What a year! The stock market tanked from the first day of trading in 2008 and continue through to December with small correction in between. I have not expected the severity of the sub-prime in far away America to affect the rest of the world so much. The whole world was flush with cash and easy credit pushing commodities, properties, stocks, inflation, etc to extreme levels.
The Financial Tsunami hit everybody hard including myself. Most of the stock holdings that I hold lost more than 50% of its value with some I dare not even look at the price. What a shame! I have come to believe in holding good blue chip stocks and collect yearly dividends and not to care about the price of the stock. I was absolutely wrong and damn wrong.
I have bought some of the stocks when the market recovers from SARS at very good prices, never would I imagine them coming down below my entry prices. The profits just vanished into thin air. I am feeling the pain like everybody else because of poor judgement, I have been telling people to get out of the stock market after the Olympic games. I felt the Chinese economic growth and feel good factor would be the engine to drive the world market ahead till the Olympic.
Most Fengshui practitioner are rather bearish in their outlook for 2009 with one predicting the STI Index plunging to 1200 pts sometime in August. That's what most analysts are predicting too, nothing new. I don't believe in all this bullshit from any of the so call Fengshui masters, my partner in another business consulted one years ago when we shifted office, the company that he manages lost big time. It would be more meaningful to donate those high consultation fees to charity.
2008 is a watershed year for me as I return to profitability in Futures Trading after being lost for more than 2 years in the wilderness. The return to the trading arcade is the turning point in my trading career as I begin to see the light at the end of the tunnel. Trading is my passion and I look forward to each new day as a challenge to beat the market. I enjoy and derive great satisfaction at the end of a 10 hour long trading day.
Making money is obviously the main driving force, those who don't believe money is important, really don't know where to shop. My mother used to tell us in our younger days when we were rather poor that she would rather die with a full stomach than an empty one (In Cantonese dialect).
Money is the root of all evil
Money is not everything
Money can't buy LOVE
Money can't buy HAPPINESS
Money can't buy HEALTH
I never believe in any of the above as an excuse for my incompetence, that's why I work hard for my money.
Wednesday, December 31, 2008
Friday, December 26, 2008
Million Dollar Traders
These are the cream of the Elite Traders whose trading profit exceeded more than a Million Bucks a year, consistently. Most of these traders I know are young, only in their 30s and 40s.
What make them stand out from the rest?
They have extra-ordinary courage to take risk in their trading. Most are scalpers and day traders who will square off their position by the end of the day so as to avoid carrying the risk overnight. They are extremely sharp in spotting trades with high probability of making a profit and executing them fearlessly. It is this trait that I really admire them.
What make them stand out from the rest?
They have extra-ordinary courage to take risk in their trading. Most are scalpers and day traders who will square off their position by the end of the day so as to avoid carrying the risk overnight. They are extremely sharp in spotting trades with high probability of making a profit and executing them fearlessly. It is this trait that I really admire them.
What's their edge?
SPEED This is one of the most important factor contributing to the success of most of these traders. Having a fast Internet lease line connection, powerful computers, fast and stable trading platform make a lot of difference to these traders. That milli second advantage is what all these traders need to beat others to a trade. Having this speed superiority will enhance the confidence of a trader which is an important emotional and psychological aspect of a trader's mindset.
The real estate close to the Chicago Mercantile Exchange (CME) is very expensive because most broking houses and traders entrench themselves near to the exchange so that the Internet lease line connection is shorter and thus faster for the execution of trades.
COST Most of these Million Dollar traders are high volume traders with an average volume of at least 1,000 to 5,000 trades a day. They are very nibble and versatile, scratching or cutting their losses very fast once they feel that a trade will not work out. Thus the transaction cost would be a very important component to their profitability. Average commission amount to a few thousand dollars a day.
All professional traders join the various exchanges such as SGX or CME as members to get preferential commission, with scratch trade rebates and volume rebates an additional bonuses. It is with the lower commission that they are able to trade without hesitation and worry about the cost of transaction.
GUTS This is what separate the Big Boys from the Small Men. This exceptional quality is what the Million Dollar Traders process. The willingness to take risk with that slight edge in their favour together with the speedy and efficient execution make trading really competitive for the rest the traders, sigh!
Sunday, December 21, 2008
Psychology of Trading
Why are we not performing up to expectation for this special account? I am a bit shy to acknowledge our shortcoming and vulnerability as a human, a trader. One of the major problem we are facing is the FEAR factor, especially when it involve losing money other than our own. Losing money in trading is quite common, we are immune to it but yet we feel very uncomfortable losing money for this special account.
Traditionally, trading condition is more difficult in December due to the holiday mood and book closure. I don't believe in giving excuses, we need to tune ourselves mentally to the new challenges ahead, put in more effort and focus in our trading.
Traditionally, trading condition is more difficult in December due to the holiday mood and book closure. I don't believe in giving excuses, we need to tune ourselves mentally to the new challenges ahead, put in more effort and focus in our trading.
Sunday, December 14, 2008
What Happen?
Hey, what is happening to our special account?
We have not been performing up to expectation, had done only 3 trades so far for the past 9 trading days with 2 of them having been stopped out. Yeah, small losses, good money management, but, bottom line is we are in the RED! That's unacceptable!
I would consider Robert and myself the Elite Traders in our field of expertise. So, what's the problem? One of the major problem is the lack of focus and not enough effort put in, spending too little time to trade this account. We need to make adjustment.
I have decided to split the account into 2, with Robert handling S$200k and myself S$250k with effect from January 2009. This will ensure individual accountability, performance and freedom. We will continue to consult each other regularly with regards to trading techniques, high probability trades and will be jointly responsible for the overall account.
Read in the newspaper about Bernard Madoff, a former chairman of the Nasdaq Stock Market, accused of US$50 billion fraud despite building a trading powerhouse that had prospered for more than four decades. His hedge funds oversaw some US$17 billion, attracting investors with the promise of high returns with low fees.
One of the funds reported having US$7.3 billion in assets claimed to have paid more than 11 per cent per year through its 15 year track record despite the generally low-yielding investment strategies he described to his clients. He had lost money on his trades and paid investors with money that wasn't there, a "Ponzi Scheme" offering unusually high returns, with early investors paid off with money from later investors.
What a shock, in term of scope and duration, Nick Leeson the rogue trader that bankrupt British Bank, Baring with US$1 Billion losses in derivatives trading would be having the last laugh.
We have not been performing up to expectation, had done only 3 trades so far for the past 9 trading days with 2 of them having been stopped out. Yeah, small losses, good money management, but, bottom line is we are in the RED! That's unacceptable!
I would consider Robert and myself the Elite Traders in our field of expertise. So, what's the problem? One of the major problem is the lack of focus and not enough effort put in, spending too little time to trade this account. We need to make adjustment.
I have decided to split the account into 2, with Robert handling S$200k and myself S$250k with effect from January 2009. This will ensure individual accountability, performance and freedom. We will continue to consult each other regularly with regards to trading techniques, high probability trades and will be jointly responsible for the overall account.
Read in the newspaper about Bernard Madoff, a former chairman of the Nasdaq Stock Market, accused of US$50 billion fraud despite building a trading powerhouse that had prospered for more than four decades. His hedge funds oversaw some US$17 billion, attracting investors with the promise of high returns with low fees.
One of the funds reported having US$7.3 billion in assets claimed to have paid more than 11 per cent per year through its 15 year track record despite the generally low-yielding investment strategies he described to his clients. He had lost money on his trades and paid investors with money that wasn't there, a "Ponzi Scheme" offering unusually high returns, with early investors paid off with money from later investors.
What a shock, in term of scope and duration, Nick Leeson the rogue trader that bankrupt British Bank, Baring with US$1 Billion losses in derivatives trading would be having the last laugh.
Saturday, December 6, 2008
Beware
"$28,000 profits in 1 day!"
"I started trading with 2,200 and my profits are showing $33,000 in 4 months"
"I have turned US$27,000 into US$183,000 in 2 months"
"How to make $1,500 per day in this downtrend market in 10 minutes"
"Make 20-50% returns every month"
These advertisements appear in our newspaper regularly, inviting you to their free seminar. They are out to con the gullible into believing that it's so easy to make money by just attending a few days intensive course that cost a few thousand dollars.
It's impossible to achieve that kind of results consistently in such a short period of time. The result might just be paper trading or a one time affair and eventually start losing money. I believe out of 100 students, probably more than 95 of them will lose money.
If these mentors or so call guru are so good, they won't be teaching others how to trade. With the type of ridiculous return advertised, they would be many times better than George Soros or Warren Buffett. Temasek and GIC should let them manage the accounts!
I came across a testimonial by a friend about doubling his money in forex trading after attending one of the course. I called to congratulate his achievement and asked how many times more did he manage to make from his initial investment. I was surprise to hear that he had quit trading and gone into some other business for reasons that he did not wish to share, probably out of shame.
If my friend indeed make money, I don't think he would have quit trading. How can you trust those testimonies in the advertisement? Make $1,500 per day in 10 minutes or $28,000 in 1 day? There is a fool born every second!
"I started trading with 2,200 and my profits are showing $33,000 in 4 months"
"I have turned US$27,000 into US$183,000 in 2 months"
"How to make $1,500 per day in this downtrend market in 10 minutes"
"Make 20-50% returns every month"
These advertisements appear in our newspaper regularly, inviting you to their free seminar. They are out to con the gullible into believing that it's so easy to make money by just attending a few days intensive course that cost a few thousand dollars.
It's impossible to achieve that kind of results consistently in such a short period of time. The result might just be paper trading or a one time affair and eventually start losing money. I believe out of 100 students, probably more than 95 of them will lose money.
If these mentors or so call guru are so good, they won't be teaching others how to trade. With the type of ridiculous return advertised, they would be many times better than George Soros or Warren Buffett. Temasek and GIC should let them manage the accounts!
I came across a testimonial by a friend about doubling his money in forex trading after attending one of the course. I called to congratulate his achievement and asked how many times more did he manage to make from his initial investment. I was surprise to hear that he had quit trading and gone into some other business for reasons that he did not wish to share, probably out of shame.
If my friend indeed make money, I don't think he would have quit trading. How can you trust those testimonies in the advertisement? Make $1,500 per day in 10 minutes or $28,000 in 1 day? There is a fool born every second!
Wednesday, December 3, 2008
Open Ceremony
We started trading today in a quiet market. The volume in the Simsci was light with less than 6,000 lots traded. We were stopped out in our first trade and incurred some losses. Daily account balance will be posted the next day at the other blog, leverage results.
December will be a quiet month due to the holiday season and year end book closing. With the death of many hedge funds and ongoing financial meltdown, most retail customers were also burnt and staying out of the market. Those left behind are the really good professional traders pitting their skill against each other. The best survive!
December will be a quiet month due to the holiday season and year end book closing. With the death of many hedge funds and ongoing financial meltdown, most retail customers were also burnt and staying out of the market. Those left behind are the really good professional traders pitting their skill against each other. The best survive!
Sunday, November 30, 2008
Another Bailout
"If you owe the bank $100, that's your problem. If you owe the bank $100 milion, that's the bank's problem" Jean Paul Getty
Citigroup, one of the world largest banking group need more than USD300 billion of US taxpayers money to bail them out, the US government have no choice, letting Citigroup meltdown could have been catastrophic.
An article by Eric Dash and Julie Creswell exposed how some of the country's best paid bankers were overrated dopes who had no idea what they were selling; or greedy cynics who did know and turned a blind eye.
The bank's executives were clueless about the reckless financial instruments they were creating, or were so ensnared by the cronyism between the bank's risk managers and risk takers that they had no interest in stopping it.
This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics.
Who are those who have benefited?
Citigroup, one of the world largest banking group need more than USD300 billion of US taxpayers money to bail them out, the US government have no choice, letting Citigroup meltdown could have been catastrophic.
An article by Eric Dash and Julie Creswell exposed how some of the country's best paid bankers were overrated dopes who had no idea what they were selling; or greedy cynics who did know and turned a blind eye.
The bank's executives were clueless about the reckless financial instruments they were creating, or were so ensnared by the cronyism between the bank's risk managers and risk takers that they had no interest in stopping it.
This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics.
Who are those who have benefited?
- People who had no business buying a home, with nothing down and nothing to pay for two years.
- People who had no business pushing such mortgages, but made fortunes doing so.
- People who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so.
- People who had no business rating those loans as AAA, but made a fortune doing so; and
- People who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.
Citigroup was involved in, and made money from, almost every link in the chain. They are just assuming home prices would keep going up. How stupid!
In Bakersfield, California, a Mexican strawberry picker with an income of USD14,000 and no literacy in English, was lent every penny he needed to buy a house for USD720,000. Those subprime lenders don't even bother whether this guy has the ability to pay the monthly instalment and his credit worthiness!
GREED is written all over the total unabashed complicity of the upper class of American capitalism.
Sunday, November 23, 2008
Accountability
Read in Sunday Times today that Town Councils must be accountable to their residents for what they do with the money they collect from them, said Singapore's National Development Minister Mah Bow Tan. "Each Town Councils has the duty to explain to its residents how it invests its funds, what is it philosophy, what are the risks it takes"
News emerged last week that eight of the 14 Town Councils run by the People's Action Party have invested about S$16 million in troubled structured products.
How about Temasek's more than $400 million losses in Australian childcare chain, ABC Learning in less than 2 years? How about GIC's billion dollar investment in overseas financial institutions? Invest for the long term? How long? How many more bad investment decisions? Who are these "professional" managers responsible for the deals?
I am glad to learn that former chief executive officer of NTUC Income is considering standing as Singapore's next elected president or contesting in the next general election as an independent candidate if more than 100,000 signatures and names of Singaporeans are willing to give him their support. He feels that the government has lost touch with the ground, the widening income gap and the high salaries of Government leaders.
Yes, the whole world is facing the same problem of high salaries of CEOs, senior executives and the indecent performance bonuses that drive them to take highly risky business ventures.
Temasek which manages a portfolio of S$185 billion, announced that its senior managers had volunteered to take salary cuts of 15% to 25% as part of a company-wide reduction. Civil service salaries, including those of top political leaders, would be adjusted in light of the economic turmoil, said Finance Minister Tharman Shanmugaratnam.
That's a good move by the government to reign in high salaries and sending a message to the private sector's fat cat CEOs, directors and senior executives. The government should do more to slow the widening income gap.
News emerged last week that eight of the 14 Town Councils run by the People's Action Party have invested about S$16 million in troubled structured products.
How about Temasek's more than $400 million losses in Australian childcare chain, ABC Learning in less than 2 years? How about GIC's billion dollar investment in overseas financial institutions? Invest for the long term? How long? How many more bad investment decisions? Who are these "professional" managers responsible for the deals?
I am glad to learn that former chief executive officer of NTUC Income is considering standing as Singapore's next elected president or contesting in the next general election as an independent candidate if more than 100,000 signatures and names of Singaporeans are willing to give him their support. He feels that the government has lost touch with the ground, the widening income gap and the high salaries of Government leaders.
Yes, the whole world is facing the same problem of high salaries of CEOs, senior executives and the indecent performance bonuses that drive them to take highly risky business ventures.
Temasek which manages a portfolio of S$185 billion, announced that its senior managers had volunteered to take salary cuts of 15% to 25% as part of a company-wide reduction. Civil service salaries, including those of top political leaders, would be adjusted in light of the economic turmoil, said Finance Minister Tharman Shanmugaratnam.
That's a good move by the government to reign in high salaries and sending a message to the private sector's fat cat CEOs, directors and senior executives. The government should do more to slow the widening income gap.
Saturday, November 22, 2008
Gambler Vs Trader
My brother posted this question to us, "What is the difference between a Gambler and a Trader?"
In his opinion, a Gambler take Risk while a Trader manage Risk.
I have yet to meet a Gambler who makes money but I have many trader friends who are consistently making good money trading in financial products. The odds of taking money away from the Casino table is so slim that less than 1% of the gamblers win over a period of time. If gamblers can win, there will be no casinos around!
The reason gamblers lose is because the odds against them is so high. High rollers get 1st class air tickets, limousine services, 5 star hotel stay, good food and expensive wine, all FREE from Casinos. Casinos welcome them with their door wide open to have fun, entertainment and providing impeccable services because these high rollers will later contribute to their bottom line.
Gamblers don't know the odds of striking lottery, TOTO, horse or soccer bets including commission and the wide spread. Smart people only go in small occasionally for the fun and entertainment. The bookmakers are the one laughing all the way to the bank, that's why the government have the monopoly, it will be criminal for anyone trying to muscle into this lucrative business.
Traders have a much better chance of winning than gamblers because they are pitting their skill against other traders though having to pay comm for each transaction. The comm amount to billions to feed the financial industry, that's why more than 80% of the trader loses money and 99% of the retail customer loses their pants.
In my opinion, traders who don't make money consistently are gambling, they lack trading and money management skill. Hedge Fund and Unit Trust managers are good for nothing if they are unable to give positive absolute return over the monies they manage. It's sad to hear so many Hedge Fund and Unit Trust losing money big time despite having huge resources at their disposal.
Most Hedge Funds take risky gamble with their leverage of 1:30 borrowed from the bank. Most Unit Trust make small money during Bull market and lose big time in Bear market. Do you still want to pay them management fees while losing money for you? They are so professional in their explanation and excuses for their underperformance without feeling guilty or shameful.
Annual awards and recognition were given out to the best performing Unit Trust even when they are losing the least money among the industry!
Even Warren Buffett is not spared. Berkshire stock has lost close to half of its value since hitting a record high last December, as the company struggles with lower returns at its insurance businesses, the declining value of its stock holdings as well as paper losses on derivative contracts. He is a legend and greatest investor because of his consistent performance over the years.
In his opinion, a Gambler take Risk while a Trader manage Risk.
I have yet to meet a Gambler who makes money but I have many trader friends who are consistently making good money trading in financial products. The odds of taking money away from the Casino table is so slim that less than 1% of the gamblers win over a period of time. If gamblers can win, there will be no casinos around!
The reason gamblers lose is because the odds against them is so high. High rollers get 1st class air tickets, limousine services, 5 star hotel stay, good food and expensive wine, all FREE from Casinos. Casinos welcome them with their door wide open to have fun, entertainment and providing impeccable services because these high rollers will later contribute to their bottom line.
Gamblers don't know the odds of striking lottery, TOTO, horse or soccer bets including commission and the wide spread. Smart people only go in small occasionally for the fun and entertainment. The bookmakers are the one laughing all the way to the bank, that's why the government have the monopoly, it will be criminal for anyone trying to muscle into this lucrative business.
Traders have a much better chance of winning than gamblers because they are pitting their skill against other traders though having to pay comm for each transaction. The comm amount to billions to feed the financial industry, that's why more than 80% of the trader loses money and 99% of the retail customer loses their pants.
In my opinion, traders who don't make money consistently are gambling, they lack trading and money management skill. Hedge Fund and Unit Trust managers are good for nothing if they are unable to give positive absolute return over the monies they manage. It's sad to hear so many Hedge Fund and Unit Trust losing money big time despite having huge resources at their disposal.
Most Hedge Funds take risky gamble with their leverage of 1:30 borrowed from the bank. Most Unit Trust make small money during Bull market and lose big time in Bear market. Do you still want to pay them management fees while losing money for you? They are so professional in their explanation and excuses for their underperformance without feeling guilty or shameful.
Annual awards and recognition were given out to the best performing Unit Trust even when they are losing the least money among the industry!
Even Warren Buffett is not spared. Berkshire stock has lost close to half of its value since hitting a record high last December, as the company struggles with lower returns at its insurance businesses, the declining value of its stock holdings as well as paper losses on derivative contracts. He is a legend and greatest investor because of his consistent performance over the years.
Friday, November 14, 2008
Getting Ready
"Money never starts an idea. It's always the idea that starts the money" Owen Laughlin
After months of preparation, we should be trading by 1st December with an initial capital of S$450,000/-. With a goal of achieving a 1% monthly return, our target will be S$4,500/- or a daily target of S$205/- base on 22 trading days in a month. That's Chicken Feat!
Am I setting a target that is too low? How can I give more than is expected of me?
Our objective is capital preservation and not taking unnecessary risk. The plan is to lay the foundation and build up foreign capital before we proceed to more aggressive trading.
After months of preparation, we should be trading by 1st December with an initial capital of S$450,000/-. With a goal of achieving a 1% monthly return, our target will be S$4,500/- or a daily target of S$205/- base on 22 trading days in a month. That's Chicken Feat!
Am I setting a target that is too low? How can I give more than is expected of me?
Our objective is capital preservation and not taking unnecessary risk. The plan is to lay the foundation and build up foreign capital before we proceed to more aggressive trading.
Sunday, November 9, 2008
Failure
"Failure, the Mother of Success"
Thomas Edison failed more than a thousand times before we could see the light at night. If he had given up hope at the 999th attempt, what would our world be today? Hey! this is the story my Primary School teacher used to encourage us, "Don't Give Up!" But, we can still use candles since we are not as smart as Edison, right?
To be successful as a trader, you don't need to invent a new indicator. The fact is, none of the indicators in use now can be foolproof even though some are extremely complicated and sophisticated. Indicators used in different time frames tell a different story.
What is so difficult to be in this business of day trading? The decision making is so simple, it's either buy or sell yet more than 80% of the new traders failed to make it. The reason is, trading comes with a hefty price tag, it's a negative, negative sum game, winner and loser both need to pay commission, winner pay taxes, loser can't deduct and now a 7% GST on commission upfront.
Apart from the IRA, the winners are the Exchanges, mostly monopoly. When profits are down, they can simply increase the clearing fees, who can stop them? The CEO and senior management get handsome bonuses and stock options for their "hard work". They have a money printing machine contributed by all the traders. And, it will get worst if they merge to reduce further competition. The runners up are all those broking firms, directors owning big bungalows and enjoying lavish lifestyle.
Traders are squeeze left, right and centre but, there are still 10% of the traders who succeed despite the odds. Those who join the Exchange as a member, get a "preferential commission" treatment, a "privilege", very much lower comm than trading as a retail customer. Again, you need to pay monthly membership fees, etc, it's so easy for the Exchanges to make money, no risk, I am so jealous.
Most traders lose money because the odds are against them. So, what is the secret to the few who are successful? What's the magic formula? I read plenty of books on trading, yet I still struggled for more than 2 years to know the answer despite being very successful as a floor trader for 20 years.
There is NO SECRET OR MAGIC FORMULA. The principles are found in most trading books, the problem is most of us read and forget. We don't apply what we learn, many even pay a few thousand for a 3/4 days intensive trading courses and think they can be good traders. Fat Hope!
"The road ahead is long, the climb is steep", Barack Obama. It take time to be a good and experience trader.
One of the most important attribute of a successful trader is the courage to admit that he is wrong in his analysis and judgement. CUT, CUT, CUT your losses fast when you are wrong, if you can't do it, don't be a trader! There is no room for being stubborn. When holding on to a bad position, a trader will not have a clear mind and tend to make further mistakes.
It's that simple, traders know about it, but it's so difficult to execute. This philosophy applies in a business venture, a relationship, etc. It's painful to cut off the disease arm or leg, but to survive, there is no choice. It's stressful holding on to hope.
I always believe in hard work and doing the right thing within my own limitation. Focus and learn, after some time you will understand the market behaviour, the players involved, the trading techniques required for your own temperament. Failure is part of the game, learn to accept it.
Thomas Edison failed more than a thousand times before we could see the light at night. If he had given up hope at the 999th attempt, what would our world be today? Hey! this is the story my Primary School teacher used to encourage us, "Don't Give Up!" But, we can still use candles since we are not as smart as Edison, right?
To be successful as a trader, you don't need to invent a new indicator. The fact is, none of the indicators in use now can be foolproof even though some are extremely complicated and sophisticated. Indicators used in different time frames tell a different story.
What is so difficult to be in this business of day trading? The decision making is so simple, it's either buy or sell yet more than 80% of the new traders failed to make it. The reason is, trading comes with a hefty price tag, it's a negative, negative sum game, winner and loser both need to pay commission, winner pay taxes, loser can't deduct and now a 7% GST on commission upfront.
Apart from the IRA, the winners are the Exchanges, mostly monopoly. When profits are down, they can simply increase the clearing fees, who can stop them? The CEO and senior management get handsome bonuses and stock options for their "hard work". They have a money printing machine contributed by all the traders. And, it will get worst if they merge to reduce further competition. The runners up are all those broking firms, directors owning big bungalows and enjoying lavish lifestyle.
Traders are squeeze left, right and centre but, there are still 10% of the traders who succeed despite the odds. Those who join the Exchange as a member, get a "preferential commission" treatment, a "privilege", very much lower comm than trading as a retail customer. Again, you need to pay monthly membership fees, etc, it's so easy for the Exchanges to make money, no risk, I am so jealous.
Most traders lose money because the odds are against them. So, what is the secret to the few who are successful? What's the magic formula? I read plenty of books on trading, yet I still struggled for more than 2 years to know the answer despite being very successful as a floor trader for 20 years.
There is NO SECRET OR MAGIC FORMULA. The principles are found in most trading books, the problem is most of us read and forget. We don't apply what we learn, many even pay a few thousand for a 3/4 days intensive trading courses and think they can be good traders. Fat Hope!
"The road ahead is long, the climb is steep", Barack Obama. It take time to be a good and experience trader.
One of the most important attribute of a successful trader is the courage to admit that he is wrong in his analysis and judgement. CUT, CUT, CUT your losses fast when you are wrong, if you can't do it, don't be a trader! There is no room for being stubborn. When holding on to a bad position, a trader will not have a clear mind and tend to make further mistakes.
It's that simple, traders know about it, but it's so difficult to execute. This philosophy applies in a business venture, a relationship, etc. It's painful to cut off the disease arm or leg, but to survive, there is no choice. It's stressful holding on to hope.
I always believe in hard work and doing the right thing within my own limitation. Focus and learn, after some time you will understand the market behaviour, the players involved, the trading techniques required for your own temperament. Failure is part of the game, learn to accept it.
Thursday, November 6, 2008
Out-trade
Out-trade can be costly affair for any trader. Out-trade meaning when there is a discrepancy between 2 traders over a transaction, it can be disagreement over volume, price, trade going into wrong trader or trader dispute having any transaction with the opposite party..
Out-trade is common for most heavy volume floor traders, it's part of the business cost due to human error on either party. It's unbelievable that most out-trades ended up losing money. For winners, the traders simply split the profit. For losses in dispute, we can request to view tape as there are many cameras on the trading floor. Disputes are settled after viewing the tape or opt for arbitration if there is still no compromise between the traders.
I have the biggest out-trade of my career in 1997. It involves 10 Nikkei contract amounting to losses of 1,700 tics which is Yen 4,250,000 or about S$68,000 at that time. After viewing the tape, trader QAC admitted that it was her mistake when I told her that the 10 contract was traded with another trader. She made me good and took all the losses graciously without any question.
Till this day, I still remember QAC as a trader who honour her trade and a real gentlewoman. No if and but unlike some traders who tried to argue even knowing they were in the wrong.
Recently, I have a out-trade of another kind or drop out trade in the electronic age, what the hell! I have never expect this to happen, missing trade from my system, hanging in the air and those brokers taking their own sweet time to determine who the owner is.
October was a hectic month, on 27/10/08, Monday, I checked my statement and found I have a imbalance position of long 14 Nikkei Contract and short 5 Topix, a perfect hedge position would be 2 to 1 ratio, which mean I should have only 10 Nikkei contract. I called the backroom and told them of the situation and the additional 4 Nikkei which might not belong to me.
After checking, they called to inform me that there was nothing wrong with my Nikkei trades on Friday and the 4 Nikkei belongs to me. So I am stuck with a naked long 4 Nikkei in a fast falling market. I couldn't believe the 4 Nikkei belongs to me but nevertheless I have to swallow it. Meanwhile, the market clashes and it was too painful to cut the losses.
On Tuesday, when the market recovers, I started to cut the position and was very happy that the damage was not that severe. It was stressful and affected my trading.
On Wednesday, I got a shock of my life when the backroom guy called me in the afternoon to tell me that I have a drop out trade the previous Friday. They will put back 2 short Topix contract into my account. What the f@#k! I was told to cut the position, take the losses and talk later.
The market has gone up and the losses came up to Yen 1,020,000 or about S$15,300/-. If they have found the error another 2 days later, the losses would have been close to S$50,000/- Who is to blame and who is accountable for the losses?
It was my mistake to have trusted the computer completely and assume that the position would never go wrong. But, how to accept a drop-out trade that was put into my account a few days later? Those guys must be sleeping and pushing away their responsibilities.
I am still awaiting an answer to their investigation, and it seems that I have to take the blame and the losses which was my own doing, as the trade belongs to me and I should know my own position. To my fellow electronic traders, check your trades, volume and position before switching off the computer and make sure it tally with the statement the following day.
Out-trade is common for most heavy volume floor traders, it's part of the business cost due to human error on either party. It's unbelievable that most out-trades ended up losing money. For winners, the traders simply split the profit. For losses in dispute, we can request to view tape as there are many cameras on the trading floor. Disputes are settled after viewing the tape or opt for arbitration if there is still no compromise between the traders.
I have the biggest out-trade of my career in 1997. It involves 10 Nikkei contract amounting to losses of 1,700 tics which is Yen 4,250,000 or about S$68,000 at that time. After viewing the tape, trader QAC admitted that it was her mistake when I told her that the 10 contract was traded with another trader. She made me good and took all the losses graciously without any question.
Till this day, I still remember QAC as a trader who honour her trade and a real gentlewoman. No if and but unlike some traders who tried to argue even knowing they were in the wrong.
Recently, I have a out-trade of another kind or drop out trade in the electronic age, what the hell! I have never expect this to happen, missing trade from my system, hanging in the air and those brokers taking their own sweet time to determine who the owner is.
October was a hectic month, on 27/10/08, Monday, I checked my statement and found I have a imbalance position of long 14 Nikkei Contract and short 5 Topix, a perfect hedge position would be 2 to 1 ratio, which mean I should have only 10 Nikkei contract. I called the backroom and told them of the situation and the additional 4 Nikkei which might not belong to me.
After checking, they called to inform me that there was nothing wrong with my Nikkei trades on Friday and the 4 Nikkei belongs to me. So I am stuck with a naked long 4 Nikkei in a fast falling market. I couldn't believe the 4 Nikkei belongs to me but nevertheless I have to swallow it. Meanwhile, the market clashes and it was too painful to cut the losses.
On Tuesday, when the market recovers, I started to cut the position and was very happy that the damage was not that severe. It was stressful and affected my trading.
On Wednesday, I got a shock of my life when the backroom guy called me in the afternoon to tell me that I have a drop out trade the previous Friday. They will put back 2 short Topix contract into my account. What the f@#k! I was told to cut the position, take the losses and talk later.
The market has gone up and the losses came up to Yen 1,020,000 or about S$15,300/-. If they have found the error another 2 days later, the losses would have been close to S$50,000/- Who is to blame and who is accountable for the losses?
It was my mistake to have trusted the computer completely and assume that the position would never go wrong. But, how to accept a drop-out trade that was put into my account a few days later? Those guys must be sleeping and pushing away their responsibilities.
I am still awaiting an answer to their investigation, and it seems that I have to take the blame and the losses which was my own doing, as the trade belongs to me and I should know my own position. To my fellow electronic traders, check your trades, volume and position before switching off the computer and make sure it tally with the statement the following day.
Sunday, November 2, 2008
Success
Being hard working does not mean you will be successful.
But, to be successful, you need to be hard working.
We don't become successful simply through luck. Success comes from doing those things and mastering those principles that produce success. Concentrate on developing those qualities in yourself that will make you a winner.
Persons with mediocre accomplishments are quick to explain why they haven't, why they don't, why they can't and why they aren't. Successful individual are less likely to make excuses.
Believe in Yourself that You Can Succeed and You Will.
Develop Positive Attitude.
Think Enthusiastically.
Build up the Confidence.
Have Faith.
Focus.
Action.
How Can I do Better?
How Can I do More with Less Effort?
How Can I Increase My Personal Efficiency?
To gain respect of others, you must first think you deserve respect. And the more respect you have for yourself, the more others will have respect for you. You are what you think you are.
But, to be successful, you need to be hard working.
We don't become successful simply through luck. Success comes from doing those things and mastering those principles that produce success. Concentrate on developing those qualities in yourself that will make you a winner.
Persons with mediocre accomplishments are quick to explain why they haven't, why they don't, why they can't and why they aren't. Successful individual are less likely to make excuses.
Believe in Yourself that You Can Succeed and You Will.
Develop Positive Attitude.
Think Enthusiastically.
Build up the Confidence.
Have Faith.
Focus.
Action.
How Can I do Better?
How Can I do More with Less Effort?
How Can I Increase My Personal Efficiency?
To gain respect of others, you must first think you deserve respect. And the more respect you have for yourself, the more others will have respect for you. You are what you think you are.
Saturday, November 1, 2008
New Account
I am setting up a new account to diversify the risk. It is partially funded by some good friends who have great appetite for risk taking. Futures trading is a highly risky business. Being in this business for more than 20 years, risk management is my forte, there is no room for being reckless.
My partner Robert (RBT) and I will be the adviser to this special account. I have known Robert for more than 15 years and have been very thankful to him for his encouragement and guidance after my return to electronic trading in the arcade. Robert is one of the most consistent trader I have known, a steady, calm and patient trader with a good grasp of the market. He is a very mature and confident trader, a rare gem!
I have absolute faith and trust in Robert's ability, integrity and honesty. I am very glad that he had agreed to work with me in building up this account. We have a very good cordial working relationship and great respect for each other.
For this account, we will take on day and position trading as and when we spot a trading opportunity that have a high probability of success. We will be more conservative in risk taking and thus a lower expectation. My target is to achieve a consistent return of minimum 1% per month.
It is a personal challenge for me to ensure the success of this account. Daily trading performance will be updated on Leverageresults on the right top corner for those who are keen to follow our progress.
Finally, I am extremely grateful to Peter (HWY) who have encouraged me to return to the arcade and George (FIG) who have given me many important pointers in trading.
My partner Robert (RBT) and I will be the adviser to this special account. I have known Robert for more than 15 years and have been very thankful to him for his encouragement and guidance after my return to electronic trading in the arcade. Robert is one of the most consistent trader I have known, a steady, calm and patient trader with a good grasp of the market. He is a very mature and confident trader, a rare gem!
I have absolute faith and trust in Robert's ability, integrity and honesty. I am very glad that he had agreed to work with me in building up this account. We have a very good cordial working relationship and great respect for each other.
For this account, we will take on day and position trading as and when we spot a trading opportunity that have a high probability of success. We will be more conservative in risk taking and thus a lower expectation. My target is to achieve a consistent return of minimum 1% per month.
It is a personal challenge for me to ensure the success of this account. Daily trading performance will be updated on Leverageresults on the right top corner for those who are keen to follow our progress.
Finally, I am extremely grateful to Peter (HWY) who have encouraged me to return to the arcade and George (FIG) who have given me many important pointers in trading.
Tuesday, October 28, 2008
Five Fundamental Truths of Trading
- Anything can happen.
- you don't need to know what is going to happen next in order to make money.
- There is a random distribution between wins and losses for any given set of variables that define an edge.
- An edge is nothing more than an indication of a higher probability of one thing happening over another.
- Every moment in the market is unique.
Mechanical Stage
- Build the self-trust necessary to operate in an unlimited environment.
- Learn to flawlessly execute a trading system.
- Train your mind to think in probabilities (the 5 fundamental truths).
- Create a strong, unshakable belief in your consistency as a trader.
Principles of Consistency
- I objectively identify my edges.
- I predefine the risk of every trade.
- I completely accept risk or I am willing to let go of the trade.
- I act on my edges without reservation or hesitation.
- I pay myself as the market makes money available to me.
- I continually monitor my susceptibility for making errors.
- I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.
The above is extracted from the book , Trading in the Zone by Mark Douglas.
Sunday, October 26, 2008
My GPMG
This is the place where I battle enemies with my General Purpose Machine Gun (GPMG). I do not know who my enemies are but I am well prepared to defend myself, sometimes even against friendly fire. Many times I meet enemies with tank or artillery firepower (Hedge Funds) and have to run for cover. Pity those who are only carrying a sword to the battlefield.
Being a scalper and day trader, I need to be well prepared with high speed Internet connection and a tip top trading platform. Apart from having sophisticated weapons, I must be well trained, physically fit to attack and defend my position.
Saturday, October 25, 2008
Believe It or Not
Mr. Alan Greenspan, the former chairman of the US Federal Reserve acknowledged he was in a state of "shocked disbelief" at the breakdown of credit markets that triggered what he called "a once-in-a-century credit tsunami" He had put too much faith in the self-correcting power of free markets and failed to anticipate the self destructive power of wanton mortgage lending.
I couldn't believe the Asian market would collapse again in yesterday's trading and suffered my biggest one day loss in electronic trading. Though I had a record profitable month, I was really humbled, my views were screwed despite the market showing early sign of weakness. The Dow Jones recovered more than 100 points overnight, there is no reason for the Asian market to keep falling.
It's the price I paid for being stubborn, there is no room for a trader not to admit he is wrong. I have not been objective, it must be the continuing unwinding of the huge positions by Hedge Fund Managers. I can't imagine how many Hedge Funds will go bankrupt with their clients' money. Of course, there are many that managed to make a killing as well, they will reward themselves handsomely without doubt.
"Trade what you see, not what you think" I have forgotten about this important rule.
Where is the bottom? Few weeks back, some friends asked me whether they can buy Cosco, Yang ZiJiang, Capital Land, etc. They were trying to average down from the stocks bought at higher levels. I told them I was not comfortable even at those levels unless they have deep pockets and can ride out the financial storm. I recommended instead some blue chips stock which I think will recover first if they insist on getting into the market.
I was dead wrong, some of those super blue chips tanked more than 40%. Can you believe it? Where is the comfort? Why were analysts still recommending buy calls weeks ago when the storm started? It's best they shut up, you will get screwed if you think they are good and believe in them, they are just human. The global meltdown has wiped out more than US$30 trillion from the value of stocks.
Economic forecasts are more often wrong than right. A July 2003 report by the US Government Accounting Office found that from 1991 to 2001, the IMF successfully predicted only 15 of the 134 recessions in developing countries during the period. Current account forecasts were also "inaccurate most of the time"
With regards to investment, it's money and risk management, we are wrong some of the time, no one is perfect. Everything is cheap now and it will get cheaper. I am worried for the economy and for those who will lose their job, it's going to be a "long cold winter", be prepared and get out of debt.
"Be greedy when others are fearful" Is it a good time to go into the maket? When can you buy shares at such a cheap price?
I couldn't believe the Asian market would collapse again in yesterday's trading and suffered my biggest one day loss in electronic trading. Though I had a record profitable month, I was really humbled, my views were screwed despite the market showing early sign of weakness. The Dow Jones recovered more than 100 points overnight, there is no reason for the Asian market to keep falling.
It's the price I paid for being stubborn, there is no room for a trader not to admit he is wrong. I have not been objective, it must be the continuing unwinding of the huge positions by Hedge Fund Managers. I can't imagine how many Hedge Funds will go bankrupt with their clients' money. Of course, there are many that managed to make a killing as well, they will reward themselves handsomely without doubt.
"Trade what you see, not what you think" I have forgotten about this important rule.
Where is the bottom? Few weeks back, some friends asked me whether they can buy Cosco, Yang ZiJiang, Capital Land, etc. They were trying to average down from the stocks bought at higher levels. I told them I was not comfortable even at those levels unless they have deep pockets and can ride out the financial storm. I recommended instead some blue chips stock which I think will recover first if they insist on getting into the market.
I was dead wrong, some of those super blue chips tanked more than 40%. Can you believe it? Where is the comfort? Why were analysts still recommending buy calls weeks ago when the storm started? It's best they shut up, you will get screwed if you think they are good and believe in them, they are just human. The global meltdown has wiped out more than US$30 trillion from the value of stocks.
Economic forecasts are more often wrong than right. A July 2003 report by the US Government Accounting Office found that from 1991 to 2001, the IMF successfully predicted only 15 of the 134 recessions in developing countries during the period. Current account forecasts were also "inaccurate most of the time"
With regards to investment, it's money and risk management, we are wrong some of the time, no one is perfect. Everything is cheap now and it will get cheaper. I am worried for the economy and for those who will lose their job, it's going to be a "long cold winter", be prepared and get out of debt.
"Be greedy when others are fearful" Is it a good time to go into the maket? When can you buy shares at such a cheap price?
Saturday, October 18, 2008
Unit Trust and Hedge Funds
Do you trust them? How to find another George Soros or Warren Buffett?
More than 90% of Unit Trust lose money with many losing more than 50% of the funds, giving all type of shit for their failure and yet being paid annual management fees for their lousy performance. Many think Unit Trust are safer than stocks because they are diversified and managed professionally. Why entrust them with your funds when many of the fund managers are no better than you and I.
Investors have been advised to stay invested for the long term, so, how long? 10 years or 20 years? Some don't even see daylight after 10 years. Investors are down a few percent the moment they buy into Unit Trust because of the sales charge and the wide spread.
Hedge Funds are highly unregulated funds that live by their wits to take highly risky bet on stock, commodities, options, debt products and derivatives (futures) for their rich investors. Since it is Others People Money (OPM), most lack moral decency. Little is known about how they operate and the type of systemic risks they may generate and what kind of risk they pose to the financial system as a whole.
They take on complex hedging positions and move market with their size taking huge performance bonuses when they are right on their bet. They borrow heavily from banks averaging 1:30 to take such risky bet. These funds claim to deliver absolute returns in both rising and falling markets.
Experts are predicting the death of more than 1,100 funds this year due to the financial turmoil, so they just close shop with investors the major loser. These Hedge Funds Managers will just set up another new outfit and start all over again later. Who are the suckers?
I believe Hedge Funds are one of the major contributor to the recent financial turmoil resulting in the collapse of Lehman Brothers. Most Hedge Fund managers are reckless and greedy. Their combined gearing would move any market, they are the biggest bully and gambler.
In recent months, many had gone "long" on oil - snapping up oil futures - and "short" on banks - selling global bank shares aggressively. How could oil moved up to almost USD150/- per barrel in just a year or two from USD50/- without these sophisticated speculators? They pushed gold, silver, palm oil, wheat, rice, etc to new highs creating havoc world wide causing great misery to the ordinary folks with running inflation.
With oil price and commodities prices dropping like a stone, many of these cowboy hedgies will go belly up. The Long-Term Capital Management (LTCM) collapsed in 1998 sparkled a liquidity crises, but the US government bailed them out. With the collapse of so many hedge funds now, how to bail all of them out?
The deepening economic gloom had casused a massive sell-off in equities and commodities by imploding hedge funds whose large scale trading strategies had gone awry.
With record redemption by disgruntled and panicky investors, it has triggered a vicious circle in Asian equities markets where they had parked some of their spare cash in the hope of getting high returns. As they sell shares to raise funds, they depress prices further and prompt more redemption pressure from investors.
More than 90% of Unit Trust lose money with many losing more than 50% of the funds, giving all type of shit for their failure and yet being paid annual management fees for their lousy performance. Many think Unit Trust are safer than stocks because they are diversified and managed professionally. Why entrust them with your funds when many of the fund managers are no better than you and I.
Investors have been advised to stay invested for the long term, so, how long? 10 years or 20 years? Some don't even see daylight after 10 years. Investors are down a few percent the moment they buy into Unit Trust because of the sales charge and the wide spread.
Hedge Funds are highly unregulated funds that live by their wits to take highly risky bet on stock, commodities, options, debt products and derivatives (futures) for their rich investors. Since it is Others People Money (OPM), most lack moral decency. Little is known about how they operate and the type of systemic risks they may generate and what kind of risk they pose to the financial system as a whole.
They take on complex hedging positions and move market with their size taking huge performance bonuses when they are right on their bet. They borrow heavily from banks averaging 1:30 to take such risky bet. These funds claim to deliver absolute returns in both rising and falling markets.
Experts are predicting the death of more than 1,100 funds this year due to the financial turmoil, so they just close shop with investors the major loser. These Hedge Funds Managers will just set up another new outfit and start all over again later. Who are the suckers?
I believe Hedge Funds are one of the major contributor to the recent financial turmoil resulting in the collapse of Lehman Brothers. Most Hedge Fund managers are reckless and greedy. Their combined gearing would move any market, they are the biggest bully and gambler.
In recent months, many had gone "long" on oil - snapping up oil futures - and "short" on banks - selling global bank shares aggressively. How could oil moved up to almost USD150/- per barrel in just a year or two from USD50/- without these sophisticated speculators? They pushed gold, silver, palm oil, wheat, rice, etc to new highs creating havoc world wide causing great misery to the ordinary folks with running inflation.
With oil price and commodities prices dropping like a stone, many of these cowboy hedgies will go belly up. The Long-Term Capital Management (LTCM) collapsed in 1998 sparkled a liquidity crises, but the US government bailed them out. With the collapse of so many hedge funds now, how to bail all of them out?
The deepening economic gloom had casused a massive sell-off in equities and commodities by imploding hedge funds whose large scale trading strategies had gone awry.
With record redemption by disgruntled and panicky investors, it has triggered a vicious circle in Asian equities markets where they had parked some of their spare cash in the hope of getting high returns. As they sell shares to raise funds, they depress prices further and prompt more redemption pressure from investors.
Saturday, October 11, 2008
Quotes
"We simply attempt to be fearful when others are greedy, and to be greedy when others are fearful" Warren Buffett
"Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway" Warren Buffett
"If you don't know the Jewelry, know the Jeweller" Warren Buffett
"We can't control what happens to us, but we can control how we respond"
"If you look around the table and don't see a sucker, then you are the sucker"
"If you are going to panic, panic early"
"If you find yourself in the bottom of a deep hole, the first thing to do is stop digging"
"Trade what you see, not what you Think"
"Experience traders control risk, inexperienced traders chase gains" Alan Farley
"The market can remain irrational longer than you can remain Solvent" John Keynes
"Don't try to buy at the bottom and sell at the top. It can't be done except by Liars" Bernard Baruch
"If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes" Peter Lynch
"Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway" Warren Buffett
"If you don't know the Jewelry, know the Jeweller" Warren Buffett
"We can't control what happens to us, but we can control how we respond"
"If you look around the table and don't see a sucker, then you are the sucker"
"If you are going to panic, panic early"
"If you find yourself in the bottom of a deep hole, the first thing to do is stop digging"
"Trade what you see, not what you Think"
"Experience traders control risk, inexperienced traders chase gains" Alan Farley
"The market can remain irrational longer than you can remain Solvent" John Keynes
"Don't try to buy at the bottom and sell at the top. It can't be done except by Liars" Bernard Baruch
"If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes" Peter Lynch
Why Traders Fail
- They are damn STUBBORN , even knowing they are wrong in their judgement or trading technique. Despite being a very successful Floor Trader, it took me more than 2 years to accept changes and adapt myself to Electronic Trading, Unbelievable!
- They repeat the same trading mistakes again and again and again and yet still again. They are unable to control their emotion because some of these mistakes made money and sometimes they are able to get out of it from a very bad situation. It gives them a false impression that it's alright to make such mistakes. They don't realise that this is the major reason why they are not making it as a Trader by having such bad trading habit.
- The 3 most terrible mistakes are a) refusing to cut losses immediately until it burns a big hole in the pocket b) the next worst action is to start averaging on that 1st mistake hoping that it will recover back up for them to get out at break even or make some money c) not able to ride the profit when the trade is in their favor.
- They will blame anything, anybody even the market but themselves for having a bad trade, manifesting their immaturity acting like a cry baby. A matured trader would get out of the bad trade immediately without hesitation to cut out the risk even though the fault lies somewhere else, such as a break in Internet connection, trading system failure, etc.
- They lack DISCIPLINE, trading involves hard work, no short cut. Need to maintain Mental and Physical fitness by having enough rest and exercise so as to stay sharp and alert or else most likely to make unnecessary mistakes followed by more mistakes.
- They fail to focus on what they are doing, like a lost sheep not knowing which direction to go. They don't know which contract and trading style suit them most.
- They lack fighting spirit and the right attitude to confront each trading day.
- They lack CONFIDENCE in themselves because they keep repeating the same mistakes.
- They must accept the fact that not all trades make money and minimise the losses in those bad trades. Treat it as a part of business cost. It would be fantastic if there is a 60% accuracy when entering a trade, but will still a need to accept the losses in the other 40%, which is definitely hard to swallow.
- They lack money and risk management skill.
- They trade a size that is too big for their comfort in the beginning before learning the proper technique and good habits.
- They finally develop a monster in themselves call FEAR and that is the final straw in their trading career.
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