S$400/- an hour". If they know that you are rich and can be slaughtered, you are dead meat.

"The point is that you can't be too greedy" - Donald Trump

In trading, greed is also a much talk about subject, we have been told countless time not to be greedy. Greed leads to overtrading, bad discipline and poor money management. Greed can make a trader risk much more than he should in order to make more and more. Risking too much only leads to a quicker downfall.

Profit for the special account came back down to S$10,177.00. I have been struggling these 2 months with my poor performance, I have been wrong in my view, I have been stubborn to hold on to some lousy positions and most important I have not been focused. Still holding 3 Topix/Nikkei spread, waiting for a correction to get out.

Road to recovery

"When we do the best that we can, we never know what miracle is wrought in our life, or in the life of another. - Francois Mauriac

Went to the Natas travel fair last Sunday to book a holiday for my family to Taiwan for a 8 days holiday in early December. I have wanted to visit Taiwan and contribute a little to their economy since I have made some good money in the Taiwan pit before the closing of the trading floor.

It's a long queue into the carpark and the hall was packed with people looking for a good bargain for their holidays. The economy doesn't seems to be affected that much by this financial crisis and the V shape recovery of the stock market around the world caught me by surprise. It's unbelievable that we can recover so fast in 6 months.

Early this year, we have been bombarded by all the bad news, figures, depression scenario and analyst forcasting how much further the world stock market will sink.

My wife have been hinting regularly that we haven't been to any place for a holiday during the past 2 years. Feeling much better after may second surgery, I agreed to bring them for a short holiday though I still have a slight headache everyday.

After booking the tour, we went to the Food Fest at the next exhibition hall. We came to a stall touting a Chinese herb from Taiwan that can cure sinusitis and can feel the result within 3 days of consuming it twice a day. The Taiwanese man showed me the main ingredient, a type of native ginger with red buds, not hot nor spicy, gave me some to taste it.

The man asked me to give it a try for at least a month and I should have my problem solved within a few months. I have been having this mucous problem even after my second surgery, I washed my nose 5 times a day with salt and every few days a lump of mucous would flow out of my nose. Despite taking a few doses of anti-biotic over the past few months, the "BUG" stubbornly refused to give up.

Having a personality of "Giving it a try" I decided to get a month supply, 5 boxes of 10 sachet each with a box free at a price of S$150.00. I have to abstain from Chili, Ice (cold drinks), Peanut and Chocolate while taking the herbs.

After the 2nd day, I felt so much better. On the 3rd morning, I felt something blocking my breathing and decided to blow it out, I was shocked to see 2 big pieces of dried blood clot that came out from my nose after some digging. There is another piece that I couldn't dig out, so I decided to suck in and out came a very big piece of blood clot from my mouth. I was stunt.

I was relieved and knew that I'm on the road to recovery. I continue to wash my nose with salt but no more lumps of mucous now and my headache is subsiding. Advance western medication failed me and probably weaken my immune system with all those anti-biotic.

Profit to date for the Special account is S$14,914.00. Still holding 1 long Topix/Nikkei spread position.