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.
Saturday, March 26, 2011
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.
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