* Daily Commentaries on Futures Trading Malaysia FKLI and FCPO * Weblog Disclaimer: The information in this weblog has been obtained from sources believed to be reliable. Its accuracy and completeness is not guaranteed and opinions are subject to change without notice. This weblog is for information only and not to be construed as a solicitation for contracts. I accept no liability for any direct or indirect losses arising from the use of this weblog.
Our market was undergoing a very tight range of sideway for 1 to 2 months already. I’m sure all the trend traders was very suffering in this period whereas it seem like a heaven for those investors who like to buy low sell high. I always believe history will repeat itself because human are the one trading the markets and it is very hard for us to change our behavior. As a result, I try to check back our historical daily chart to look for a particular months which was trading in a tight range as what our market experiences now. Based on my finding, I had found out there are a period in history which our market was trading within a tight range before it meets a trend, so let’s examine it and found out when the market is going to end it sideways.
From May 2007 to Aug 2007, our cash market was trading in a range between the low 1235 and high 1292. As you can see from the chart, from May till mid of June, the market move in extremely range bound until it trying to hit the high of 1292 in the 3rd week of June. The market has a very strong resistance at 1290 level but as well as strong support at the 50 days SMA. At the month end of July, the market was having a very strong tendency moving upward because the candle stick was trading around 1280-1290 level and it waiting for a break up. Unfortunately, few days later, the 50 days SMA was violated and the market was crashing down to the lowest of 1142. It is very clearly SMA 50 serve as a very good indicator to determine the beginning of trend in this example. So let’s us go back and see is it there are any similarity between history and what happen to our market now.
From April 2010 until now, our market was moving in much more tight range compare to case above. I will always remember this period, because I’m 1 of the victim in the market and whenever the market hit 40++, there will be long signal: whereas hit 30++ there will be a sell signal, end up I always buy at the high and sell at the low. I admit myself I fail to conquer the market during this period cause myself as a trend trader, I understand the consequences of trading as a scalper, so I choose to stay out from the market after 8 or 9 times of consecutive losses. The only people that able to survive in this market is when hit above 40, they sell, hit below 30 then buy. By doing so, they are making a lot of fortune in this market. Bear in mind that, it is impossible for a market keep trading in sideway forever, trend should come in 1 day, it just a matter of soon or later. If we connect current market with what happen in 2007, we can see there is a similarity. No doubt 1350 will be our market resistance while 50 days SMA will serve our market support. So today our cash market was breaking the support 50 days SMA at 1328 and the market was closed at 1308. In this case, the strongest support was taken out already, so I will strongly suggest go for short at high rather to long at the low. Will history going to repeat itself as what happen in year 2007, let’s wait and see.
I think it is better to go back to basic of futures market before u enter in to this game, and that is follow the rules. As I try to search on goggle, I found someone writing 10 golden rules in trading futures. So thanks to Fred Tam for sharing out this and I will go through 1 by 1 and is it I breaking some rules.
RULE 1 : USE MONEY THAT YOU CAN AFFORD TO LOSE
I using the savings that I saved up all the years I working, so I thk the money I investing in futures was afford to lose, so I’m fulfilling 1st rules.
RULE 2 : DON’T OVERTRADE
“Inexperienced traders can easily become overconfident after a number of winning trades. This can lead to overtrading – which is dangerous. One can be right 7 times out of 10 but the three times that you are wrong can wipe you out if you had overgeared yourself because of overconfidence. Success comes from prudence in money management. Never overtrade.” So far I didn’t really go on too much overtrade yet. But sometimes I did try to trade more though my capital not much allow. It just simply based on my feeling that tell me that is a trend, then I go for it. Never overtrade….I will remember it that my intention of overtrade are always come from winning streak that I having.
RULE 3 : CUT YOUR LOSSES SHORT, LET YOUR PROFITS RUN
I did let my profits run, but I really don’t know to cut my losses short. So I was encountered the severe losses of 17 points for 1 signal due to slippage. The reason I don’t want to cut my losses short is because I afraid might lose the trend once I cut my losses. Maybe there is some secret behind how to cut losses short, I think is time for me to work on it.
RULE 4 : IF YOU GET INTO A LOSING STREAK, TAKE A BREATHER
“When things don’t work out right, when your best forecasts fail you – get away from the market and take a trading break. A period away from the market can be refreshing and will recharge you.” I like this 1!!! I think I disobey this rule the most. I was always thinking if there is losing streak if I following a signal, the possibility of next signal was a trend is become higher and this induced me keep non-stop trading even get into a losing streak. I admit I was too stubborn in riding a trend until forget stay out during a losing streak till my system work again. I will remember this rule for sure……
RULE 5 : BUILD A PYRAMID WHEN ADDING TO A PROFITABLE TRADE
I know how to work on this 1, but maybe my capital too small and I don’t have chances to practice it. But I will always bear in mind that it only can practice in a market that potential to have bigger trend or else it will very difficult in adding more and more position.
RULE 6 : NEVER ADD TO A LOSING POSITION
“Adding to a losing position by averaging is very dangerous. Remember you are investing with "margin" and did not pick up scrips. The contract is not yours; you merely paid a percentage of the total value. Averaging a losing position is equivalent to not admitting your mistakes, that you were wrong in the first place. Successful traders cut their losses short.”This 1 I also never try to practice it for even once. Cause I know that once u really get used to it, u will always try to average down whenever u losing in a trade. Once u get used to this bad habit, it definitely will ruin all your capital in 1 day later.
RULE 7 : DON’T RISK YOUR ENTIRE CAPITAL ON ONE TRADE
“Divide your trading capital into 10 equal parts and never lose more than 10 percent on one trade. If you lost the first trade, you still have nine more opportunities to be right. Putting all your capital on one trade is suicidal.” I was using 5k trading 1 lot all the way, so I allocate 2.5k buffer for each lot that I allow to lose. Imagine if each false signal cost me 500, so I can afford 5 times of false signal in a roll only. As a result, I did overtrade for this round. In this case, I expose my capital to too much of risk already because I want to trade more to grow my capital faster, so drive me become overtrade.
RULE 8 : NEVER MEET MARGIN CALLS
Definitely never! Cause I don’t want to trade till so stress until can’t sleep well. Margin calls are made because people do not want to admit being wrong and take a loss; they hope the market will eventually go in their direction. To avoid this mistake, I will never meet margin calls.
RULE 9 : REMOVE PROFITS FROM YOUR ACCOUNT
“Probably no more than 1% of traders have a rule to take profits out of their trading account. The few wise investors I know have bought a house, a car or simply put part of their winnings into a fixed deposit account, otherwise the chances are high that they may lose them all back.” Honestly I had never think of this issue, cause I always want my capital keep growing and I had ignore this rules. Perhaps I’m too greedy…It is time to add something that is important to me already.
RULE 10 : HAVE A GAME PLAN
“Lack of a game plan does not know what to do when you are wrong – and not knowing what to do even when you are right.”
Here are a few guidelines:
1. Know when and at what price you are going to enter the market.
2. Know how much money you are going to risk on each and every trade.
3. Know when and at what price you are going to get out when you are wrong.
4. Know when and at what price you are going to take your profits if you are right.
5. Know how much money you are going to make if you are right.
6. Have a safety stop in case the market does the unexpected.
7. Have an approximate idea of when the market should meet your objectives or when it should begin to make a move; and if it has not done so, get out.
Honestly I don’t have any game plan before I going into any trade. I don’t know how much profit I going to make and I don’t even know where is my cut loss point. I just follow the exactly what the system tell me, and I believe that it should leads me to where I want to go. I going into a trade without any game plan, and basically I understand why I hitting badly this time already.
From the 10 rules above, for those I breaking the rules I marked as red color whereas for those I obey I marked as green color. Surprisingly I get 4 green out from 10 rules. This indicates what? I still far away to be a successful trader. In order to achieve my dream, I think I have to become a investors that always obey the rules of trading. This 10 golden rules, I will keep it in my mind and whenever I start doing not smooth again, I will refer back this 10 rules and try to find out is it I trying to break the rules of trading again. Actually I like to learn from mistake, because mistakes will cause the pain in u. And then from the pain, it motivate u for finding ways to prevent it happen again cause no one like to feel the same pain. U can fall down, but don’t ever fall down from a same place over and over again. Remember the pain, learn from mistakes, by doing so, u only can keep improve yourself. I love trading and I try to not give up easily, cause I really want to enjoy the fruits of success in trading.
That time when I was in college life, I used to stay in hostel and I getting know 1 person that very good in gambling football. I remember clearly that time was world cup, and this fella I forgot how many times he wins the bet a roll, he was really did win till 2k++ in that period. Bear in mind that 1 match he really bet for 50-100 and the max was only 200 and he can win that much, it consider a very impressive record. So I try to ask what make him winning so much, because betting in football is just like a 50:50 chances game, plus u needs to pay to the broker for maybe 10% of commission once u win. He say he was doing a lot of market research analysis and compare every comment for those popular website and go for that team that stand higher chances of winning rate.
Old people likes to have this quote, “when u winning too much, u have to stop, nothing was permanent, or else u going to lose what had u earn together with your original capital”. And this statement was so true and it did happen to my friends as well. After a while, when he getting win more and more, he tends to gamble bigger than before and up to 500 per match . Sometimes he even bet few matches together in 1 night and the bet size can up to few k. So what happen to my friend? I don’t know the exactly amount he was losing, but I just know cause of losing too much in gambling football, he start to ignore his study until he failed a lot of subjects in the exam. Gambling was good, it can push a person to the sky limit and let u feel how successful u are; at the same time, it can crush everything little thing that u build up, and in the end u will not get nothing at all.
So what I trying to say in here is that there is a similarity between gambling in football and investing in futures. Futures were a 50:50 game and it either goes up or goes down only. But futures it consider worst than football in the sense that u have to pay commission no matter u win or lose, on the other hand. u have to pay if u win in a football match only. So the main issue to survive in futures markets is not only have to follow to right side, u have to think a way to cover your commission as well so that it will not stopping u from survive in the long run. If I compare with my friend, actually I am in a same situation with him. I am exactly like him, win a lot at first and very confident with the market research I did. With the consistency that I achieve, I keep adding more and more lots in my investment portfolio until I meet a greatest sideways ever and I lose what I earn in a very short time only.
So what I want to know is that futures really a market that same with gambling football? So when u keep winning, u have to stop, or else u going to lose everything? If let’s say futures market was a different market from football gambling, what I have to do in order to prevent the same thing happen again? In fact I still looking for answer….
