"Start small, dream big, build deep" Ng Tee How, President of AFACT
Yes, to all aspiring traders, that's sound advice.
"Small opportunities are often the beginning of great enterprises." - Demosthenes, Greek orator.
Met many traders during the launch of AFACT, Association of Financial and Commodity Traders (S) on the 23rd July 2009 and again the topic of "algo" trading seems to be the talk of the town. Here is the link to what "algo" is all about, http://nytimes.com/2009/07/24/business/24trading.html?ref=business.
These high frequency traders generated about US$21 billion in profit last year according to estimates by a research firm. These high-frequency specialists clearly have an edge over typical traders with their powerful computers housed right next to the Exchanges.
These systems are so fast they can outsmart or outrun other investors, humans and computers alike. A loophole in regulations allows market places like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee. That's definitely unfair advantage for those who have deep pockets.
I don't see such high-frequency trading in most Asian exchanges at the moment and such edge shouldn't be given to those few who can afford to pay a price for it. Many traders complained about these "algo" traders in the futures market with their intelligent software to "catch and squeeze them". There is no doubt that trading is difficult in the last 2 months, with lower volume, summer holidays and a trending up market.
Most traders don't do well in a trending up market, as it tend to whipsaw on it's way up unlike a falling market that can be drastic. There is definitely manipulation by the big boys in the market with their financial muscle, and if they are smart, that's a huge advantage, but don't forget Nick Leeson causes the collapse of Baring Bank trying to support the Nikkei!
These big boys such as hedge funds, mutual funds, unit trusts and banks operate on behalf of their rich clients to take high risk trades so as to get a cut of the profits and commission. It doesn't hurt their pocket when they lose, just bye bye and close shop. Not many of them make money while their investors are the real suckers.
Many traders are clearly unhappy and frustrated with the "algo" chipping away their profits but as traders we need to be flexible to adjust to the ever changing trading environment. We can still make money with sound money management and the trading skill acquired over the years, just tune it a little bit here and there. I don't feel such a huge impact of these "algo" traders, if I don't make money on any given day, it's because I am stubborn and don't follow the rules, it's my own problem!
"You can't stop the waves, but can can learn to surf" - Jon Kabat-Zinn
Robert is leaving the trading arcade to trade from home by the end of the month. I feel sad that he is leaving as he is the one who has given me a lot of inspiration to make a come back to trade in the arcade. I still remember his words of encouragement "is making about S$1,000/- a day OK with you?" I went back thinking, if Robert can make it, why can't I do it?
Robert's style of trading don't require so much speed, he is a tactical trader waiting for the right entry level and an extra-ordinary patience in riding profits on his good trades. He is so easy going and relax, watching you-tube and movies while trading and monitoring the market. I really admire him and how he can do it yet still being highly profitable.
Profit for the special account took a hit from the widening of the Topix/Nikkei spread, down to S$14,937.00. Now holding long 4 spread, didn't expect it to widen that much. That's one of the major problem of a trader, so, always "expect the unexpected"
Saturday, July 25, 2009
Saturday, July 18, 2009
Updates
"True religion is real living; living with all one's soul, with all one's goodness and righteousness" - Albert Einstein
"The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money" - Journalist Matt Taibbi on Goldman Sachs quarterly profits of US$3.44 billion.
Almost all the bank's earnings come from trading and they are not going to tell us how they do it. That money-making machine is running at US$38 million per day or US$1.58 million an hour. Wow! unbelievable, how Goldman can be so fast, opportunistic and canny in it's multi-billion dollar bets on the direction of the financial markets?
Goldman's Traders were known in New York as the Bandits of Broad Street and competitors comparing Goldman staff to bellicose "orcs" in the Lord of the Rings. With many of Goldman alumni in powerful government positions, that might have given Goldman a competitive edge in term of sensitive information.
The most objectionable aspect of Goldman's success is that it's earnings are shared by such a small number of already wealthy people since it distributes 49% of revenue to employees. These bankers are going back to enriching themselves through an elaborate, opaque form of casino trading which is semi-detached from the rest of the society.
It's no wonder traders are complaining about the difficult market trading condition. It's tough, we need to work harder, work smarter and taking more risk in order to survive in such a competitive environment with many more blood-sucking vampire squids.
Profit to date for the special account is S$16,056.00, at least this Jaw is still able to snatch some food from the vampire squids.
"The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money" - Journalist Matt Taibbi on Goldman Sachs quarterly profits of US$3.44 billion.
Almost all the bank's earnings come from trading and they are not going to tell us how they do it. That money-making machine is running at US$38 million per day or US$1.58 million an hour. Wow! unbelievable, how Goldman can be so fast, opportunistic and canny in it's multi-billion dollar bets on the direction of the financial markets?
Goldman's Traders were known in New York as the Bandits of Broad Street and competitors comparing Goldman staff to bellicose "orcs" in the Lord of the Rings. With many of Goldman alumni in powerful government positions, that might have given Goldman a competitive edge in term of sensitive information.
The most objectionable aspect of Goldman's success is that it's earnings are shared by such a small number of already wealthy people since it distributes 49% of revenue to employees. These bankers are going back to enriching themselves through an elaborate, opaque form of casino trading which is semi-detached from the rest of the society.
It's no wonder traders are complaining about the difficult market trading condition. It's tough, we need to work harder, work smarter and taking more risk in order to survive in such a competitive environment with many more blood-sucking vampire squids.
Profit to date for the special account is S$16,056.00, at least this Jaw is still able to snatch some food from the vampire squids.
Saturday, July 11, 2009
Updates
"Freedom is not worth having if it does not include the freedom to make mistakes" - Mahatma Gandhi
In trading, we have the freedom to make mistakes everyday, but not many of us are willing to admit our mistakes resulting in burning holes in our pockets at the end of the day.
"One mistake and you will regret it forever" - a Chinese proverb
Many years ago, I had a lunch partner trading together with me in the Taiwan Pit. This friend was a medium sized trader who was well respected by most traders on the floor as a very successful trader. I was impressed by him too, especially his courage in executing the size that I deem too big for my own comfort.
He traded in other contracts like Nikkei as well as forex, I find it amazing that he could cope with a few contracts base on his gut feel. He would always tell me his exploits, those that he made a killing but I never hear about his losses. The impression that gave everyone, including myself, was that he was a damn good trader.
Once, we happened to collect our monthly statement from our own clearing member and decided to exchange notes on our profit for the month. He showed me proudly that he had made more than 40K but I noticed that his commission was close to 30K resulting in his nett profit of less than 20K. I was shocked and questioned him how he ended up with such huge commission.
He told me that was his style of trading especially calling the backroom to execute trades on his behalf. The execution fee was US$1.00 per contract and it was OK for him since he was able to make more profit to cover the expenses. I told him the profit ratio to commission was way out, he was giving away too much money to the clearing firm. Instead he should execute the trades himself and have more quality trades.
I showed him my statement of about the same profit, but my commission was less than 5K, my nett profit was more than double his. I advised him to seriously look into the cost, it didn't make sense to me. I told him to execute the trades himself, stop trading forex because of the slippage, instead trade on the futures platform. Unfortunately, all these advice fell on deaf ears.
We drifted apart as he stayed away from the pit and executed his trades from cafes away from the exchange floor. Whenever we met, I always asked him "how's trading?". Without fail, he will answer "good, surviving", very confident without a trace of trouble in his trading system.
I was shocked when he came to me for financial help again, I helped him once and he recovered. This time I knew that it was more serious and be prepared to write off the loan. He later confided in me that he was in deep shit, both he and his wife were sued by the banks. Many traders helped without knowing his problem, but it was not enough to pull him out of the quicksand.
I scolded him for not telling me the truth about his trading losses, in fact lying that he was doing OK. It was the pride that killed him, he was too shy to admit his mistakes, he wanted to upkeep his image as a successful trader. If he had been honest with me, I could have help pull him up from falling into the gutter.
He confessed losing a bomb in currency trading even though he put in very tight stop loss. With his size, I could imagine the amount of slippage, commission and worst, always hitting his stop since it was placed so close to his entry level. The market always test a trader's patience by taking their tight stop until they get frustrated. Once the trader take away the stop order they will be in deep shit one fine day.
He is now helping up in a ex-trader's antique shop at a pay that's only a fraction of the commission that he once paid monthly. He regretted his mistakes but at least he is happy to be at peace with himself and accepting the cruel fate that he can't blame anyone. It's a honest living and I am glad he has come down to earth though at a extremely high price, there's no turning back the clock.
Square off all position, profit to date is S$13,609.00 for the special account.
In trading, we have the freedom to make mistakes everyday, but not many of us are willing to admit our mistakes resulting in burning holes in our pockets at the end of the day.
"One mistake and you will regret it forever" - a Chinese proverb
Many years ago, I had a lunch partner trading together with me in the Taiwan Pit. This friend was a medium sized trader who was well respected by most traders on the floor as a very successful trader. I was impressed by him too, especially his courage in executing the size that I deem too big for my own comfort.
He traded in other contracts like Nikkei as well as forex, I find it amazing that he could cope with a few contracts base on his gut feel. He would always tell me his exploits, those that he made a killing but I never hear about his losses. The impression that gave everyone, including myself, was that he was a damn good trader.
Once, we happened to collect our monthly statement from our own clearing member and decided to exchange notes on our profit for the month. He showed me proudly that he had made more than 40K but I noticed that his commission was close to 30K resulting in his nett profit of less than 20K. I was shocked and questioned him how he ended up with such huge commission.
He told me that was his style of trading especially calling the backroom to execute trades on his behalf. The execution fee was US$1.00 per contract and it was OK for him since he was able to make more profit to cover the expenses. I told him the profit ratio to commission was way out, he was giving away too much money to the clearing firm. Instead he should execute the trades himself and have more quality trades.
I showed him my statement of about the same profit, but my commission was less than 5K, my nett profit was more than double his. I advised him to seriously look into the cost, it didn't make sense to me. I told him to execute the trades himself, stop trading forex because of the slippage, instead trade on the futures platform. Unfortunately, all these advice fell on deaf ears.
We drifted apart as he stayed away from the pit and executed his trades from cafes away from the exchange floor. Whenever we met, I always asked him "how's trading?". Without fail, he will answer "good, surviving", very confident without a trace of trouble in his trading system.
I was shocked when he came to me for financial help again, I helped him once and he recovered. This time I knew that it was more serious and be prepared to write off the loan. He later confided in me that he was in deep shit, both he and his wife were sued by the banks. Many traders helped without knowing his problem, but it was not enough to pull him out of the quicksand.
I scolded him for not telling me the truth about his trading losses, in fact lying that he was doing OK. It was the pride that killed him, he was too shy to admit his mistakes, he wanted to upkeep his image as a successful trader. If he had been honest with me, I could have help pull him up from falling into the gutter.
He confessed losing a bomb in currency trading even though he put in very tight stop loss. With his size, I could imagine the amount of slippage, commission and worst, always hitting his stop since it was placed so close to his entry level. The market always test a trader's patience by taking their tight stop until they get frustrated. Once the trader take away the stop order they will be in deep shit one fine day.
He is now helping up in a ex-trader's antique shop at a pay that's only a fraction of the commission that he once paid monthly. He regretted his mistakes but at least he is happy to be at peace with himself and accepting the cruel fate that he can't blame anyone. It's a honest living and I am glad he has come down to earth though at a extremely high price, there's no turning back the clock.
Square off all position, profit to date is S$13,609.00 for the special account.
Thursday, July 9, 2009
Reality Bites
"Horse die, get down and walk" - Cantonese saying.
Read a report about more white collar Korean workers going into physically demanding work or traditional kind of manual labour, from farming and fishing to the professional back-scrubbers who clean patrons at the nation's numerous public bathhouses.
Their expectations hit the dark reality of this economy, where people have no choice but to go into the blue collar work force. "This work hurts my pride" and some say they feel guilty working such rough jobs after years of expensive cram schools and college.
Being paid S$2,500 as a crab farmer is considered one of the highest paying work in the current market, more than pouring lattes or busing tables in Seoul since the global downturn hammered this once fast growing export economy.
Most of my fellow traders are complaining but there are some who are still doing well and yet are also complaining. Luckily for me, I lead a simple lifestyle and have simple taste.
Read a report about more white collar Korean workers going into physically demanding work or traditional kind of manual labour, from farming and fishing to the professional back-scrubbers who clean patrons at the nation's numerous public bathhouses.
Their expectations hit the dark reality of this economy, where people have no choice but to go into the blue collar work force. "This work hurts my pride" and some say they feel guilty working such rough jobs after years of expensive cram schools and college.
Being paid S$2,500 as a crab farmer is considered one of the highest paying work in the current market, more than pouring lattes or busing tables in Seoul since the global downturn hammered this once fast growing export economy.
Most of my fellow traders are complaining but there are some who are still doing well and yet are also complaining. Luckily for me, I lead a simple lifestyle and have simple taste.
Saturday, July 4, 2009
Updates
"Imagination is more important than knowledge. For while knowledge defines all we currently know and understand, imagination points to all we might yet discover and create" - Albert Einstein
More Computer Science graduates are now employed as traders, to write trading software programmes for the increasingly powerful and fast machines. Can we beat the machines or black boxes in the futures trading game? These machines trade without emotion, they trade according to the rules and parameters set by their masters. More importantly, they are obedient and discipline.
I am using a simple programme, the auto spreading from the TT system to execute some of my trades, it save me plenty of time from the constant need to monitor the market, making me a bit lazy. The machine is not 100%, sometimes it fails too, giving a worst fill from my intended price level. I vomited blood using the Pat's System to do auto spreading, cursing and swearing many times when it fail to fill the other leg leaving me with some bad positions.
With more traders using black boxes, the competition is tough with razor thin margin, but which business is easy? Which business have no competition? Do we have a better choice? The learning process is often fill with disappointment, that's life! Be realistic about your expectation, work hard and learn from your failures.
It took me more than 2 years after the open outcry trading to be successful in converting to electronic trading. Despite my wealth of experience as a trader, it took me so long to learn, I survived with the savings from my past earnings, I felt terrible during those period. How I wish I have a mentor to guide me, that would have save me the 2 years that I have wasted.
One of the reasons it had taken me so long is the lack of focus in trading, doing it half heartily on a part time basis while trying to branch out to other businesses. Not being a shrewd businessman, I lost more precious capital, it's a new learning process again, why so stupid!
I realised my folly and return to full time trading at the arcade in February 2008.
"Knowing is not enough; we must apply" - Goethe
I negotiated with the manager for a free booth for a month in the arcade and a month free trial for using the best trading platform, the TT system. I gave myself one month to focus and concentrate only in trading, no room for failure, if I don't make it, I will be out of trading for good.
I worked very hard for the month and with some trading advice from a few fellow traders, I managed to make S$20,000.00 in February. My world brighten up again and I have not a single losing month since then. This is the best money I have seen since the trading pit closed in June 2005.
The profit for the special account is S$11,745.00 to date, very slow indeed. My good friend has given notice to withdraw his capital soon to invest in property as it is getting hot again in Singapore with many projects well received by investors and flippers. Total trading profit since December 2008 is S$29,607.00
More Computer Science graduates are now employed as traders, to write trading software programmes for the increasingly powerful and fast machines. Can we beat the machines or black boxes in the futures trading game? These machines trade without emotion, they trade according to the rules and parameters set by their masters. More importantly, they are obedient and discipline.
I am using a simple programme, the auto spreading from the TT system to execute some of my trades, it save me plenty of time from the constant need to monitor the market, making me a bit lazy. The machine is not 100%, sometimes it fails too, giving a worst fill from my intended price level. I vomited blood using the Pat's System to do auto spreading, cursing and swearing many times when it fail to fill the other leg leaving me with some bad positions.
With more traders using black boxes, the competition is tough with razor thin margin, but which business is easy? Which business have no competition? Do we have a better choice? The learning process is often fill with disappointment, that's life! Be realistic about your expectation, work hard and learn from your failures.
It took me more than 2 years after the open outcry trading to be successful in converting to electronic trading. Despite my wealth of experience as a trader, it took me so long to learn, I survived with the savings from my past earnings, I felt terrible during those period. How I wish I have a mentor to guide me, that would have save me the 2 years that I have wasted.
One of the reasons it had taken me so long is the lack of focus in trading, doing it half heartily on a part time basis while trying to branch out to other businesses. Not being a shrewd businessman, I lost more precious capital, it's a new learning process again, why so stupid!
I realised my folly and return to full time trading at the arcade in February 2008.
"Knowing is not enough; we must apply" - Goethe
I negotiated with the manager for a free booth for a month in the arcade and a month free trial for using the best trading platform, the TT system. I gave myself one month to focus and concentrate only in trading, no room for failure, if I don't make it, I will be out of trading for good.
I worked very hard for the month and with some trading advice from a few fellow traders, I managed to make S$20,000.00 in February. My world brighten up again and I have not a single losing month since then. This is the best money I have seen since the trading pit closed in June 2005.
The profit for the special account is S$11,745.00 to date, very slow indeed. My good friend has given notice to withdraw his capital soon to invest in property as it is getting hot again in Singapore with many projects well received by investors and flippers. Total trading profit since December 2008 is S$29,607.00
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