Deadly Mistake.......

Honestly I really have no idea what I learning throughout the years of trading. I’m keep repeating the same mistake over and over again, and I really don’t know when I going to learn for not repeating it again. Discipline…..why is so hard to be a discipline person, just follow only, what is the big deal? Is it due to my own characteristics or I start to put my own prediction on the market direction? No one will ever survive without applying the discipline in their trading, and I keep reminding myself, however, I still failed to do it and I really disappointed with my discipline.

Suppose there is a long signal trigger for both of my cash and fkli chart around 12 noon something. However due to my personal greedy of myself, I told my broker to help me park to long at 1358 because I don’t want to get out at such a high price which around 1362 to 1363. After that I just leave my order like that to make a assumption the order can be done by today. Unfortunately, when my brokers inform me again around 4 pm something, the market already hit 1369. I have to admit for make a very emotion mistake and failed to follow accordingly to my trading plan accordingly with discipline.

At first I carrying a short position at 1354 and the market did went down to 1338 before and now the market rebound from the lowest to highest at1370 on today. In this case, I can’t believe my paper profit suddenly turn to become paper loss in 2 days, and I admit I carry a hope towards my position to wish the market can go back to around 1350 so that I can get out with some tiny profit. Is too bad that market never response to my wish and it just keep going opposite of my direction. Until my both cash and fkli signal turn to long signal, I still waiting….waiting there is a suddenly crash or what so that I can get out my with lesser pain, but market still not listen to me…..

Honestly, I start to doubt on the discipline to follow my signal. Maybe it is time for me to think about a better plan for me to follow my signal exactly. If I keep not doing my part, I know very well the consequences, I will soon kick out by the market…..

Up Up Up!!!

Today our market was influence by the rally of Dow futures as well as good performance from regional market and bringing our FKLI spot month to close at 1367. Though our market was doing discount on last Friday but now had becoming premium as our cash market close at 1363.

For my position that long at 1252, I still keep it till now, due to our cash market support at 1350 is still well maintaining. With the breaking new high of our cash market, I shall peg my new support at 1355-1360, and hopefully our market can reach 1380 level by this week. Honestly it is quite confusing as a position holder in our FKLI. Though our cash market was steadily moving upward bias, however, due to influences from regional market, our FKLI was moving between premium and discount, so it is not an easy feeling when seeing your profit reach to a new level and then wipe off half of it in 1 or 2 days. Therefore, as a position holder, we should not influence by the price fluctuation, however, focus on our trading plan strictly is a must to ride on the trend.

Come into my trading room

“Come into my trading room”, another book which written by Alexander elder after completed the “Trading for a Living”. I would say it is another trading book that cannot be missed up for those serious trader that looking for ways to survive in the market. Bear in the mind, we need to learn how to trade rather than aiming getting rich faster in trading, cause when you know how to trade well, soon you will getting richer easily.

The author was emphasizes 3 aspects that is a must in order to success in trading and they are mind, method and money-trading psychology, trading method and money management. In the chapter talking about mind, author strengthen that every traders should keep their own trading record and always reviewing on their history trade to remind them what is the mistake being made and what need to be done to make successful trade. Whereas in method part, author did mentioned about triple screen which trading based on big picture and finding entry point for smaller time frame chart. I was trying to do exactly as what indicates in the book, but I think triple screen system is more suitable in trading stocks rather than futures. Lastly, I really impress by what being delivered by the author on the money management part. And what author trying to delivered was so true, if the best signal can be prove making money in the long run, the best programmer should be the one trading the market, but not us. The puzzle only can be solve by just a simple money management rules, but it just require a lot of discipline in working on it, which it is quite tough for a human being to follow exactly.

I quite enjoy the books that written by Alexander elder, since his book was delivered in a quite simple understanding ways. Once u read his book, I will noticed the 1 he talking about is quite similar with me, who as an amateur trader. As I go through so many books, I only realized actually I didn’t know too much about proper ways in trading, and I thought I mastered the secret of trading, but in fact, I’m not…..So I will keep on my habit in reading, and by doing so, I able to discover more and more keys to success in trading.

Another resistance being taken out

Once again, the markets break another stubborn resistance at 1360 and try to marching upward again, but are too bad the break up is not supported by higher volume. Honestly it is a quite suffers week for those position holders that holding long after the break up of 1350 and I also keep scratching my head for our market movement.

When looking at the chart back, it is definitely a good week for day traders as they can earn a lot of fortune by sell at 1358-1360 level and then buy it again at 1351-1352 level. I was begins my trading life as a day trader before, and my record was able to wining 5-6 times in a roll but in the end I still given out all my profit in a trend. This is why I reluctant to get in the market for scalping and I also understand how addicted it is when you winning in a roll.

However, I also get to know some people that very successful in day trading, so it doesn’t means day trader is unable to survive in the long run. Day trader are always try to trade in highly volatile market rather than nearly dead market to avoid slippage that will deteriorate their exit level. What I understand is that day traders have to focus more on their exit point rather than entry point, so when they are wrong, it require them to immediately to response to the market, cause a single delaying on decision making will bring disaster to their account. I admit I’m kind of traders that like to think, that’s why I think day trading is not suitable for my personality.

Clues from open interest and prices

	may				june				july
	spot	next			spot	next			spot	next
31/5	0	14466	14466	30/6	0	14449	14449	30/7
27/5	14250	12604	26854	29/6	8920	13322	22242	29/7
26/5	18642	8662	27304	28/6	10783	9240	20023	28/7
25/5	20135	5331	25466	25/6	14523	6517	21040	27/7
24/5	20059	3277	22336	24/6	16443	2483	18926	26/7	21304	5077	26381
21/5	20251	2301	22552	23/6	16946	1304	18250	23/7	19580	2110	21690
20/5	20866	2061	22927	22/6	19890	1055	20945	22/7	19539	1600	21139

As a futures technical trader, we are studying the market in 3 aspects which includes price, volume and open interest. Out of these 3, price is most important, however, volume and open interest did provide another confirmation on the price action and indication of changes of trend. By studying volume and open interest, it can serve as an alarm when we are too comfortable in riding the trend.

I am quite particular on open interest of our market because with the massive increase in open interest, the market only able to move significantly in 1 direction rather than in range. On 26/7/2010, the open interest was increasing 21.5% from 21690 to 26381 after successful breaking the resistance at 1350. Increasing in open interest only can bring meaning that more buyers come in and they feel the market able to go higher again in the future. On the hand, it also represent more sellers come into the market by judging any price above 1350 is a good price to short cause they carrying bearish view on the market. Open interest alone can’t give too much information on market direction, however, it is different story when it combine with utilization of price changes.

According to “Trading for a Living” from Elder Alexander, when open interest increase during a rally, it confirms the uptrend and give signal that it is safe to add long positions due to more sellers are coming into the market. When sellers can’t withstand the pressure of their losing position become wider and wider, soon they will close their position and their short covering is likely to push the price higher. Until a point where open interest goes flat during a rally, it warns the uptrend is getting old and best gains have been made and it is advisable to avoid go in any long position. When open interest falls during a rally, it shows both winners and losers are getting profit and cutting losses respectively, and the uptrend is ready reverse so it is time to goes short. In addition, when open interest increase during a trading range, it is a bearish sign because commercial hedgers and savvy institutions are more likely to sell short than speculators and making the prices couldn’t go up.

So our market was in the 1^st situation or 4^th situation? It is too bad that I don’t have any data to doiback testing on connection between prices and open interest, or else I can obtain another useful tool in identifying the market direction. So now our market was moving between 1350 and 1360, and it is still safe for long position as long our cash market didn’t close below 1350.

Trading 4

I was entering a long position for FKLI Aug at 1252 during market closing on last Friday (26/7/10). The long position being initiated is due to break up of my strongest resistance at 1350 together with the rally of regional markets. I hold my bullish view on our market as well as other market which supporting by major good financial report.

Though market was entering into bullish mode, but I don’t expect it able to achieve any higher attempt in short term and I expect it need to take quite some time to reach caused by lack of FDI involvement. According to world investment report 2010, FDI in Malaysia plunged 81% from RM23.47 billion in 2008 to just RM4.43 billion in 2009. The reduction in FDI definitely is not a good sign to the market because the funds are needed to sustain the volatility of market. When FDI is not in, eventually it is quite difficult to maintain some significant movement since our cash market are solely depend on local players only.

Anyway, I set my target profit around 1370-1380 and I will review it from time to time subject to any unexpected matters. On the other hand, I will pay my attention on new support point at 1350 and it shall alert me that bear is trying to take over the rally if market is touching this support point again.