* 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.
I’m sure it is quite disappointing for our local players that long our FKLI on previously. With the rally of Dow Jones for around 2%, our market again doesn’t show any buying interest from investors. When Dow Jones plunged 2%, there is no panic selling, when Dow Jones rally 2%, there is no enthusiasm in buying, so what does it means? Is it investors are totally out of connection with oversea market and they don’t know the performance of other markets?
I remember in last time, the movement of 1% in Dow Jones can easily cause our market to gap up or gap down more than 10 points, however, when looking at the chart now, it definitely quite disappointing and I’m sure this is the reason why more and more experienced traders unwilling to trade our market. The strongest resistance in FKLI still capped at 1350 and the support establish at 1340 with higher low pattern as you can see from the chart. I assuming the market was looking for a break up in nearer term corresponding with the breaking high of US market. As I looking back the chart in Dow Jones, the previous high in April was around 11200 while Hang Seng was 22000. To make a comparison, Dow Jones yesterday closed at 10322 and Hang Seng now doing around 20800 which means Down Jones need 900 points to go whereas Hang Seng still lack of 1200 points to break high. But looking at our market, we just less than 10 points to break previous high, so I really proud to be a Malaysian and Malaysia really boleh!!!
Recently I just start doing my manual best testing for the signal by applying stop loss and profit target level with discipline. Before I going review the result of my back testing, I would like to share a bit the strategy that I was using all the time.
Actually I was using moving average to trade the market, and I allocate 5k for trading 1 lot. I start to put myself in trading in the early of august and my initial capital was around 9k. I did suffer some draw down from the day I start trading and once my capital had grow till 10k, I start to trade 2 lots whereas start trading 3 lots once hit 15k plus using some flexible trading style. With such a method, I achieved 70-80% of capital growth around 1st of December, and for me it is quite impressive return which I don’t think there is any kind of investment can realized such a great return. So this are the ways how I trade futures in the past. Though I did success for some period in futures trading, however I still can’t go through greatest sideways that happen in April 2010. I am very disciplined trader in following every signal, but in the end disaster still approaching me, so I start to thinking how will be the result if I put my per-determined cut loss and profit taking level before I go in any trade.
In the past, I let the market to decide my cut loss and profit taking, but now I wish to have my own game plan before I going into any trade so that I know what I need to do when I right as well as what I need to do when I wrong. As a result, I adopting 1:3risks to reward ratio which are 9 points cut loss and 31 points profit taking for every signal I going to trade together with miscellaneous rules to follow. I was doing the back testing from early August to December and I allocating 10k for trading 1 lot so that I can compare the return on different of trading method. Once I finished the testing, the result was quite disappointing…..For this 4 months of trading using new approach, I able to achieve 900 of profit only which is too much different from what I get in the past. As I looking back the at those trade, I had noticed I being stopped out a lot by the noise so the frequency of losing trade was higher than what I expected.
8000vs 900….. 1 method that can increase my capital in faster way but more risk involves, whereas another method can allow me to survive in the market in long run, but the return was not promising as compare to 1st method. After this back testing, it raise up some question to me.
1.Is it our market volume too sluggish, so it is not effective in using predetermined trading plan?
2.Do I have to widen my stop loss so that to avoid those noises?
3.How I suppose to get in to the trend if the signal can give me 100 pts of profit since I setting up 31 pts profit target?
It is easy to set up a trading plan but it is not easy to follow it exactly. I think I have to work harder to come out some trading plan that really suitable to apply in our market. There is no perfect ways to beat the market. The only way to beat the market is finding some method that suit to our trading style and it is valid to survive in long run then it consider as ultimate trading plan. Guess what, my first trading plan was failed, but is ok, if I not giving up keep trying and trying again, I believe I can discover something in 1 day!!!
Market is full with unexpectation, sometimes it can't be explained logically. Last Friday (16/7/10), Dow Jones down for more than 2%, however, our cash market seem didn’t show any response. With the plunge of US market, cash market falling of 3 point and closed at 1333.5 compare to closing on Friday at 1336.5. Here is the question, why our market was not affected by fall of Dow Jones? Such a weird phenomena recall something I read before, "in an uptrend, investors are ignoring bad news and tends to respond to good news only." and I just wondering are we in uptrend market now?
Besides that, I had noticed today our cash market volume had achieved more than 1 billion of total shares traded today which is quite high compare to previous trading days. I always pay my attention to the total volume of a market because I know that trend can be sustained only with the support of higher volume. Rising prices of the shares associated with higher volume, we shall say that the bull was in charge, and investors are so optimistic toward the market and they willing to pay higher price to buy stocks due to they believe the market can rise more higher in futures. However, it is different story if a price doesn’t goes up yet volume goes up. This might indicate sellers are becoming enthusiastic to sell off their shares and it possible to pointing a major reversal. Nevertheless it still needs further evidence to judge the validity of the reversal trend from the holding power of daily chart market support together with volume was come from blue chips shares rather than penny stocks.
Without continuous good news from US market, our cash market was consolidating within the range of 1330-1340. The price level was still moving within the upper band of the Bollinger bands which shows the market still moving in a bull territory so the domination of bear can be ignore in nearer term. I would capped my short term support at 1330 while long term support at 1312. I think the market will trigger my short signal if the market playing below 1330 for quite some time.
<<一个投机者的告白>>, and please don’t get it wrong as <<一个偷鸡者的告白>> because the risk involve as a speculator always larger than a chicken stealer, hahaha. Anyway, the author of this book was called Andre Kostolany, and I will briefly describe a little biography about this author. Andre Kostolany (1906-1999) was a world-renowned stock market expert and speculator. He worked most of the time in France and Germany. He originally studied philosophy and history of art in Budapest but his father forced him to abandon his studies and sent him to Paris in 1927 to work as a broker. He began his career as a speculator and arbitrageur, and he was able to make a profit of the decline in market prices which began in the end of 1929, which the market was bearish at that time. He remains the stock market guru in Germany and his many insightful books are still available, but not in English, and his best quotation is “Never run after a bus or a stock. Just be patient, the next one will come along for sure.” However, Andre Kostolany died in 1999, but his memory lives on in the German-speaking world.
Basically, this is not a book that talking about technical, fundamental, or emotion trading, however, it is a book for the author to share out the experiences being in this speculation line throughout the years. Actually this author didn’t really spend his speculation career in stock market only, he also did speculate on currency, commodities, property and so on. As long there is potential reward waiting for him, he will go for it, and this is the role of being a speculator. One of the quotations in the second chapter was writing like this, “people that got lot money can speculate, people that less money cannot speculate, people that no money at all must speculate.” And he defines people that no money at all is those can’t afford to buy property or even can’t take care of themselves when they are old. If no money, then work for money, and this is what he did when he become bankruptcy from a failure speculation and then he try to work as a broker and consultant to build up his capital again. He also mentioned as long as human still living in this earth, the opportunity of speculate is always there because no matter the gambler earn a lot or lost a lot in the market, they will always in the market, and this is the reason why financial market is the only industry never obsolete by the era changing.
There are some very interesting parts that get from chapter 7 which is psychology of trading. Author classify investors in 2 major category, 1 is stubborn type and another 1 is hesitate type. So he was saying trading is a game to make the stubborn type investors become winners in the long run and their achievement is the scarification of those hesitate type investors. What make the difference between stubborn and hesitate type investors? There are 4: money power, mind set, patient and luck. Money power is relating whether the investors trading with money that are not use for emergency, mind set is how creative is your way of covert your idea into action, patient is testing how you undergo those pressure when the market was moving opposite of your direction while luck involve changes of economy policy, war, and natural disaster. If an investor lack of any out of the four determinant, investors will easily become hesitate investors. It was so true during a retracement of the markets, lot of investors that don’t have much holding power and patient; they are easily shaking and choose to cut their loss fast. However, for those investors that have lot of holding power and patient, they will keep buying those blue chips stock and just sit there for the price to rise above their entry level. This only can apply in an uptrend market but not a downtrend, so investors should know clearly what is the current condition before they make a decision to holding their investment for longer time. It is definitely an interesting book to read if you prefer story telling that kind of book. Each successful trader has their own story and insight towards trading, I wish by reading those books, it able to let me develop some necessary skill to survive in market by adopting some valuable ideas of their experiences.
