Sunday, October 2, 2011
Friday, July 29, 2011
How Algorithms Shape Our World
You may not agree with him.
http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world.html
http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world.html
Wednesday, July 27, 2011
How to Make Money in Microseconds
Interesting article on Algorithm Trading
http://www.lrb.co.uk/v33/n10/donald-mackenzie/how-to-make-money-in-microseconds
http://www.lrb.co.uk/v33/n10/donald-mackenzie/how-to-make-money-in-microseconds
Sunday, July 17, 2011
Thank You!
Thank you for those "friends" who stand by me.
I'm fine, I'm Ok and not that foolish to be upset by a cowardly moron.
I have met up with my option trader friend and was told that he had employed two new traders who have good IT knowledge for this round of recruitment.
For those who have sent me resume and not selected, I'm sorry I couldn't help much except hopefully he look into the resume again in the next round.
There was another Proprietary trading firm that advertised for prop traders recently in the newspaper, it was shocking to many of us when we were told that there were more than 900 applicants.
Most prop firms look for young traders preferably below 25 years of age without trading experience so that there is no emotional baggage. Of course, those with IT and engineering background, with good analytical skill and able to crunch numbers will have the edge in the selection.
But, don't be despair, successful traders come from all walks of life as long as you have the passion.
"True success is not only about achieving success through sheer hard work. It is also about achieving stellar results in what one has a genuine passion and interest for." - Wong Chun Han, from the Sunday Times today.
Ask yourself whether this interest in trading is strong enough for you to dedicate your life to the pursuit of success in this particular field.
Every trader tried to look for the "Holy Grail" strategy, it's just about 2 simple rules that somehow is so difficult to follow.
CUT YOUR LOSSES
RIDE YOUR PROFITS
For every trade that you take, these 2 rules should always be in your mind, every time, without fail.
Yes, talking is easy, cheap, doing it is damn difficult. Where to cut? When to cut? How far to cut? These are some the most asked questions from traders. Only the individual trader through trial and error can determine his own risk profile and how he want to trade, short, medium or long term trading.
There is no choice but to quit the industry if a trader can't train himself repeatedly to "Just Do It"
Wish all a Successful Trading journey.
I'm fine, I'm Ok and not that foolish to be upset by a cowardly moron.
I have met up with my option trader friend and was told that he had employed two new traders who have good IT knowledge for this round of recruitment.
For those who have sent me resume and not selected, I'm sorry I couldn't help much except hopefully he look into the resume again in the next round.
There was another Proprietary trading firm that advertised for prop traders recently in the newspaper, it was shocking to many of us when we were told that there were more than 900 applicants.
Most prop firms look for young traders preferably below 25 years of age without trading experience so that there is no emotional baggage. Of course, those with IT and engineering background, with good analytical skill and able to crunch numbers will have the edge in the selection.
But, don't be despair, successful traders come from all walks of life as long as you have the passion.
"True success is not only about achieving success through sheer hard work. It is also about achieving stellar results in what one has a genuine passion and interest for." - Wong Chun Han, from the Sunday Times today.
Ask yourself whether this interest in trading is strong enough for you to dedicate your life to the pursuit of success in this particular field.
Every trader tried to look for the "Holy Grail" strategy, it's just about 2 simple rules that somehow is so difficult to follow.
CUT YOUR LOSSES
RIDE YOUR PROFITS
For every trade that you take, these 2 rules should always be in your mind, every time, without fail.
Yes, talking is easy, cheap, doing it is damn difficult. Where to cut? When to cut? How far to cut? These are some the most asked questions from traders. Only the individual trader through trial and error can determine his own risk profile and how he want to trade, short, medium or long term trading.
There is no choice but to quit the industry if a trader can't train himself repeatedly to "Just Do It"
Wish all a Successful Trading journey.
Wednesday, July 13, 2011
This Son of a Gun
Some how or rather I have offended this Son of a Gun who is following my blog very closely and hammering me viciously in his blog. He has a personal grudge to run me down which I have tried to ignore.
It started when this "twkia" posted comments on the AFACT FORUM and attack all the trainers from SGX Academy. He is one of our fellow floor trader but we do not know who he is, what a shame. We tried to reconcile with him by inviting him to our AFACT gathering so as to settle any misunderstanding, he agreed but obviously chicken out at the last minute.
He is filled with so much hatred for SGX and especially me who called him to show face, step forward and don't be a coward. Why hide behind a skirt and keep attacking us? He dared not take up any of the challenges thrown at him despite giving him all the advantage. That obviously infuriated him and from then on he set up another blog to attack me.
From his earlier blog post, this Son of a Gun is not only vicious, but cruel, spearing penguins as his hobby. With such a wicked mind, I don't know why he still visit the temple to ask for blessings. Who is he praying to? If there is KARMA, then this coward would most probably be a penguin in his next life.
Despite being blessed with an intelligent mind and a healthy body, he chose to be a Big Bully on the Internet calling me all sort of names. Don't know who his father is, obviously never teach him how to be humble and respect others including animals. The Earth turns around, one of this day Heaven will punish him and make him learn how to be humble.
Dear readers, Have I mislead you here in my blog with regard to trading? Have I commented or attack this Son of a Gun in any of my post?
Though I despise this coward, I would like to thank him for polishing my head and to let him know I have another smoother head for him since he enjoyed it so much.
It's time for me to take a break from writing so as not to create more jealousy and hatred. I'm not here to gain fame or to sell anything to my readers but just to share some of my trading experiences.
I would like to thank those who have shown appreciation and Coconut for being so kind to add in his thoughts.
It started when this "twkia" posted comments on the AFACT FORUM and attack all the trainers from SGX Academy. He is one of our fellow floor trader but we do not know who he is, what a shame. We tried to reconcile with him by inviting him to our AFACT gathering so as to settle any misunderstanding, he agreed but obviously chicken out at the last minute.
He is filled with so much hatred for SGX and especially me who called him to show face, step forward and don't be a coward. Why hide behind a skirt and keep attacking us? He dared not take up any of the challenges thrown at him despite giving him all the advantage. That obviously infuriated him and from then on he set up another blog to attack me.
From his earlier blog post, this Son of a Gun is not only vicious, but cruel, spearing penguins as his hobby. With such a wicked mind, I don't know why he still visit the temple to ask for blessings. Who is he praying to? If there is KARMA, then this coward would most probably be a penguin in his next life.
Despite being blessed with an intelligent mind and a healthy body, he chose to be a Big Bully on the Internet calling me all sort of names. Don't know who his father is, obviously never teach him how to be humble and respect others including animals. The Earth turns around, one of this day Heaven will punish him and make him learn how to be humble.
Dear readers, Have I mislead you here in my blog with regard to trading? Have I commented or attack this Son of a Gun in any of my post?
Though I despise this coward, I would like to thank him for polishing my head and to let him know I have another smoother head for him since he enjoyed it so much.
It's time for me to take a break from writing so as not to create more jealousy and hatred. I'm not here to gain fame or to sell anything to my readers but just to share some of my trading experiences.
I would like to thank those who have shown appreciation and Coconut for being so kind to add in his thoughts.
Saturday, July 9, 2011
There is still HOPE!
Met up with many traders during our AFACT second anniversary dinner few days ago and as usual we ended up discussing about trading and the market condition. Most traders are finding it tough to make good money due to the various reasons I have written recently.
Met a trader from another arcade yesterday and was told that he had resigned as a trading member, closed account with his clearing firm and pondering what to do next with whatever money left he withdrew. Probably in his 50s, he would take a break for the next 6 months. I felt sad for him, trading is so uncertain, it's only meant for those who are willing to change and adapt according to market condition and against the better players coming on board.
Spreaders and Scalpers blamed the Algos, they are most affected by the advance in computer technology, losing their most important edge, "speed". Short term traders are increasingly finding it difficult to survive, the Algos distort the market. I believe it's still the big boys who are able to control the market and very efficiently with their speed and size to pulverise the small time traders.
In order to survive, trade small, follow the trend and go with the waves, trading should not be stressful once you have a plan.
For those following my other blog on trading performance between 2 veteran traders would know that there are some traders who are still able to survive. 8038 has been trading SGX products from Australia for the past 2 weeks and still able to be profitable consistently despite the lack of speed a few thousand km away.
Why? Because he don't do high frequency scalping, his comm is just a fraction of his profit unlike 8022. To be successful like 8038, a trader need to be patient to wait for a trading set up and the nerves to ride the profit. 8038 losses are small on his losing days, I admire the type of discipline he has.
Looking at the account of 8022, he didn't lose money trading over the last eight months, his losses are in the comm. Despite repeatedly reminding him to be conscious of the trading cost he insisted on his way of trading. These are some of the traders that I have honestly told them not to waste their time. It's not about perseverance, it's about being stubborn.
For those who are not making money, their characteristics are similar to 8022. for those who are willing to change, there is HOPE, 8038 is a very good example for all to learn.
Met a trader from another arcade yesterday and was told that he had resigned as a trading member, closed account with his clearing firm and pondering what to do next with whatever money left he withdrew. Probably in his 50s, he would take a break for the next 6 months. I felt sad for him, trading is so uncertain, it's only meant for those who are willing to change and adapt according to market condition and against the better players coming on board.
Spreaders and Scalpers blamed the Algos, they are most affected by the advance in computer technology, losing their most important edge, "speed". Short term traders are increasingly finding it difficult to survive, the Algos distort the market. I believe it's still the big boys who are able to control the market and very efficiently with their speed and size to pulverise the small time traders.
In order to survive, trade small, follow the trend and go with the waves, trading should not be stressful once you have a plan.
For those following my other blog on trading performance between 2 veteran traders would know that there are some traders who are still able to survive. 8038 has been trading SGX products from Australia for the past 2 weeks and still able to be profitable consistently despite the lack of speed a few thousand km away.
Why? Because he don't do high frequency scalping, his comm is just a fraction of his profit unlike 8022. To be successful like 8038, a trader need to be patient to wait for a trading set up and the nerves to ride the profit. 8038 losses are small on his losing days, I admire the type of discipline he has.
Looking at the account of 8022, he didn't lose money trading over the last eight months, his losses are in the comm. Despite repeatedly reminding him to be conscious of the trading cost he insisted on his way of trading. These are some of the traders that I have honestly told them not to waste their time. It's not about perseverance, it's about being stubborn.
For those who are not making money, their characteristics are similar to 8022. for those who are willing to change, there is HOPE, 8038 is a very good example for all to learn.
Saturday, July 2, 2011
Reality
My cousin broke the news to me yesterday that he's quitting trading and going back to work soon, after a friend recommended him a job. I was a little surprised but supported his decision since he is not getting anywhere after being a trader for 2 years.
He broke even on his seventh month of trading, that was quite remarkable for a newbie who didn't know a thing about trading, confused even over bid and offer in the beginning. Last year was good and he improved tremendously with consistent profit every month though on the average, still below his last drawn salary. He enjoyed the freedom of being a trader.
The last six month was lousy, he got hit a few times shaking his confidence. Volatility shrank and scalping became very tough with the coming of the Algos, his profit came down, so was mine. After some serious consideration, he felt that it's better to go back for a more stable income, CPF, year end bonuses and medical benefits.
I'm glad that he made money trading, didn't burn a big hole in his pocket like others we heard so often. He took a 2 year break from his career, gained plenty of experience as a financial futures trader and most important he has given himself a chance, an opportunity to become a trader after hearing so many glamorous stories of successful traders. There is no regret.
8022 just told me that he is quitting too and looking for a job. I admire his perseverance to stay on for another 5 years as a electronic trader after the trading floor closed in 2005. I can imagine his suffering without income for 5 years and using up his savings on daily expenditures for the family.
The hardest part for a trader is when they get too old to get re-employed, when they are in their late 40s and the only thing they know best is trading and not making money.
Reality sets in, only the best traders make it and that's less than 10%.
Scalping is getting very tough, very tiring especially when many of your opponents are powerful machines with plenty of muscle to push the market in their favour. The machines distort the scalpers with their speed in putting and pulling out orders, sometimes huge orders to bully the small traders. Trading hours are long now, thus making the lives of short term traders more miserable. Volatility reduces as the Exchanges extend the trading hours and traders trade more incurring more comm.
I spoke to my brother about the challenges we are facing now as an electronic trader in a non level playing field, where Exchanges are embracing Algo traders with open arms giving them better comm rebates and speed. Change! that's what we need to do. The machines are now the scalpers, they are like the FT (Foreign Talent) in our country, it's difficult to compete with them, we are now left with the crumbs.
I have to change the strategy of trading, that's what I'm slowly adapting, trying to avoid heavy scalping to reduce the comm. It's hard for an old dog to learn new tricks after 25 years as a scalper, it's a challenge.
He broke even on his seventh month of trading, that was quite remarkable for a newbie who didn't know a thing about trading, confused even over bid and offer in the beginning. Last year was good and he improved tremendously with consistent profit every month though on the average, still below his last drawn salary. He enjoyed the freedom of being a trader.
The last six month was lousy, he got hit a few times shaking his confidence. Volatility shrank and scalping became very tough with the coming of the Algos, his profit came down, so was mine. After some serious consideration, he felt that it's better to go back for a more stable income, CPF, year end bonuses and medical benefits.
I'm glad that he made money trading, didn't burn a big hole in his pocket like others we heard so often. He took a 2 year break from his career, gained plenty of experience as a financial futures trader and most important he has given himself a chance, an opportunity to become a trader after hearing so many glamorous stories of successful traders. There is no regret.
8022 just told me that he is quitting too and looking for a job. I admire his perseverance to stay on for another 5 years as a electronic trader after the trading floor closed in 2005. I can imagine his suffering without income for 5 years and using up his savings on daily expenditures for the family.
The hardest part for a trader is when they get too old to get re-employed, when they are in their late 40s and the only thing they know best is trading and not making money.
Reality sets in, only the best traders make it and that's less than 10%.
Scalping is getting very tough, very tiring especially when many of your opponents are powerful machines with plenty of muscle to push the market in their favour. The machines distort the scalpers with their speed in putting and pulling out orders, sometimes huge orders to bully the small traders. Trading hours are long now, thus making the lives of short term traders more miserable. Volatility reduces as the Exchanges extend the trading hours and traders trade more incurring more comm.
I spoke to my brother about the challenges we are facing now as an electronic trader in a non level playing field, where Exchanges are embracing Algo traders with open arms giving them better comm rebates and speed. Change! that's what we need to do. The machines are now the scalpers, they are like the FT (Foreign Talent) in our country, it's difficult to compete with them, we are now left with the crumbs.
I have to change the strategy of trading, that's what I'm slowly adapting, trying to avoid heavy scalping to reduce the comm. It's hard for an old dog to learn new tricks after 25 years as a scalper, it's a challenge.
Sunday, June 26, 2011
Busy Month
It's been a busy June with the school holidays, friends visiting from China followed by friends from Thailand that I couldn't find the time to update my blog.
I just don't seems to have enough time, scalping is taking up too much of my energy especially against the machines. I'm getting tired, need a break, my mind is blank.
My home laptop is giving me problem, constant reminder that the harddisk is going to crash, I can't even publish my post, can only save now and publish them in the office.
I just wonder whether those previous lessons were too boring, sorry for not being able to express them well.
I just don't seems to have enough time, scalping is taking up too much of my energy especially against the machines. I'm getting tired, need a break, my mind is blank.
My home laptop is giving me problem, constant reminder that the harddisk is going to crash, I can't even publish my post, can only save now and publish them in the office.
I just wonder whether those previous lessons were too boring, sorry for not being able to express them well.
Sunday, June 5, 2011
Lesson No. 9 - Emotions
Read today's Sunday Times about an article on the Ups and Downs of Forex Trading, how a Mr. Wong made $600,000 with a initial capital of $100,000, fantastic, then up his trading size and lost all together with an additional $700,000 that he put up, amazing. Total loss of S$800,000 in just 4 months. I admire his guts. Would you call this trader a gambler?
He shared that 60% of your time, energy and attention should be focused on managing your emotions, 30% on money management and 10% on your strategy. (His opinion)
What are the emotions that affect our trading?
Fear
Greed
Hope
Anger
Worry
Ego
Stubbornness
Overconfidence
Being human, we are definitely emotional creatures and traders have to really make an effort to control his emotions in order to stay calm. The most effective way is to have a plan, knowing what action to take just in case the unexpected happens.
It's very simple to draw up a trading plan but extremely difficult for most traders to follow up, thus they become shorter and shorter term traders, weaving in and out of the market. It's perfectly fine if they are scalpers knowing what is their edge and able to consistently make money.
For Day Traders, make an effort to trade your plan.
He shared that 60% of your time, energy and attention should be focused on managing your emotions, 30% on money management and 10% on your strategy. (His opinion)
What are the emotions that affect our trading?
Fear
Greed
Hope
Anger
Worry
Ego
Stubbornness
Overconfidence
Being human, we are definitely emotional creatures and traders have to really make an effort to control his emotions in order to stay calm. The most effective way is to have a plan, knowing what action to take just in case the unexpected happens.
It's very simple to draw up a trading plan but extremely difficult for most traders to follow up, thus they become shorter and shorter term traders, weaving in and out of the market. It's perfectly fine if they are scalpers knowing what is their edge and able to consistently make money.
For Day Traders, make an effort to trade your plan.
Sunday, May 29, 2011
Lesson No.8 - Cutting losses & Riding profits.
Cutting losses and riding profits are equally important to the success of a trader. Both are difficult to master.
To cut the story short, in order to make money, profits must be more than the losses and must be enough to cover all the expenses for a trader to survive.
Sound stupid, who don't know about it, but why many are still losing money? The answer lies in the past few lessons, simply just unable to follow them.
In trading performance, notice the difference between the 2 traders?
8038 is very consistent, slow and steady, controlling his losses very well and riding his profits on low volume. I like to see traders making money on low volume trading from home, controlling the comm with patience instead of recklessly getting into a trade.
Remember, being a Day Trader don't try to scalp, when the volume increases you are just not trading right. Too much slippage. Compare the comm of 8022 and 8038, you will understand what I'm talking about. Despite advising 8022 on numerous occasion to reduce his volume, he just can't change the way he trades, thus going around in circles.
When you are not making money after some time, put in an effort to find out the reasons from your trading journal. Unfortunately, most don't keep one, that's why they are not learning.
To cut the story short, in order to make money, profits must be more than the losses and must be enough to cover all the expenses for a trader to survive.
Sound stupid, who don't know about it, but why many are still losing money? The answer lies in the past few lessons, simply just unable to follow them.
In trading performance, notice the difference between the 2 traders?
8038 is very consistent, slow and steady, controlling his losses very well and riding his profits on low volume. I like to see traders making money on low volume trading from home, controlling the comm with patience instead of recklessly getting into a trade.
Remember, being a Day Trader don't try to scalp, when the volume increases you are just not trading right. Too much slippage. Compare the comm of 8022 and 8038, you will understand what I'm talking about. Despite advising 8022 on numerous occasion to reduce his volume, he just can't change the way he trades, thus going around in circles.
When you are not making money after some time, put in an effort to find out the reasons from your trading journal. Unfortunately, most don't keep one, that's why they are not learning.
Saturday, May 21, 2011
Lesson No 7 - Trading Rules
Formulate your own trading rules that suits your style of trading and follow them religiously. Examples below are some that you might want to adopt, adjust, change or add.
1. Check the overnight performance of the various markets.
2. Check the timing for announcement of economic data and the various figures.
3. Plan your Trades.
4. Justify your trade entry.
5. Put in a stop immediately.
6. Limit your losses per trade, 5 ticks, 10 ticks or 20 ticks.
7. Limit your losses per day, $500, $1,000 or $2,000.
8. Stop trading if being stop out 3, 4 or 5 times in a row.
9. Avoid getting in an out of the market too often unless you are a scalper.
10. Avoid Averaging on bad trades unless it's in your trading plan.
11. Avoid chasing the market if you miss it, the market is there everyday.
12. Don't ever allow a big winning trade to turn into a loser, move your stop to protect it.
13. Beware of the risk of trying to pick tops or bottoms, many stops are placed there.
14. Trade what you see not what you think.
15. Get out of a Trade immediately if you don't feel comfortable.
16. Stop trading if you are tired.
17. Never never carry a losing position overnight.
18. Do a post mortem of your trades at the end of the day.
19. Control your frustration, don't blame anybody for your losses and admit when you are wrong.
20. Learn from your losses, you paid for them.
Trading is simple but it's not easy.
Many traders are not making money because they can't even follow simple rules.
1. Check the overnight performance of the various markets.
2. Check the timing for announcement of economic data and the various figures.
3. Plan your Trades.
4. Justify your trade entry.
5. Put in a stop immediately.
6. Limit your losses per trade, 5 ticks, 10 ticks or 20 ticks.
7. Limit your losses per day, $500, $1,000 or $2,000.
8. Stop trading if being stop out 3, 4 or 5 times in a row.
9. Avoid getting in an out of the market too often unless you are a scalper.
10. Avoid Averaging on bad trades unless it's in your trading plan.
11. Avoid chasing the market if you miss it, the market is there everyday.
12. Don't ever allow a big winning trade to turn into a loser, move your stop to protect it.
13. Beware of the risk of trying to pick tops or bottoms, many stops are placed there.
14. Trade what you see not what you think.
15. Get out of a Trade immediately if you don't feel comfortable.
16. Stop trading if you are tired.
17. Never never carry a losing position overnight.
18. Do a post mortem of your trades at the end of the day.
19. Control your frustration, don't blame anybody for your losses and admit when you are wrong.
20. Learn from your losses, you paid for them.
Trading is simple but it's not easy.
Many traders are not making money because they can't even follow simple rules.
Saturday, May 14, 2011
Lesson No 6 - How do you want to trade?
Full Time or Part Time?
Scalper?
Day Trader?
Spreader?
Position Trader? or
Option Trader?
For someone who is new to trading, jumping in to be a full time trader is like on a suicide mission, the risk of losing your capital is extremely high. With 90% failure rate, what do you think your odds will be against all those veteran traders?
If you are having a decent paying job, think carefully before you embark on this treacherous mission straight away. There are so many things to learn about trading, it will probably take a few years, just like going to school and paying tuition fees.
Ask yourself honestly whether you are prepared go without income for a year or two, even losing your capital.
For someone new, I suggest starting out as a part time trader taking a few hours (3 would be ideal) at night to focus on trading. Anything more than that will be very tiring since you need to work the next day, don't burn yourself out, have a clear mind.
Open an account with Interactive Brokers as a retail customer to trade any International product.(they offer one of the lowest comm rate). When your daily trading volume goes up, consider joining any of the Exchanges as a member to enjoy even lower comm. Check out SGX website and membership department, the Exchange offer some incentives and clearing fee rebates for new members.
Read some good trading books.
Learn about Technical and Fundamental Analysis.
Learn to be proficient in the Trading Platform for execution of trades.
Learn the charting platform.
Visit websites like www.investopedia.com for financial terms and tutorials and www.elitetrader.com, a community for active traders.
Join AFACT (Association of Financial and commodity Traders) at www.afact.org.sg for support and events, participate in the Forum, read the past threads to learn more about the trading.
To shortcut the learning process, visit www.sgxacademy.com for the various courses offered. Singaporeans who are in the financial or related industry can apply for 50% funding for some of the courses.
Once you are ready, decide on what instrument to trade, choose a contract you are comfortable, with good daily volume and volatility.
For a newcomer, I suggest doing light scalping or day trading, square off the position at the end of the day to reduce overnight risk. Have a set of rules governing how you want to engage the market, follow them strictly with military discipline. There should not be "If" or "should" in your vocabulary as excuses for any mistake made, just learn from it and move forward.
Start out with only 1 contract, until you are consistently making money doing so before attempting to add an additional contract. Many traders start losing money by increasing their trading size because they are unable to adjust their mentality to the higher risk of trading. It's one of the many challenges facing even veteran traders like myself.
Be patient, selective and justify the entry before putting in a trade, then put in a stop order immediately (without fail). It's OK not to trade for the session if you don't have a set up for an entry, that will actually build up your patience. Limit yourself to not more than 3 entries and set a limit losses for the night (maximum $300 to $500 depending on your risk tolerance).
It's very important to justify a trade entry, reasons for taking that trade. WHY? You must be able to explain and be accountable for your action. It doesn't matter if you are wrong, your stop will protect you from disaster. Once you are doing the right thing, practice will make perfect, subconsciously, you are developing good trading habits.
Scalper?
Day Trader?
Spreader?
Position Trader? or
Option Trader?
For someone who is new to trading, jumping in to be a full time trader is like on a suicide mission, the risk of losing your capital is extremely high. With 90% failure rate, what do you think your odds will be against all those veteran traders?
If you are having a decent paying job, think carefully before you embark on this treacherous mission straight away. There are so many things to learn about trading, it will probably take a few years, just like going to school and paying tuition fees.
Ask yourself honestly whether you are prepared go without income for a year or two, even losing your capital.
For someone new, I suggest starting out as a part time trader taking a few hours (3 would be ideal) at night to focus on trading. Anything more than that will be very tiring since you need to work the next day, don't burn yourself out, have a clear mind.
Open an account with Interactive Brokers as a retail customer to trade any International product.(they offer one of the lowest comm rate). When your daily trading volume goes up, consider joining any of the Exchanges as a member to enjoy even lower comm. Check out SGX website and membership department, the Exchange offer some incentives and clearing fee rebates for new members.
Read some good trading books.
Learn about Technical and Fundamental Analysis.
Learn to be proficient in the Trading Platform for execution of trades.
Learn the charting platform.
Visit websites like www.investopedia.com for financial terms and tutorials and www.elitetrader.com, a community for active traders.
Join AFACT (Association of Financial and commodity Traders) at www.afact.org.sg for support and events, participate in the Forum, read the past threads to learn more about the trading.
To shortcut the learning process, visit www.sgxacademy.com for the various courses offered. Singaporeans who are in the financial or related industry can apply for 50% funding for some of the courses.
Once you are ready, decide on what instrument to trade, choose a contract you are comfortable, with good daily volume and volatility.
For a newcomer, I suggest doing light scalping or day trading, square off the position at the end of the day to reduce overnight risk. Have a set of rules governing how you want to engage the market, follow them strictly with military discipline. There should not be "If" or "should" in your vocabulary as excuses for any mistake made, just learn from it and move forward.
Start out with only 1 contract, until you are consistently making money doing so before attempting to add an additional contract. Many traders start losing money by increasing their trading size because they are unable to adjust their mentality to the higher risk of trading. It's one of the many challenges facing even veteran traders like myself.
Be patient, selective and justify the entry before putting in a trade, then put in a stop order immediately (without fail). It's OK not to trade for the session if you don't have a set up for an entry, that will actually build up your patience. Limit yourself to not more than 3 entries and set a limit losses for the night (maximum $300 to $500 depending on your risk tolerance).
It's very important to justify a trade entry, reasons for taking that trade. WHY? You must be able to explain and be accountable for your action. It doesn't matter if you are wrong, your stop will protect you from disaster. Once you are doing the right thing, practice will make perfect, subconsciously, you are developing good trading habits.
Thursday, May 12, 2011
Problems? See them as opportunities.
For those who miss this well written article by - Pragya Mehta
The word "perception" comes from the Latin words perceptio and percipio, as is defined by the Oxford English Dictionary as "the process of becoming aware or conscious of a thing or things".
It means that one should not only look at things, but also comprehend them.
Let me illustrate this with a short story.
There was a boy who stammered while speaking, and his friends often teased him about it. One day, he asked his mother whether he was "physically challenged in speaking".
His mother replied: "No, son. It is just that your brain run faster than your tongue does." And with that, she turned his weakness into a strength.
There are many ways to look at a problem. Some people see it as a stumbling block, while others see it as a stepping stone. People often blame "circumstances" for their problems. But they may not realise that these circumstances are simply the result of decisions they have made.
There is nothing inherently good or bad in any situation, but our thinking makes it so.
All problems can be solved eventually. Tears and regret will not help. What is important is to accept the mistakes you have made, analyse what went wrong and be happy to have gained experience in life.
Commit yourself to do better in future and be thankful for the opportunity to grow stronger, become more understanding and have more confidence.
So, the next time you encounter a problem, tell yourself: An opportunity is knocking.
Change your perception.
The word "perception" comes from the Latin words perceptio and percipio, as is defined by the Oxford English Dictionary as "the process of becoming aware or conscious of a thing or things".
It means that one should not only look at things, but also comprehend them.
Let me illustrate this with a short story.
There was a boy who stammered while speaking, and his friends often teased him about it. One day, he asked his mother whether he was "physically challenged in speaking".
His mother replied: "No, son. It is just that your brain run faster than your tongue does." And with that, she turned his weakness into a strength.
There are many ways to look at a problem. Some people see it as a stumbling block, while others see it as a stepping stone. People often blame "circumstances" for their problems. But they may not realise that these circumstances are simply the result of decisions they have made.
There is nothing inherently good or bad in any situation, but our thinking makes it so.
All problems can be solved eventually. Tears and regret will not help. What is important is to accept the mistakes you have made, analyse what went wrong and be happy to have gained experience in life.
Commit yourself to do better in future and be thankful for the opportunity to grow stronger, become more understanding and have more confidence.
So, the next time you encounter a problem, tell yourself: An opportunity is knocking.
Change your perception.
Sunday, May 8, 2011
Lesson No 5 - Passion
"I'm in for the money"
That's the truth, money is the main motivating force for me to be in this trading business. Trading can be lonely, boring and tiring at times, testing our patience and stretching our tolerance to the limit. Who is trading for fun and not for the money?
So, we have to develop this passion for making money by being pro-active to understand and learn more about trading. The Internet offers free information for traders who are keen to learn. Do you know any of these websites?
What trading books have you read? What have you learn from them? Most read and forget, never apply what they have learnt.
Passion is when your mind is totally focus on trading and love doing so, when you eat, sleep and even dream about trading. You make constant effort to monitor the market closely, knowing what price it open, overnight closing price, what's the high, low, volume, open interest, etc, etc at the back of your mind.
There must be a desire to know what is happening in the market, reasons for certain price movement, factors affecting it and what action you should take. One will then have a good feel of the market, that's what separate the 10% from the 90%.
That's the truth, money is the main motivating force for me to be in this trading business. Trading can be lonely, boring and tiring at times, testing our patience and stretching our tolerance to the limit. Who is trading for fun and not for the money?
So, we have to develop this passion for making money by being pro-active to understand and learn more about trading. The Internet offers free information for traders who are keen to learn. Do you know any of these websites?
What trading books have you read? What have you learn from them? Most read and forget, never apply what they have learnt.
Passion is when your mind is totally focus on trading and love doing so, when you eat, sleep and even dream about trading. You make constant effort to monitor the market closely, knowing what price it open, overnight closing price, what's the high, low, volume, open interest, etc, etc at the back of your mind.
There must be a desire to know what is happening in the market, reasons for certain price movement, factors affecting it and what action you should take. One will then have a good feel of the market, that's what separate the 10% from the 90%.
Friday, April 29, 2011
Lesson No 4 - Characteristic of Successful Traders
Found it printed and pasted in front of a trader in our room. Are they relevant? Are you able to follow each and every one of them? Will you read them everyday before the start of trading as a reminder?
Important Characteristic of a Successful traders:
1. Successful traders do not blame. They accept the losses they have, and they don’t dwell on them, or blame other people or conditions. They learn from their mistakes and move on with their trading.
2. Successful traders have a system. They stick to their system of trading religiously.
3. Successful traders have patience. They know that most positions will not be profitable the minute they are opened.
4. Successful traders do not overtrade. They realize that overtrading puts their account at risk, and they know that not every day is a day for trading.
They wait for high probability opportunities.
5. Successful traders realize that nothing is 100% foolproof.
They trust in their indicators, but they are aware of other factors that may influence their trades.
6. Successful traders do not stay in a losing trade. They honor the stop losses that they set, and they do not hold their position in the hopes that the market will eventually “go their way.”
7. Successful traders do not rush into trades. They take their time while selecting trades and they are picky about which trades to jump on. They don’t place orders just for the sake of having a position in the market every second.
8. Successful traders stick to a successful strategy. They have one to three techniques that really work, and they use them over, and over, and over again.
9. Successful traders have the ability to adapt. They adjust their trading methods and decisions to changing market conditions.
Important Characteristic of a Successful traders:
1. Successful traders do not blame. They accept the losses they have, and they don’t dwell on them, or blame other people or conditions. They learn from their mistakes and move on with their trading.
2. Successful traders have a system. They stick to their system of trading religiously.
3. Successful traders have patience. They know that most positions will not be profitable the minute they are opened.
4. Successful traders do not overtrade. They realize that overtrading puts their account at risk, and they know that not every day is a day for trading.
They wait for high probability opportunities.
5. Successful traders realize that nothing is 100% foolproof.
They trust in their indicators, but they are aware of other factors that may influence their trades.
6. Successful traders do not stay in a losing trade. They honor the stop losses that they set, and they do not hold their position in the hopes that the market will eventually “go their way.”
7. Successful traders do not rush into trades. They take their time while selecting trades and they are picky about which trades to jump on. They don’t place orders just for the sake of having a position in the market every second.
8. Successful traders stick to a successful strategy. They have one to three techniques that really work, and they use them over, and over, and over again.
9. Successful traders have the ability to adapt. They adjust their trading methods and decisions to changing market conditions.
Sunday, April 24, 2011
Lesson No. 3 - Understand Yourself
Below are some of questions an aspiring trader need to ask himself and answer them honestly. It's important to understand yourself as trading is in a big way a psychological warfare you are pitting against the opposite party holding a different view. It's going to be an ongoing war that will not end until you give up and hang up your weapons. You may lose some of the battles, injuring yourself sometimes badly, but as long as you still survive and determine to fight on, the war is not over.
Believe and have faith in yourself for the task you set out to achieve. In life, you have to give yourself that opportunity, a chance to prove that you too can make it. Another option is to go all out and sell your abilities to someone who appreciate it and offer you the opportunity.
Here are the questions:
1. What are the reasons you want to be a trader?
2. What motivates you to be a trader?
3. Are you passionate and hungry to succeed in Trading?
4. Do you consider yourself a pro-active person?
5. Do you take the initiative to make things happen or you just wait for things to happen?
6. What is your initial capital?
7. How much are you going to risk in this endeavour?
8. What is your expectation?
9. Do you have a time frame for calling it quits?
10. Have you spoken to your family members and discuss with them?
11. What is your risk tolerance level?
12. What type of trader you want to be?
13. What type of knowledge have you acquired to prepare yourself?
14. What are the strategies you already know?
15. If you are still not making money using them, what are the reasons?
16. What are your strengths?
17. What are your weaknesses?
18. Can you focus on doing a job well?
19. Are you prepared for the hardwork and the challenges ahead?
20. Do you have the courage to take this giant step?
I will continue to update them as and when more questions come to my mind and welcome contributions from the old birds.
Believe and have faith in yourself for the task you set out to achieve. In life, you have to give yourself that opportunity, a chance to prove that you too can make it. Another option is to go all out and sell your abilities to someone who appreciate it and offer you the opportunity.
Here are the questions:
1. What are the reasons you want to be a trader?
2. What motivates you to be a trader?
3. Are you passionate and hungry to succeed in Trading?
4. Do you consider yourself a pro-active person?
5. Do you take the initiative to make things happen or you just wait for things to happen?
6. What is your initial capital?
7. How much are you going to risk in this endeavour?
8. What is your expectation?
9. Do you have a time frame for calling it quits?
10. Have you spoken to your family members and discuss with them?
11. What is your risk tolerance level?
12. What type of trader you want to be?
13. What type of knowledge have you acquired to prepare yourself?
14. What are the strategies you already know?
15. If you are still not making money using them, what are the reasons?
16. What are your strengths?
17. What are your weaknesses?
18. Can you focus on doing a job well?
19. Are you prepared for the hardwork and the challenges ahead?
20. Do you have the courage to take this giant step?
I will continue to update them as and when more questions come to my mind and welcome contributions from the old birds.
Friday, April 22, 2011
Lesson No 2 - What Instrument to Trade?
My focus on these lessons will be for aspiring new traders with limited capital of less than S$30k and how they can take small steps in trading and shorten their learning curve.
I will also showcase a trader with a small capital trading from home using the Pats system platform and monitoring his progress without any pressure for him to perform. His result will be posted on my other blog on Trading Performance. He has many years of experience in trading and now experimenting with different strategies in Forex Trading which he felt have better growth prospect. I'm surprised!
I have longer term investments in properties and shares but for short term trading, I have chosen to trade in futures for my bread and butter. The major reason is that the transaction cost is the cheapest, please let me know if there are any other instruments that are more competitive and secure, I will definitely look into it.
By joining as a member of SGX costing S$1,200 a year, I enjoyed preferential comm rate for all Exchanges given by my broker over a retail customer. But of course I have to pay taxes on my profit after cost while most retail customer even some full time, treat their profit as capital gain which they felt is tax free. (Grey Area)
The difference in comm is quite substantial, from the statement you will notice that the comm for trading Simsci is S$1.70 and US$0.65 for the Taiwan contract. While retail customer might be paying anything from S$8 to S$12 for the Simsci and for those who trade higher volume, they can bargain the comm down to maybe S$5 which is still more than double. Comm for trading the Nikkei is US$0.70, with a tick value of roughly US$30, making it one of the best contract to trade in term of costing.
I have chosen to specialise in the Simsci because of the scratch trade rebates given to members even though the comm is among the highest. For any trade at the same price in a given half hour time bracket (ex. 8 am to 8.30 am or 8.30 am to 9 am), SGX will refund me the clearing fees of S$1.50 per contract. Thus I only need to pay S$0.40 to my broker for a round turn of Simsci contract.
Another reason for choosing Simsci is that most of my funds are in Sing Dollars which I can use as margin to trade without incurring any interest for holding the Simsci position overnight. If I will to trade the Taiwan contract I will need US$ and I need Yen for Nikkei as margin for my overnight positions. Interest is charge by my broker for extending these foreign currency loans to be put up at the Exchange as margin while I receive a very small amount of interest for my credit balances.
For those who are non members, one of the most competitive broker is Interactive Brokers, check out their website, they offer very good rates for trading overseas contracts, free trading platform and some Exchange fees for charting services.
Many felt that trading futures is risky compared to other instrument because of the leverage. They are just ignorant. What can you do with S$30k in your account and wanted to trade for a living?
Any Fund Manager who can consistently return 10% nett per annum to their client is a damn bloody good manager because 90% of them failed to do so. A return of 10% for $30k is only $3k a year which is only $250 a month. Can you survive on it doing full time trading? So your goal will be to make at least $3k (10%)a month or 120% a year.
Those who are thinking of quitting their job for full time trading career need to consider it very carefully before taking the plunge because you will need to be a super trader making 10% a month less all cost in order to survive. Of course, there are many who made it, the journey is long and tough.
I will use Simsci as an example in my illustration, a basket of 27 blue chip stocks listed on SGX at the current price of 3770 x 20 per tick which has a value of S$75,400.00 for 1 contract.
Futures trading requires margin because of the high leverage of up to 20 times depending on the volatility and this margin will be adjusted accordingly by the Exchanges periodically, it's not fixed.
Paying a comm of only S$1.70 to trade a value of S$75,400 worth of blue chip stocks is extremely cheap and you need to put up a margin of less than $4k. Nikkei at the price of 9670 x 500 gives us a value of Yen 4,835,000 or around US$59,000 worth of 225 blue chip Japanese stocks. Buying 1 contract cost only US$.70 for the professional traders, this is the reason why I traded futures.
A retail trader paying S$10 for 1 contract of Simsci worth S$75,400 is still cheap compared to buying stocks, probably he need to pay around S$200 comm for that value of stocks. The only difference is that retail traders can choose individual stock to trade and pick those that he feels have better potential of upward price movement.
One big advantage of futures over stock trading is that you can go short the futures naked and hold that position until expiry. Another is you are investing in a diversified portfolio of blue chip stocks, no headache in stock picking.
Another fact that most are ignorant is that interest cost and dividends are being factored into futures pricing. Dividends are paid for those buying into futures when there are dividends to be paid out by some of the stocks in the basket. For example the price of the April Simsci contract is now trading at 3770 while the May contract is trading at a discount of about 28 ticks at 3742, implying a S$560 dividend to be paid out. Historically, investors holding and rolling over their long term positions are assured of returns over time due to inflation and dividends.
The April Simsci contract was also at a discount of 28 ticks over the previous March contract making a payout of S$1,120 over a 2 month period. So for the long term investors, when they roll over their position forward, their pricing will get cheaper and cheaper over time due to the dividends and low interest rate now. One exception is if one were to buy the Nikkei at the peak in 1990 at 39000, he will be losing his pants and still rolling his position at a loss after 20 years. Thus the importance of cutting losses.
So for a investor who used S$4k as margin to buy one contract in March and roll over to May contract, a period of 2 months, can reap a dividend of S$1,120 as long the the futures price remain the same till expiry. He will have additional capital gain if the price move further up while suffer losses if the price depreciate. For 1 Simsci contract value of $75k that yield 3% dividend, one would expect to get S$2,250 worth over a 1 year period with a margin investment of S$4k. That's 50% return if the price remain the same a year later.
Rolling over position from April to May is call calender spread which will be active towards the end of the expiry date for any futures contract. There is a spread quote which is heavily traded too by those who specialise in spread trading. April contract now is known as the near month while May, June, July the far month.
With a $30k account, a trader can easily day trade up to 20 Simsci contracts at one go, that is where the risk comes from. The leverage of up to S$1.5 million worth of stocks with just S$30k. If make use properly, that is where you can reach your million dollar dream.
For those who are not currently members of any Exchanges, find a good and cheap broker. There are many futures contracts that are very liquid with good volatility, it's one's preference, to name a few, mini S&P, Nasdaq, Dow, FTSE, DAX, Gold, Oil, Currency futures, etc. Traders now have plenty of choice. Understand the contract and monitor it closely for some time before you attempt to trade.
I will also showcase a trader with a small capital trading from home using the Pats system platform and monitoring his progress without any pressure for him to perform. His result will be posted on my other blog on Trading Performance. He has many years of experience in trading and now experimenting with different strategies in Forex Trading which he felt have better growth prospect. I'm surprised!
I have longer term investments in properties and shares but for short term trading, I have chosen to trade in futures for my bread and butter. The major reason is that the transaction cost is the cheapest, please let me know if there are any other instruments that are more competitive and secure, I will definitely look into it.
By joining as a member of SGX costing S$1,200 a year, I enjoyed preferential comm rate for all Exchanges given by my broker over a retail customer. But of course I have to pay taxes on my profit after cost while most retail customer even some full time, treat their profit as capital gain which they felt is tax free. (Grey Area)
The difference in comm is quite substantial, from the statement you will notice that the comm for trading Simsci is S$1.70 and US$0.65 for the Taiwan contract. While retail customer might be paying anything from S$8 to S$12 for the Simsci and for those who trade higher volume, they can bargain the comm down to maybe S$5 which is still more than double. Comm for trading the Nikkei is US$0.70, with a tick value of roughly US$30, making it one of the best contract to trade in term of costing.
I have chosen to specialise in the Simsci because of the scratch trade rebates given to members even though the comm is among the highest. For any trade at the same price in a given half hour time bracket (ex. 8 am to 8.30 am or 8.30 am to 9 am), SGX will refund me the clearing fees of S$1.50 per contract. Thus I only need to pay S$0.40 to my broker for a round turn of Simsci contract.
Another reason for choosing Simsci is that most of my funds are in Sing Dollars which I can use as margin to trade without incurring any interest for holding the Simsci position overnight. If I will to trade the Taiwan contract I will need US$ and I need Yen for Nikkei as margin for my overnight positions. Interest is charge by my broker for extending these foreign currency loans to be put up at the Exchange as margin while I receive a very small amount of interest for my credit balances.
For those who are non members, one of the most competitive broker is Interactive Brokers, check out their website, they offer very good rates for trading overseas contracts, free trading platform and some Exchange fees for charting services.
Many felt that trading futures is risky compared to other instrument because of the leverage. They are just ignorant. What can you do with S$30k in your account and wanted to trade for a living?
Any Fund Manager who can consistently return 10% nett per annum to their client is a damn bloody good manager because 90% of them failed to do so. A return of 10% for $30k is only $3k a year which is only $250 a month. Can you survive on it doing full time trading? So your goal will be to make at least $3k (10%)a month or 120% a year.
Those who are thinking of quitting their job for full time trading career need to consider it very carefully before taking the plunge because you will need to be a super trader making 10% a month less all cost in order to survive. Of course, there are many who made it, the journey is long and tough.
I will use Simsci as an example in my illustration, a basket of 27 blue chip stocks listed on SGX at the current price of 3770 x 20 per tick which has a value of S$75,400.00 for 1 contract.
Futures trading requires margin because of the high leverage of up to 20 times depending on the volatility and this margin will be adjusted accordingly by the Exchanges periodically, it's not fixed.
Paying a comm of only S$1.70 to trade a value of S$75,400 worth of blue chip stocks is extremely cheap and you need to put up a margin of less than $4k. Nikkei at the price of 9670 x 500 gives us a value of Yen 4,835,000 or around US$59,000 worth of 225 blue chip Japanese stocks. Buying 1 contract cost only US$.70 for the professional traders, this is the reason why I traded futures.
A retail trader paying S$10 for 1 contract of Simsci worth S$75,400 is still cheap compared to buying stocks, probably he need to pay around S$200 comm for that value of stocks. The only difference is that retail traders can choose individual stock to trade and pick those that he feels have better potential of upward price movement.
One big advantage of futures over stock trading is that you can go short the futures naked and hold that position until expiry. Another is you are investing in a diversified portfolio of blue chip stocks, no headache in stock picking.
Another fact that most are ignorant is that interest cost and dividends are being factored into futures pricing. Dividends are paid for those buying into futures when there are dividends to be paid out by some of the stocks in the basket. For example the price of the April Simsci contract is now trading at 3770 while the May contract is trading at a discount of about 28 ticks at 3742, implying a S$560 dividend to be paid out. Historically, investors holding and rolling over their long term positions are assured of returns over time due to inflation and dividends.
The April Simsci contract was also at a discount of 28 ticks over the previous March contract making a payout of S$1,120 over a 2 month period. So for the long term investors, when they roll over their position forward, their pricing will get cheaper and cheaper over time due to the dividends and low interest rate now. One exception is if one were to buy the Nikkei at the peak in 1990 at 39000, he will be losing his pants and still rolling his position at a loss after 20 years. Thus the importance of cutting losses.
So for a investor who used S$4k as margin to buy one contract in March and roll over to May contract, a period of 2 months, can reap a dividend of S$1,120 as long the the futures price remain the same till expiry. He will have additional capital gain if the price move further up while suffer losses if the price depreciate. For 1 Simsci contract value of $75k that yield 3% dividend, one would expect to get S$2,250 worth over a 1 year period with a margin investment of S$4k. That's 50% return if the price remain the same a year later.
Rolling over position from April to May is call calender spread which will be active towards the end of the expiry date for any futures contract. There is a spread quote which is heavily traded too by those who specialise in spread trading. April contract now is known as the near month while May, June, July the far month.
With a $30k account, a trader can easily day trade up to 20 Simsci contracts at one go, that is where the risk comes from. The leverage of up to S$1.5 million worth of stocks with just S$30k. If make use properly, that is where you can reach your million dollar dream.
For those who are not currently members of any Exchanges, find a good and cheap broker. There are many futures contracts that are very liquid with good volatility, it's one's preference, to name a few, mini S&P, Nasdaq, Dow, FTSE, DAX, Gold, Oil, Currency futures, etc. Traders now have plenty of choice. Understand the contract and monitor it closely for some time before you attempt to trade.
Tuesday, April 19, 2011
Sunday, April 10, 2011
Lesson No 1 - Cost of Trading
The reason why 90% of the traders are losing money is because trading is a NEGATIVE, NEGATIVE sum game.
With $100 on the table that 90% of these traders lose money, how much will the 10% make? I asked a fellow trader this question, and we both felt that probably only half the amount or just $50. (Just our opinion) The other $50 disappear into the black hole of the system known as cost of trading.
All form of trading involve cost to facilitate the transaction whether you make or lose money. Rightly so because we need to pay for the services provided to ensure that the transaction is in order, safe and legal.
Traders even need to pay the government tax upfront in the form of 7% GST on the comm, no running away. For professional traders, they have to declare their profits which is subjected to taxes while they can't claim a penny if they lose money the following year except carrying the losses forward. Thus, the negative negative sum game.
Some gains are considered capital gain if taken in as an investment under their personal name. It's a grey area whether one derive this income solely from trading or trading as a part timer. Best to check with the acccountant if one is making lots of money.
Understanding the cost of trading is important for a trader who should treat trading as a business.
Let's look at the transaction cost of the various instruments.
1. Property - Basically for long term investors, 1% comm for the agent, stamp duty, valuation fee and lawyer's fee making it one of the most expensive in term of transaction cost. With capital gain tax and additional stamp duty thrown in for profits made within a year, only very savvy property specuvestors having good connections with developers and inside information should flip and trade.
One major upside on property investment is the depreciating value of our money and the limited supply of land in major cities. Thus, it is one of the easiest form of long term investment, it will always go up in the long run, no worries about mismanagement compared to listed companies.
The downside of property investment is liquidity especially when the market is down with transaction taking months to complete. Sellers might be squeezed to get out if there is an urgent need for cash.
2. Stocks - Cost of trading stocks have come down tremendously over the years but still the comm from trading Singapore stocks range from 0.4% to 0.25% for retail customers. It's still quite hefty but very liquid with narrow spreads and most traders treating profits as capital gain. Professional stock traders are registered with the Stock Exchanges paying yearly membership fees with comm below 0.1% but paying taxes on their profits.
3. ETFs, CFDs and Warrants - I'm not too sure about the comm structure but I'm sure it won't be cheaper than stocks with plenty of hidden costs factor into the prices by the banks that issue them and kiss your investment goodbye if these banks fail like Lehman Brothers.
4. Forex - "No comm, the best instrument to trade", claimed a very ignorant trader brain washed by some Forex course that he had taken. In actual fact, the spread between the bid and ask price is the comm for the brokers. It's very much cheaper now to trade Forex as the Euro/US$ pair spread sometimes narrow down to 1 pip which is US$10 for a round turn of buying and selling US$100k worth of currency. While some not so liquid currency pairs have spread of more than 3 pips which is US$30 per round turn transaction.
But, in time of volatility, the spread may widen to 3 or 5 pips making the transaction rather expensive. Moreover, Forex brokers are like bucket shop where they trade against the client's order. With the advance in computer software, its easy for the brokers to take advantage of client's order without them knowing it.
Forex Brokers are not well regulated, if they collapsed, say bye bye to your money. Most firm offering Forex courses are also introducing brokers for recommending their students to the Forex Broker, earning a comm for every transaction done. Rather good recurring income.
Futures - It's the cheapest in term of transaction cost and Interactive Brokers offer the most competitive rates for retail customers.
Options - About the same comm as Futures but some strike price may not be liquid with rather wide spread from the market makers. This instrument is meant more for the professional traders.
In my next post, I shall discuss more on the cost of trading Futures compared to the other instruments.
With $100 on the table that 90% of these traders lose money, how much will the 10% make? I asked a fellow trader this question, and we both felt that probably only half the amount or just $50. (Just our opinion) The other $50 disappear into the black hole of the system known as cost of trading.
All form of trading involve cost to facilitate the transaction whether you make or lose money. Rightly so because we need to pay for the services provided to ensure that the transaction is in order, safe and legal.
Traders even need to pay the government tax upfront in the form of 7% GST on the comm, no running away. For professional traders, they have to declare their profits which is subjected to taxes while they can't claim a penny if they lose money the following year except carrying the losses forward. Thus, the negative negative sum game.
Some gains are considered capital gain if taken in as an investment under their personal name. It's a grey area whether one derive this income solely from trading or trading as a part timer. Best to check with the acccountant if one is making lots of money.
Understanding the cost of trading is important for a trader who should treat trading as a business.
Let's look at the transaction cost of the various instruments.
1. Property - Basically for long term investors, 1% comm for the agent, stamp duty, valuation fee and lawyer's fee making it one of the most expensive in term of transaction cost. With capital gain tax and additional stamp duty thrown in for profits made within a year, only very savvy property specuvestors having good connections with developers and inside information should flip and trade.
One major upside on property investment is the depreciating value of our money and the limited supply of land in major cities. Thus, it is one of the easiest form of long term investment, it will always go up in the long run, no worries about mismanagement compared to listed companies.
The downside of property investment is liquidity especially when the market is down with transaction taking months to complete. Sellers might be squeezed to get out if there is an urgent need for cash.
2. Stocks - Cost of trading stocks have come down tremendously over the years but still the comm from trading Singapore stocks range from 0.4% to 0.25% for retail customers. It's still quite hefty but very liquid with narrow spreads and most traders treating profits as capital gain. Professional stock traders are registered with the Stock Exchanges paying yearly membership fees with comm below 0.1% but paying taxes on their profits.
3. ETFs, CFDs and Warrants - I'm not too sure about the comm structure but I'm sure it won't be cheaper than stocks with plenty of hidden costs factor into the prices by the banks that issue them and kiss your investment goodbye if these banks fail like Lehman Brothers.
4. Forex - "No comm, the best instrument to trade", claimed a very ignorant trader brain washed by some Forex course that he had taken. In actual fact, the spread between the bid and ask price is the comm for the brokers. It's very much cheaper now to trade Forex as the Euro/US$ pair spread sometimes narrow down to 1 pip which is US$10 for a round turn of buying and selling US$100k worth of currency. While some not so liquid currency pairs have spread of more than 3 pips which is US$30 per round turn transaction.
But, in time of volatility, the spread may widen to 3 or 5 pips making the transaction rather expensive. Moreover, Forex brokers are like bucket shop where they trade against the client's order. With the advance in computer software, its easy for the brokers to take advantage of client's order without them knowing it.
Forex Brokers are not well regulated, if they collapsed, say bye bye to your money. Most firm offering Forex courses are also introducing brokers for recommending their students to the Forex Broker, earning a comm for every transaction done. Rather good recurring income.
Futures - It's the cheapest in term of transaction cost and Interactive Brokers offer the most competitive rates for retail customers.
Options - About the same comm as Futures but some strike price may not be liquid with rather wide spread from the market makers. This instrument is meant more for the professional traders.
In my next post, I shall discuss more on the cost of trading Futures compared to the other instruments.
Saturday, April 9, 2011
So, you want to be a Trader?
The definition of a trader is someone who buy a certain product and sell it later at a higher price to make a profit.
I have received an email from a reader asking me to share on my blog how someone can begin his career as a trader. After giving it some thought, I shall begin lessons on trading and readers decide whether they should take up trading as a career.
I would also appreciate readers to share their views and comments on the various subjects that I will touch on. I'm very thankful to Coconut for being my constant companion for the past one year and have contributed tremendously in sharing his experience. I look forward to sharing that little knowledge that I know.
Can traders be train? Is there such thing as Natural Born Traders?
The answer is Yes to both of the above.
Smart people learn fast and slow learner don't be despair, as long as one is passionate, hardworking and determine, it just take a little longer to accomplish your dream. It took me quite some time to realise my dream too.
Below are some common instruments for trading;
1. Properties
2. Stocks
3. Forex
4. Futures/Commodities
5. CFDs
6. Warrants
7. Options
Trading, speculation, investing and gambling, they are brothers and sisters in the same family trying to make money from each other.
Statistics have shown that up to 90% of the traders lose money, it is a cold hard fact. I have asked many what are the reasons for such a high percentage of losers versus only 10% who make money. Not many can give me a good answer, it's the usual, no discipline, no money management, cannot control their emotions, etc..
Similarly, the percentage of Equity Funds, Unit Trust, Hedge Funds, etc.. losing money or under performing their benchmark is around the same at 90% even though they are managed by professionals. Choosing one that give consistent return year after year is just as tough, might as well learn and do it yourself, losing money yourself is much better than paying someone else to lose money for you. (refer more to investors, because most are told to hold for the long long term)
Think about it and I shall discuss this topic in my next post. I will be away next week for a holiday to the Chinese Capital with my wife.
I have received an email from a reader asking me to share on my blog how someone can begin his career as a trader. After giving it some thought, I shall begin lessons on trading and readers decide whether they should take up trading as a career.
I would also appreciate readers to share their views and comments on the various subjects that I will touch on. I'm very thankful to Coconut for being my constant companion for the past one year and have contributed tremendously in sharing his experience. I look forward to sharing that little knowledge that I know.
Can traders be train? Is there such thing as Natural Born Traders?
The answer is Yes to both of the above.
Smart people learn fast and slow learner don't be despair, as long as one is passionate, hardworking and determine, it just take a little longer to accomplish your dream. It took me quite some time to realise my dream too.
Below are some common instruments for trading;
1. Properties
2. Stocks
3. Forex
4. Futures/Commodities
5. CFDs
6. Warrants
7. Options
Trading, speculation, investing and gambling, they are brothers and sisters in the same family trying to make money from each other.
Statistics have shown that up to 90% of the traders lose money, it is a cold hard fact. I have asked many what are the reasons for such a high percentage of losers versus only 10% who make money. Not many can give me a good answer, it's the usual, no discipline, no money management, cannot control their emotions, etc..
Similarly, the percentage of Equity Funds, Unit Trust, Hedge Funds, etc.. losing money or under performing their benchmark is around the same at 90% even though they are managed by professionals. Choosing one that give consistent return year after year is just as tough, might as well learn and do it yourself, losing money yourself is much better than paying someone else to lose money for you. (refer more to investors, because most are told to hold for the long long term)
Think about it and I shall discuss this topic in my next post. I will be away next week for a holiday to the Chinese Capital with my wife.
Sunday, April 3, 2011
TIme for some correction?
Two weeks ago, I felt the Simsci was a good level to buy at above 3460. Any more room for it to go further? Are the foreign funds back pushing the Index to close at a 2 weeks high? With the looming election approaching, can we short the market?
I will still buy on retracement.
My friend called on Wednesday to short the Nikkei above 9800, he felt that there should be some window dressing in Japan and the market whould correct down again in the next few days. Let's see.
My short term trading strategy will be to buy 2 Simsci and sell 1 Nikkei.
Some reistance for the S&P at 1334 level.
It has been a good week for traders because of the increase volatility, for those who missed it, just too bad, wait for the next opportunity.
Saturday, March 26, 2011
US$130k commission!
Overheard at the hawker centre during lunch break about a very big scalper incurring a comm of US$130k trading the Nikkei on Tuesday when the Nuclear reactor exploded in Japan after the earthquake and tsunami.
It was a hectic day for traders with good volatility across all markets, SGX Nikkei traded more than 4x the normal average daily volume at close to 400,000 with plenty of panic selling. If this trader was to trade the SGX Nikkei alone, he would have contributed about a quarter of the volume! Amazing, a human Algo!
It's rather unbelievable to incur such a high comm, probably this trader hedge against Osaka Nikkei, Minis and Topix. Heard that he made US$250k and lost it back, thus was not able to cover the comm incurred.
There are many big scalpers out there, one that I know traded an average daily volume of more than 5,000 lots in the Tw contract. His monthly volume rebates come up to US$20,000 to US$30,000 a month from the Exchange. His strategy is to trade as much as possible without losing money, the monthly rebates will be his income and profit being additional bonus.
These big traders have negotiating power to bargain for rebates or better comm, an edge that small traders don't have.
It was a hectic day for traders with good volatility across all markets, SGX Nikkei traded more than 4x the normal average daily volume at close to 400,000 with plenty of panic selling. If this trader was to trade the SGX Nikkei alone, he would have contributed about a quarter of the volume! Amazing, a human Algo!
It's rather unbelievable to incur such a high comm, probably this trader hedge against Osaka Nikkei, Minis and Topix. Heard that he made US$250k and lost it back, thus was not able to cover the comm incurred.
There are many big scalpers out there, one that I know traded an average daily volume of more than 5,000 lots in the Tw contract. His monthly volume rebates come up to US$20,000 to US$30,000 a month from the Exchange. His strategy is to trade as much as possible without losing money, the monthly rebates will be his income and profit being additional bonus.
These big traders have negotiating power to bargain for rebates or better comm, an edge that small traders don't have.
Thursday, March 24, 2011
Averaging
A reader have written to me:
"I see that a lot of former floor traders tend to average losing trades and therefore get stuck with huge paper losses during extended market moves. Is this a common strategy among floor traders?"
I believe this is a inherit human pyschology, inborn in us to react in such a manner that we are buying something cheaper now than what we have bought earlier, thus average to get a medium price.
Of course, the problem is when we buy cheaper and cheaper and even cheaper. Where is the bottom? How much more money we have to buy further? Futures trading is based on leverage, it even bankrupt Barring Bank when my fellow trader Nick Leeson average the Nikkei after the Kobe earthquake.
Most new traders adopt this strategy of averaging on bad trades basically because they don't know how to cut losses, unwilling to cut losses or cannot bear the pain of cutting losses until a level whereby it bust their account.
Most of the time when a trader averages on a bad trade, the market is kind enough to come back for them to take a small profit. They can do it for days or weeks but one hit will wipe them off for the past effort in accumulating the profit. How to make money in the long run when it's only small profits and huge losses?
Traders who adopt this strategy will not be able to make it because most of the time they will be back to square one from where they first started, it can be 3 months down the road or 2 years down the road, wasting their time, effort and money.
For those who failed as a trader, asked yourself honestly whether are you one of those who have adopted this strategy subconciously. Ask any trader who losses money on any particular day whether he averages on bad trades, most likely answer is yes.
Averaging on bad trades is a very bad habit meant only for those traders who have very very deep pocket and traders who have planned it together with strict money management rules. They might have to hold the rotten position for weeks or months suffering the agony of the paper losses and lost opportunities.
I do averaging at times when my discipline is down, most likely I'll lose money at the end of the day, strange? That's the fact. I have to justify why I average on a bad trade and ever ready to cut loss when the price move further against me because I'm damn bloody wrong for whatever reasons unknown to me.
"I see that a lot of former floor traders tend to average losing trades and therefore get stuck with huge paper losses during extended market moves. Is this a common strategy among floor traders?"
I believe this is a inherit human pyschology, inborn in us to react in such a manner that we are buying something cheaper now than what we have bought earlier, thus average to get a medium price.
Of course, the problem is when we buy cheaper and cheaper and even cheaper. Where is the bottom? How much more money we have to buy further? Futures trading is based on leverage, it even bankrupt Barring Bank when my fellow trader Nick Leeson average the Nikkei after the Kobe earthquake.
Most new traders adopt this strategy of averaging on bad trades basically because they don't know how to cut losses, unwilling to cut losses or cannot bear the pain of cutting losses until a level whereby it bust their account.
Most of the time when a trader averages on a bad trade, the market is kind enough to come back for them to take a small profit. They can do it for days or weeks but one hit will wipe them off for the past effort in accumulating the profit. How to make money in the long run when it's only small profits and huge losses?
Traders who adopt this strategy will not be able to make it because most of the time they will be back to square one from where they first started, it can be 3 months down the road or 2 years down the road, wasting their time, effort and money.
For those who failed as a trader, asked yourself honestly whether are you one of those who have adopted this strategy subconciously. Ask any trader who losses money on any particular day whether he averages on bad trades, most likely answer is yes.
Averaging on bad trades is a very bad habit meant only for those traders who have very very deep pocket and traders who have planned it together with strict money management rules. They might have to hold the rotten position for weeks or months suffering the agony of the paper losses and lost opportunities.
I do averaging at times when my discipline is down, most likely I'll lose money at the end of the day, strange? That's the fact. I have to justify why I average on a bad trade and ever ready to cut loss when the price move further against me because I'm damn bloody wrong for whatever reasons unknown to me.
Sunday, March 20, 2011
My Favourite Breakfast Stall
The Mei Ling Street Market in Queenstown is where my wife usually visit to buy dried foodstuff from her friend Joyce who help her father at the stall, Chua Yan Heng. It's always crowded on a Sunday morning compared to other stalls, I suppose they are friendly and price reasonable.
The chicken feet hor fun is my favourite on the occasional Sunday morning where I accompanied my wife to replenish her dried foodstuff. Stall Shi Hui Yuan is a Hor Fun specialist opening from Wednesday to Sunday located on the second floor, #02-33 at Mei Ling street market. Waiting time for the food is about 10 to 20 minutes with a constant crowd queuing for their order.
It's simply delicious! The price is reasonable at S$3.00 per plate and S$3.50 for a bigger portion. I enjoyed the food so much that I would like to share it with my readers here.
The chicken feet hor fun is my favourite on the occasional Sunday morning where I accompanied my wife to replenish her dried foodstuff. Stall Shi Hui Yuan is a Hor Fun specialist opening from Wednesday to Sunday located on the second floor, #02-33 at Mei Ling street market. Waiting time for the food is about 10 to 20 minutes with a constant crowd queuing for their order.
It's simply delicious! The price is reasonable at S$3.00 per plate and S$3.50 for a bigger portion. I enjoyed the food so much that I would like to share it with my readers here.
Where is the Simsci heading?
Daily chart of the Simsci for 1 year.
Never see day light since the start of the Rabbit year and trading well below the start of year 2011.
Analysts and Feng Shui experts who have predicted a good year for our stock market went into hiding now and praying that the market will go back up again before the end of the year, or else, they have to close shop.
Being a professional Sismci trader, I have been caught too since I didn't liquidate any of my stock holdings. I'm not bearish, the Singapore economy is doing well, why the weakness?
The big funds are moving the markets. Our stock market had a good run for the past 2 years for them to lock in good profits and divert the money elsewhere. They will come back again when the market is cheap and valuation reasonable.
Simsci seems to have good support at 3460 levels, being a very short term trader, I will long above this level with small stop below it.
Never see day light since the start of the Rabbit year and trading well below the start of year 2011.
Analysts and Feng Shui experts who have predicted a good year for our stock market went into hiding now and praying that the market will go back up again before the end of the year, or else, they have to close shop.
Being a professional Sismci trader, I have been caught too since I didn't liquidate any of my stock holdings. I'm not bearish, the Singapore economy is doing well, why the weakness?
The big funds are moving the markets. Our stock market had a good run for the past 2 years for them to lock in good profits and divert the money elsewhere. They will come back again when the market is cheap and valuation reasonable.
Simsci seems to have good support at 3460 levels, being a very short term trader, I will long above this level with small stop below it.
Saturday, March 19, 2011
Expect the Unexpected
Too often we heard traders commented "Didn't expect the market to drop down so low", "Strong support here, market should rebound" and "No reason for market to come down to such levels, it was so bullish yesterday"
Sound familiar?
Anyone caught in the Nikkei meltdown on Tuesday?
Some traders made millions in just a few days while many were asked to top up their margin or have their long positions liquidated automatically by their brokers. This type of wild movement hardly happen and most short term traders were caught, they just didn't know where to cut or how to cut or too painful to cut.
On Thursday, 10/3/2011, Nikkei was still trading around 10500 levels for most of the day, very strong, consolidating at these levels for the past month despite the sell down of most Asian stock market.
Nikkei came crashing down on Friday after a massive earthquake hit the North Eastern seabed of Japan and subsequent Tsunami that pulverised some coastal cities. Monday sell off continues with the Nikkei traded down to a low of 9130.
Panic sets in on Tuesday when one of the nuclear reactor in Fukushima exploded sending radioactive fumes into the atmosphere. The Nikkei was sold all the way down to a low of 7790, real devastating nightmare for those holding long positions.
A former floor trader revealed that his paper losses was more than US$200k at one point by averaging down on his bad positions. Well, that's the danger of this type of strategy unless you have deep deep pocket. He held on to his positions and cut his losses on the way up only losing below US$20k at the end of the day.
It was a blessing to him, he was happy and lucky to lose this smaller amount but if he had held on to his positions, he would at least be making US$100k now. So what's the moral of the story?
Another friend revealed that he made more than S$100k in just a few minutes on Tuesday during the opening, he managed to catch that big fat rabbit that got lost.
One of my student told me that his classmate from another course made more than a million shorting the Nikkei since Friday upon hearing of the Tsunami that wipe out some coastal cities in Japan. He added on to his short position on Monday and finally took his profit on Tuesday, just 3 days but he was prepared for it. This guy is a natural born trader, my respect to him, a very humble chap.
I suppose there are many great traders out there making tons of money, it happens only once every few years, yours if you have the guts to take the risk.
Sunday, March 13, 2011
Cold Hard Truth
In today's Straits Times were 2 big advertisement on the 3rd and 4th page;
"Learn When To Enter & Exit A Trade With Laser Accuracy - The Easy Way"
"YES! I Finally Found An Easy Way To Make Money Trading Forex"
I wonder why these marketers are sharing their easy money making secret, so stupid! should keep it to themselves and make plenty of money without anybody knowing it.
After being a professional trader for 25 years, I still find it very challenging making those big bucks in such an easy manner. 30 minutes a day? Who are they kidding?
Most of my fellow traders are putting in more than 10 hours of hard work, monitoring the market day and night. We must be cock! for not knowing such easy strategies exist to make easy money.
These marketers can easily put up their strategies on the computer to do auto trading for themselves and make the big bucks, why spent so much money advertising and time teaching others?
Or are they making the big buck for themselves just by teaching? Every second there is a Fool being born, I have been a Fool many times over too. Are they willing to show their daily transaction statements and monthly statements for just a couple of months to show proof?
I'm also a trainer as well as a professional trader with a impeccable track record to show. I'm still trading and I know how tough it is to trade for a living now, I'm not going to lie about it, that's the Cold Hard Truth.
"Learn When To Enter & Exit A Trade With Laser Accuracy - The Easy Way"
"YES! I Finally Found An Easy Way To Make Money Trading Forex"
I wonder why these marketers are sharing their easy money making secret, so stupid! should keep it to themselves and make plenty of money without anybody knowing it.
After being a professional trader for 25 years, I still find it very challenging making those big bucks in such an easy manner. 30 minutes a day? Who are they kidding?
Most of my fellow traders are putting in more than 10 hours of hard work, monitoring the market day and night. We must be cock! for not knowing such easy strategies exist to make easy money.
These marketers can easily put up their strategies on the computer to do auto trading for themselves and make the big bucks, why spent so much money advertising and time teaching others?
Or are they making the big buck for themselves just by teaching? Every second there is a Fool being born, I have been a Fool many times over too. Are they willing to show their daily transaction statements and monthly statements for just a couple of months to show proof?
I'm also a trainer as well as a professional trader with a impeccable track record to show. I'm still trading and I know how tough it is to trade for a living now, I'm not going to lie about it, that's the Cold Hard Truth.
Sunday, March 6, 2011
Guts Vs Reckless
Last week, I felt sad and painful for a fellow trader who suffered heavy losses. He joined us a few months back trading in the same room. A fantastic generous guy whom is not well like by some because of his naturally loud voice that disturb other traders unknowingly. He is a extremely nice chap, helpful and caring.
He traded the Simsci, Tw and Nikkei simultaneously with gusto, fearless and I always admire his guts in taking trades with size I feel uncomfortable. He goes to the maximum that his margin allows for him to day trade. When he is wrong, he averages then flip and turn, he can moves the Simsci a few ticks in a quiet market! And, I will be there to Yum him sometimes without knowing the trade belongs to him.
Is trading that simple?
This trader has been trading for more than a year and I heard he had already lost quite a fair sum of money since. Another quality that I admire is his perseverance, never say die attitude, a rare quality for a trader. But, he is also damn emotional and bloody stubborn, that's what make me feel that he will never make it as a trader if he don't change.
He simply does not practice money management even if he knows how important it is to any trader including those with plenty of experiences.
While relating how I admire this trader's guts, another senior trader laugh it off as an act of recklessness, GUTS, to him is having the courage to act and add on to a good position. I don't dispute that, the greatest traders on earth are those that dare to add on to their winning trades.
How about Warren Buffett? He was 6 months too earlier to get into the stock market during the Lehman Brother's collapse in 2008 accumulating cheaper and cheaper stocks on the way down. He was wrong for 6 months! Now, he is taking profit, it seems so simple when we look back in history.
Of course, Warren Buffett is a investor, we are traders, very short term.
He traded the Simsci, Tw and Nikkei simultaneously with gusto, fearless and I always admire his guts in taking trades with size I feel uncomfortable. He goes to the maximum that his margin allows for him to day trade. When he is wrong, he averages then flip and turn, he can moves the Simsci a few ticks in a quiet market! And, I will be there to Yum him sometimes without knowing the trade belongs to him.
Is trading that simple?
This trader has been trading for more than a year and I heard he had already lost quite a fair sum of money since. Another quality that I admire is his perseverance, never say die attitude, a rare quality for a trader. But, he is also damn emotional and bloody stubborn, that's what make me feel that he will never make it as a trader if he don't change.
He simply does not practice money management even if he knows how important it is to any trader including those with plenty of experiences.
While relating how I admire this trader's guts, another senior trader laugh it off as an act of recklessness, GUTS, to him is having the courage to act and add on to a good position. I don't dispute that, the greatest traders on earth are those that dare to add on to their winning trades.
How about Warren Buffett? He was 6 months too earlier to get into the stock market during the Lehman Brother's collapse in 2008 accumulating cheaper and cheaper stocks on the way down. He was wrong for 6 months! Now, he is taking profit, it seems so simple when we look back in history.
Of course, Warren Buffett is a investor, we are traders, very short term.
Sunday, February 27, 2011
Another Week of Selling
Unbelievable, another week of ferocious selling in the Simsci especially on Thursday afternoon. Funds are getting out and events in the Middle East cause Oil prices to soar again above the US$100/- level. The shorts take this opportunity to squeeze those who are long, it's real painful to be holding long positions in equity, some even panic.
The market recovered half the losses for the week on Friday, Funds came in to cover their shorts and for those who have been shaken out of their long position the previous few days, will only stare and watch the market creeping up slowly without getting back into position.
Is such a correction good for us to enter into a short position? The trend is heading South and correction of 50% for the week. Who can predict where the market is going tomorrow? I need to be enlighten.
Still, being a scalper, just stick to what I'm doing best and try not to predict the market, don't try to be too smart. Let the market tell me how I should react to it's movement, whether it's Tango, Cha Cha or Waltz, just follow.
The market recovered half the losses for the week on Friday, Funds came in to cover their shorts and for those who have been shaken out of their long position the previous few days, will only stare and watch the market creeping up slowly without getting back into position.
Is such a correction good for us to enter into a short position? The trend is heading South and correction of 50% for the week. Who can predict where the market is going tomorrow? I need to be enlighten.
Still, being a scalper, just stick to what I'm doing best and try not to predict the market, don't try to be too smart. Let the market tell me how I should react to it's movement, whether it's Tango, Cha Cha or Waltz, just follow.
Sunday, February 20, 2011
Why Still Losing Money?
A former trader who joined me in December has performed like a roller coaster and now back to square one from where he started. I wrote an email to him in my earlier post but it doesn't seems to get into his head that something is wrong with the way he trades.
This trader has been struggling since the floor closed in 2005 but never give up losing quite a fair sum and digging deeply into his savings. I admire his stamina.
As usual, I asked him, "How much would you like to make a month?" He told me his objective is to make S$3k to S$5k a month. He would be happy and satisfied given that he has not been making money for so many years. I was surprised at the low target since this amount is what he can easily make in one day on the floor.
The floor days are over, many floor traders have given up trading, losing out the edge to the Algos, even many existing traders are finding it increasingly difficult to make a decent profit. New breed of traders are taking over, it's a renewal process, change is inevitable and when a trader don't adapt, losses will force him out of the game.
Why is it so difficult to make even S$3k/5k a month? Even for an old bird? Just $200 a day consistently, 10 Simsci ticks or 5 Nikkei ticks. This trader with 20 years of trading experiences, having made a small fortune from trading, knowing his technicals yet still unable to make it after 5 years.
Something must be wrong somewhere for a well educated overseas graduate who is hardworking and determined. He is not short of trading knowledge, so why?
Can I use the word STUBBORN? Nobody would be willing to admit having a stubborn personality, there would be all type of excuses and explanations to justify their actions.
This trader has chosen not to reply my email advice, too lazy to analyse what went wrong, believing that he is trading right and his strategies should work out. I tried to pull him out from falling into the drain but he chose to jump in instead.
He had 5 straight losing days last week and I can sense some desperation in him when he visited me at the arcade. He needed a break.
He lost in December, recovered the losses and made money in January, then blew them away in February. So, 3 months without income, that's the same story for most traders who are not making it. Expenses will kill them with anxiety setting in leading slowly to depression.
I told the trader to go back to basic, check his trading journal on his performace in January why he performed well for the month (he told me he kept one, hopefully, though I have my doubts). How is he able to record the journal with so many trades, he basically didn't even plan his trades.
Of course, looking at his daily trading statements, I have already sound the alarm bell to him before he slide down into losing territory, I knew something was not right with the way he trades.
His trading volume increases tremendously scalping form home without increasing his profitability. He trades a few different contracts including overseas contracts like DAX, S&P, Currency futures, Nikkei, Tw and the core Simsci. I didn't like the small profits that he makes with the increased comm, a recipe for disaster waiting to happen. He lost his focus.
It does not make sense for a trader trying to make S$200 while the comm adds up to more than $300 a day. It's totally not logical, obviously he's trying to make more, his impatience is his greatest weakness, he is just not ready yet to increase his size.
Scalping is not for someone trading from home, when a trader's profit per trade is small, he is definitely on the wrong track, success rate will be low in the long term.
This trader told me that he increases his trading size after the good performance in January, didn't average on bad trades but being stopped out most of the time. Explanations again that I find it hard to accept but nevertheless, he's trading his own money and only answerable to himself. It must be small profit target but big stop loss levels.
I have emphasie many times to go for good quality trades, just one or two trades a day to make that $200, be patient to wait for that rabbit, it's boring, it's tough but can be achievable. That's the objective for a beginner, accumulate and build up the base, the foundation neccesary before increasing the size.
This trader has been struggling since the floor closed in 2005 but never give up losing quite a fair sum and digging deeply into his savings. I admire his stamina.
As usual, I asked him, "How much would you like to make a month?" He told me his objective is to make S$3k to S$5k a month. He would be happy and satisfied given that he has not been making money for so many years. I was surprised at the low target since this amount is what he can easily make in one day on the floor.
The floor days are over, many floor traders have given up trading, losing out the edge to the Algos, even many existing traders are finding it increasingly difficult to make a decent profit. New breed of traders are taking over, it's a renewal process, change is inevitable and when a trader don't adapt, losses will force him out of the game.
Why is it so difficult to make even S$3k/5k a month? Even for an old bird? Just $200 a day consistently, 10 Simsci ticks or 5 Nikkei ticks. This trader with 20 years of trading experiences, having made a small fortune from trading, knowing his technicals yet still unable to make it after 5 years.
Something must be wrong somewhere for a well educated overseas graduate who is hardworking and determined. He is not short of trading knowledge, so why?
Can I use the word STUBBORN? Nobody would be willing to admit having a stubborn personality, there would be all type of excuses and explanations to justify their actions.
This trader has chosen not to reply my email advice, too lazy to analyse what went wrong, believing that he is trading right and his strategies should work out. I tried to pull him out from falling into the drain but he chose to jump in instead.
He had 5 straight losing days last week and I can sense some desperation in him when he visited me at the arcade. He needed a break.
He lost in December, recovered the losses and made money in January, then blew them away in February. So, 3 months without income, that's the same story for most traders who are not making it. Expenses will kill them with anxiety setting in leading slowly to depression.
I told the trader to go back to basic, check his trading journal on his performace in January why he performed well for the month (he told me he kept one, hopefully, though I have my doubts). How is he able to record the journal with so many trades, he basically didn't even plan his trades.
Of course, looking at his daily trading statements, I have already sound the alarm bell to him before he slide down into losing territory, I knew something was not right with the way he trades.
His trading volume increases tremendously scalping form home without increasing his profitability. He trades a few different contracts including overseas contracts like DAX, S&P, Currency futures, Nikkei, Tw and the core Simsci. I didn't like the small profits that he makes with the increased comm, a recipe for disaster waiting to happen. He lost his focus.
It does not make sense for a trader trying to make S$200 while the comm adds up to more than $300 a day. It's totally not logical, obviously he's trying to make more, his impatience is his greatest weakness, he is just not ready yet to increase his size.
Scalping is not for someone trading from home, when a trader's profit per trade is small, he is definitely on the wrong track, success rate will be low in the long term.
This trader told me that he increases his trading size after the good performance in January, didn't average on bad trades but being stopped out most of the time. Explanations again that I find it hard to accept but nevertheless, he's trading his own money and only answerable to himself. It must be small profit target but big stop loss levels.
I have emphasie many times to go for good quality trades, just one or two trades a day to make that $200, be patient to wait for that rabbit, it's boring, it's tough but can be achievable. That's the objective for a beginner, accumulate and build up the base, the foundation neccesary before increasing the size.
Sunday, February 13, 2011
5 Days of Selling in the Simsci
I was too busy to update the blog for the past 2 weeks, so many things to do during the Chinese New Year, no wonder some Chinese hate the CNY. But it's our culture to celebrate with numerous feast, visiting relatives and friends that we may meet only once a year, as well as reciprocate by inviting them to our house.
There are plenty of preparation such as spring cleaning up the house and decorating it, making cookies, shopping for new clothes, stocking up the house with soft drinks and food.
The Simsci slide the whole week with market closing lower everyday despite the S&P surging up almost everyday hitting pre-crisis high before the Lehman collapse.
Many Simsci traders were caught by the relentless selling from Day 1 to Day 5 of the suppose prosperous Rabbit Year. Almost all analyst have predicted a roaring start for the Singapore stock market this year and they were so wrong.
The Big boys are still the one controlling the market with their funds withdrawing from Emerging markets and returning back to the Develop markets.
I was caught too for being not objective enough, our economy is sound, we have fantastic growth and the local companies are well managed with many reporting profits within expectation. I'm still puzzled by the selling for 5 days, couldn't believe it, that's why I lost money.
I was angry for not capitalizing on the downward move, good volatility and yet not able to make money. My trading volume increases tremendously, my losses are mostly commissions.
There are plenty of preparation such as spring cleaning up the house and decorating it, making cookies, shopping for new clothes, stocking up the house with soft drinks and food.
The Simsci slide the whole week with market closing lower everyday despite the S&P surging up almost everyday hitting pre-crisis high before the Lehman collapse.
Many Simsci traders were caught by the relentless selling from Day 1 to Day 5 of the suppose prosperous Rabbit Year. Almost all analyst have predicted a roaring start for the Singapore stock market this year and they were so wrong.
The Big boys are still the one controlling the market with their funds withdrawing from Emerging markets and returning back to the Develop markets.
I was caught too for being not objective enough, our economy is sound, we have fantastic growth and the local companies are well managed with many reporting profits within expectation. I'm still puzzled by the selling for 5 days, couldn't believe it, that's why I lost money.
I was angry for not capitalizing on the downward move, good volatility and yet not able to make money. My trading volume increases tremendously, my losses are mostly commissions.
Thursday, February 3, 2011
Wednesday, February 2, 2011
Looking for Good Traders
During lunch, I met a fellow trader who is a pioneer in the Futures Trading industry, my senior who have dished out countless advices to newbies including me. He is one of the most successful floor trader as well as electronic trader and a very well respected options trader.
He is looking to recruit and groom a few traders who have some experience in Futures trading. So, I asked him, "what criteria are you looking for?"
Without hesitation, he replied, "Only one criteria, he must be a person of integrity with some trading experience."
Yes, floor traders like us are men of our words, we honour what we said.
He will personally train the new traders and probation will be for six months.
It's a rare opportunity to learn from one of the best trader in Singapore.
Members of AFACT and students of SGX Academy who are interested can let me know.
He is looking to recruit and groom a few traders who have some experience in Futures trading. So, I asked him, "what criteria are you looking for?"
Without hesitation, he replied, "Only one criteria, he must be a person of integrity with some trading experience."
Yes, floor traders like us are men of our words, we honour what we said.
He will personally train the new traders and probation will be for six months.
It's a rare opportunity to learn from one of the best trader in Singapore.
Members of AFACT and students of SGX Academy who are interested can let me know.
Sunday, January 30, 2011
A tough month
A trader from another arcade revealed that he had been losing money since the year started, everyday in a row for 3 weeks! It's unprecedented, he couldn't believe his ass luck, it has never happened in his entire trading career for such a long spell of money losing days.
Yes, few of my traders lost money this month too. What exactly happened to these seasoned traders?
We are now trading against better, more informed traders as well as our greatest enemies, the big Algos who uses their muscle power to push the market up and down sometimes for no apparent reason to squeeze the smaller traders.
I must admit that the operators behind these Algos are good, they are well capitalized to intimidate the smaller traders with their size. They have the speed, at least a 1000 times faster than any trader, using machines that have no emotion. These powerful machines can feel the pulse and the heart beat of the market to sense a certain market direction.
Machines don't need to rest while traders need to be alert at all times. With trading hours extending longer and longer to almost 24 hours trading, the volatility shrink making it even more difficult for a trader.
Another factor that heavily favours the Algos is the volume rebate given by the Exchanges for the high volume of trades churn out by the machines and big time traders. Their transaction cost is so much lower.
Scalpers and Calender spreaders are most affected by the Algos with their high cost of trading. Comm take up a big percentage of their profit which allow only a small margin of error for their trades.
I was told the " The Flipper" has set up shop in Singapore to take advantage of the smaller market to corner and the system here that favours the Algos. Just google and read more about this single largest and most successful individual futures trader on planet Earth. He can simply put anyone of us in his pocket.
I think there are many more smaller "Flipper" now in our market supported by big Prop firms, that's what make trading so tough.
Yes, few of my traders lost money this month too. What exactly happened to these seasoned traders?
We are now trading against better, more informed traders as well as our greatest enemies, the big Algos who uses their muscle power to push the market up and down sometimes for no apparent reason to squeeze the smaller traders.
I must admit that the operators behind these Algos are good, they are well capitalized to intimidate the smaller traders with their size. They have the speed, at least a 1000 times faster than any trader, using machines that have no emotion. These powerful machines can feel the pulse and the heart beat of the market to sense a certain market direction.
Machines don't need to rest while traders need to be alert at all times. With trading hours extending longer and longer to almost 24 hours trading, the volatility shrink making it even more difficult for a trader.
Another factor that heavily favours the Algos is the volume rebate given by the Exchanges for the high volume of trades churn out by the machines and big time traders. Their transaction cost is so much lower.
Scalpers and Calender spreaders are most affected by the Algos with their high cost of trading. Comm take up a big percentage of their profit which allow only a small margin of error for their trades.
I was told the " The Flipper" has set up shop in Singapore to take advantage of the smaller market to corner and the system here that favours the Algos. Just google and read more about this single largest and most successful individual futures trader on planet Earth. He can simply put anyone of us in his pocket.
I think there are many more smaller "Flipper" now in our market supported by big Prop firms, that's what make trading so tough.
Thursday, January 27, 2011
Amazing Precision
Perfect Shot that need plenty of practice. Just like trading, a lot of hard work is needed to train for making good trades. Focus and keep improving.
Saturday, January 22, 2011
Trader's Symposium
I have been invited again to be one of the speaker at the Trader's Symposium this year. It's kind of challenging to find a topic to share with aspiring traders and motivate them when they can learn it from books and magazines.
What can I share with them in just half an hour?
What would they like to know?
I still have a few months to think about a topic to share and to deliver it honestly on something I have been doing for the past 25 years.
Traders need to be very flexible to adapt as the market condition keep changing with new and better players. My brother, one of the most consistent trader, took a tumble recently and he realised that the strategy he has been using is not working. His cash register suddenly stopped and need servicing.
He need adjustment to tackle the market. That's what makes trading so challenging, change is needed constantly to stay in the game. He managed to keep his losses small, that's what make him a rather good trader, I have great respect for him.
When you are a small fish in a big ocean, survival skill is vital.
What can I share with them in just half an hour?
What would they like to know?
I still have a few months to think about a topic to share and to deliver it honestly on something I have been doing for the past 25 years.
Traders need to be very flexible to adapt as the market condition keep changing with new and better players. My brother, one of the most consistent trader, took a tumble recently and he realised that the strategy he has been using is not working. His cash register suddenly stopped and need servicing.
He need adjustment to tackle the market. That's what makes trading so challenging, change is needed constantly to stay in the game. He managed to keep his losses small, that's what make him a rather good trader, I have great respect for him.
When you are a small fish in a big ocean, survival skill is vital.
Thursday, January 13, 2011
Trading Performance
I have decided to post the results of account FAT8025 on my other blog under Trading Performance for those who like to know them. ->>
It's a second account for this trader, so I'm not expecting too much from him since he don't have much energy left for night trading. I'm curious to see how he handles a losing position and money management.
It's a second account for this trader, so I'm not expecting too much from him since he don't have much energy left for night trading. I'm curious to see how he handles a losing position and money management.
Wednesday, January 12, 2011
S&P - NIKKEI Spread
This is one of the account that is using Inter-Market spread strategy to trade. I'm tracking this trader's performance with a base capital of S$27,104.00. He spend a few hours at night trading from home using the Pat's System.
No speed required for trading this strategy except looking for levels to get in and out. No pressure to perform, no charts required and 40/60 profit sharing.
No speed required for trading this strategy except looking for levels to get in and out. No pressure to perform, no charts required and 40/60 profit sharing.
Tuesday, January 11, 2011
Sunday, January 9, 2011
Email to my Trader
All my traders funded their own accounts because I believe that they are responsible for their own action. I merely facilitate and guide them, holding a small share in their account that they are comfortable with.
Here is a letter I have just written to a veteran trader of 20 years who have joined me 2 months ago, trading from home. He has been struggling with Electronic trading for the past few years.
Hi Bro,
You have done well in a quiet and very difficult December month for most traders. I have seen great improvement in your trades that comes mostly form the Simsci contract. Last week, you started to drift backward and seems to be struggling again.
From the recent statements, I observed that you are going back to arbitrage trading between CME NK and SGX NK to cover your losses in the Simsci. I'm surprised that you made money doing that with your slow trading platform and Internet speed. The risk/reward ration is about even but it's draining tremendous amount of your energy starring at the screens waiting for such opportunities.
We don't have the edge in arbitrage trading anymore, the Algos have taken over that role with their low latency, high frequency trading at a very much lower comm offered by the Exchanges. You are not going to grow and progress doing that at home, the stress will affect your health and in turn affect your concentration doing outright trading.
You are no longer young with the energy to compete with the Algos. Imagine yourself driving a old boneshaker along the express way at the speed of 50 km/hr while the rest are zooming past at double the speed or more. I definitely don't encourage such trading without the proper setup to compete on a level playing field. The reward for you effort is low. Focus instead on outright trading, losses is part of the game.
Refer to your trades last month and dissect them to understand why you have done well. But did you keep a trading journal?
Recently I challenged my brother too when he spoke about keeping a journal on his previous trades and strategies. I lost! He took the trouble reviewing his trades at the end of each day and record them for future reference so that he can improve on it. That's the biggest reason why he is now the most consistent trader and improving everyday. Can you still remember he was struggling together with you in the arcade through 2009?
95% of the traders do not keep a trading journal, my brother made that little extra effort.
Both of you are equally talented and intelligent, but he is now way ahead of you, why? I have great respect for you, a highly successful floor trader with plenty of guts. For traders who are not making it, I have only one word to describe their characteristic, "STUBBORN". They are all in denial with all sort of excuses, a drunkard will not admit that he is drunk.
Questions that I would like to ask you.
1. Do you keep a trading journal?
2. Can you justify your every trade? (Reasons for entering into a trade)
3. Do you have a stop loss before taking the trade?
4. Do you average on a bad trade?
5. Do you have a profit target?
6. Do you know the right time to trade?
7. Do you know which contract you are most comfortable with?
Being a veteran trader, you should have the answers to all of them, which is rather simple and straight forward. Keep repeating what you have done correctly. There is no compromise on discipline and following strict money management rules.
There is no option for you but to improve yourself, you must do it, you have to do it and I believe you can do it.
I hope change will take place in 2011 and I will come back to ask you the above questions again. Most important, challenge you to show me your journal.
Regards
Here is a letter I have just written to a veteran trader of 20 years who have joined me 2 months ago, trading from home. He has been struggling with Electronic trading for the past few years.
Hi Bro,
You have done well in a quiet and very difficult December month for most traders. I have seen great improvement in your trades that comes mostly form the Simsci contract. Last week, you started to drift backward and seems to be struggling again.
From the recent statements, I observed that you are going back to arbitrage trading between CME NK and SGX NK to cover your losses in the Simsci. I'm surprised that you made money doing that with your slow trading platform and Internet speed. The risk/reward ration is about even but it's draining tremendous amount of your energy starring at the screens waiting for such opportunities.
We don't have the edge in arbitrage trading anymore, the Algos have taken over that role with their low latency, high frequency trading at a very much lower comm offered by the Exchanges. You are not going to grow and progress doing that at home, the stress will affect your health and in turn affect your concentration doing outright trading.
You are no longer young with the energy to compete with the Algos. Imagine yourself driving a old boneshaker along the express way at the speed of 50 km/hr while the rest are zooming past at double the speed or more. I definitely don't encourage such trading without the proper setup to compete on a level playing field. The reward for you effort is low. Focus instead on outright trading, losses is part of the game.
Refer to your trades last month and dissect them to understand why you have done well. But did you keep a trading journal?
Recently I challenged my brother too when he spoke about keeping a journal on his previous trades and strategies. I lost! He took the trouble reviewing his trades at the end of each day and record them for future reference so that he can improve on it. That's the biggest reason why he is now the most consistent trader and improving everyday. Can you still remember he was struggling together with you in the arcade through 2009?
95% of the traders do not keep a trading journal, my brother made that little extra effort.
Both of you are equally talented and intelligent, but he is now way ahead of you, why? I have great respect for you, a highly successful floor trader with plenty of guts. For traders who are not making it, I have only one word to describe their characteristic, "STUBBORN". They are all in denial with all sort of excuses, a drunkard will not admit that he is drunk.
Questions that I would like to ask you.
1. Do you keep a trading journal?
2. Can you justify your every trade? (Reasons for entering into a trade)
3. Do you have a stop loss before taking the trade?
4. Do you average on a bad trade?
5. Do you have a profit target?
6. Do you know the right time to trade?
7. Do you know which contract you are most comfortable with?
Being a veteran trader, you should have the answers to all of them, which is rather simple and straight forward. Keep repeating what you have done correctly. There is no compromise on discipline and following strict money management rules.
There is no option for you but to improve yourself, you must do it, you have to do it and I believe you can do it.
I hope change will take place in 2011 and I will come back to ask you the above questions again. Most important, challenge you to show me your journal.
Regards
Monday, January 3, 2011
Confidence
Start the New Year with a Joke from the mail.
What is Confidence?
20 CEOs from different countries board an airplane and are told the flight that they are about to take is the first-ever to feature pilotless technology : It is an uncrewed aircraft.
19 of the CEOs promptly leave the aircraft, each offering some excuses. The Malaysian CEO alone remains on board the jet, seeming very calm indeed.
Asked why he is so confident in this first uncrewed flight, he replies:
"If the software is developed by my company's IT systems department, this plane won't even take off!"
NOW THAT'S CONFIDENCE!
Saturday, January 1, 2011
HAPPY NEW YEAR!
Life ends; when you stop Dreaming,
Hope ends; when you stop Believing,
Love ends; when you stop Caring,
And Friendship ends; when you stop Sharing.
WISH ALL MY FRIENDS A HAPPY AND PROSPEROUS NEW YEAR !!!
Hope ends; when you stop Believing,
Love ends; when you stop Caring,
And Friendship ends; when you stop Sharing.
WISH ALL MY FRIENDS A HAPPY AND PROSPEROUS NEW YEAR !!!
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