I guessed some inexperience trader read the handle wrongly and gave tremendous theoretical edge (about -50 ticks) in the Jan contract. In my opinion, he did the right thing by locking in his losses in the Dec contract rather than fighting.

I admire the traders who immediately offer 0.5 for the spread (1-2 ticks edge). The errant trader gamely took the offer and squared off.

Kudos to those who made their month pay on the 1st day of the month!

SGF06

10:10:41 1 264.0
10:11:50 2 267.0
10:11:53 1 266.0
10:11:57 1 264.6
10:13:50 20 268.7
10:13:53 1 268.6
10:13:55 5 268.5
10:13:57 5 268.0
10:14:16 1 269.0
10:14:18 1 269.0
10:14:18 2 268.9
10:14:21 1 269.4
10:14:25 2 269.4

Total : 43 lots

SGZ05

10:12:20 1 273.6
10:13:20 2 273.6
10:13:21 1 273.6
10:13:21 1 273.6

SGZ05-SGF06

10:34:32 5 0.3
10:34:32 3 0.3
10:36:40 3 0.3
10:36:50 2 0.3
10:38:42 3 0.3
10:38:51 2 0.3
10:42:53 4 0.3
10:42:57 1 0.3
10:44:57 4 0.5
10:44:57 3 0.5
10:47:32 1 0.5
11:00:12 1 0.5
11:00:12 1 0.5
11:28:01 1 0.5
11:28:01 1 0.5
11:28:01 1 0.5
12:32:46 1 0.5
12:33:05 1 0.5
12:33:05 1 0.5
12:33:34 1 0.5
12:33:34 1 0.5
12:33:34 1 0.5
12:34:19 1 0.5
12:34:58 1 0.5
12:34:58 1 0.5

Total: 40+ lots

I believe while markets are competitive, they are not perfectly efficient. This is because speculators and hedgers in doing their business may knowingly or unknowingly give some trading edge.

Notice the buying pressure in December and selling pressure in March. It is possible to buy -15, -10 and -5 (Long March Short December). The spread is trading -5 and 0. Arbitrage!

NKZ05

10:02:24 2 15395
10:02:25 1 15395
10:02:27 4 15395
10:02:28 1 15395
10:02:28 2 15395
10:02:28 2 15395
10:02:28 2 15395
10:02:29 2 15395
10:02:29 1 15395
10:02:47 1 15395
10:03:44 48 15395
10:03:44 52 15400
10:03:49 19 15400
10:03:49 6 15400
10:03:49 3 15400
10:03:50 2 15400
10:03:54 1 15400
10:03:55 2 15400
10:04:02 41 15405

NKH06

10:02:21 250 15390
10:02:22 4 15390
10:02:23 2 15390
10:02:24 1 15395
10:02:24 1 15390
10:02:24 30 15390
10:02:25 2 15390
10:02:26 1 15390
10:02:26 1 15390
10:02:26 5 15390
10:02:26 3 15390
10:02:26 5 15385
10:02:29 4 15390
10:02:32 10 15390
10:02:37 10 15390
10:02:38 9 15390
10:02:45 3 15390
10:02:46 3 15390
10:02:46 10 15390
10:02:47 1 15390
10:02:48 2 15390
10:02:52 2 15390
10:03:09 1 15385
10:03:21 1 15385
10:03:45 1 15390
10:03:48 2 15390

Throughout the day, it is possible to leg between -15 and +10. With the spread trading between -10 and 0, some traders are laughing their way to the bank.

Here's another, at 4PM when CME Nikkei Dollar open, there's another arbi opportunity. The December opened at 15300, March opened at 15230 and we are trading at 15115!

NKDZ5
02:00:02 1 15300
02:00:02 6 15300
02:00:03 1 15300
02:00:03 5 15300
02:00:03 1 15280
02:00:03 2 15245
02:00:03 1 15210
02:00:03 1 15205
02:00:03 2 15200
02:00:06 1 15200
02:00:07 1 15185
02:00:10 2 15200
02:00:10 4 15200
02:02:17 1 15150
02:03:17 1 15150
02:05:45 4 15145
02:06:16 1 15120
02:06:16 1 15120
02:06:16 1 15115
02:06:17 1 15115
02:07:58 4 15115
02:07:58 6 15115

NKDH6
02:00:02 2 15230
02:00:02 2 15200
02:00:02 3 15160
02:00:02 1 15160
02:00:02 3 15150
02:00:04 5 15110
02:00:39 1 15125
02:00:43 1 15125
02:00:56 1 15125
02:00:56 18 15125

NKH06
16:00:00 1 15115

Many moons ago, a friend and I was discussing about the Nikkei.

Friend: I think we should long Nikkei.
Me: Wait till it crosses 10,000. It is an important chart and psychological level.
Friend: What?! 8,000 you find it expensive yet you want to long 10,000?
Me: Haven’t you heard of confirmation??

A few days later,

Friend: I longed the Nikkei.
Me: Why?
Friend: Even if Nikkei drop to zero, I will lose 100k. But will it?
Me:???

My friend had made a lot of money and I know he has been adding to his position. This morning, we had a little idle chat after the Tankan report.

Me: Hey the Tankan is a little below expectation yet the market rallied. But it looks weak.
Friend: It’s okie.
Me: I think Nikkei is doing an extended 5th wave. Time for correction.
Friend: It’s a bull market.
Me: So? Never try to catch the top, you can buy back later.
Friend: It’s a bull market. I don’t want to lose my position.
Me: Ok. Let’s not quoted from the book that we both had read.

Many of us spend a lot of time on learning trading methods. I certainly did. I was lucky though, someone told me that trading methods that make sense and simple will always work.

“Can you teach me how to make money from trading?” He smiled at me and said “How about teaching you not to lose money, ever?” I did not fully understand what he was driving at but it sounded like the Holy Grail. I nodded eagerly.

“The secret to trading is not to lose money!”
“Huh” I was puzzled.
“Well, if you don’t lose money ever, then the money will come!”
“Ok, how not to lose money!?” I was a little impatient by now.

“Oh well, you can start by throwing a coin. Head you buy and tail you sell” I was nodding my head but I was even more clueless by now. “And if you are wrong, the secret is not to lose any money!”

I could have pulled out whatever little hair I had. But fortunately, he had his fun. This is what he told me.

Nobody will lose any money in trading if he enter and exit the trade at the same price. (We do not want to consider commissions and other costs yet). However if we believe the market is random and fair, like throwing a coin, then out of 10 times, we will be right for 5 times. For the 5 times we are correct, we will take 1 tick profit each and for the 5 times we are wrong, we will ‘scratch” the trades (enter and exit the trade at the same price). For our effort, we will make 5 ticks. In our random and fair world we will at worst lose 5 ticks and make 5 ticks thus break even!

The technique is known as scalping. As the saying goes “A million trades to make a million dollar”, trading can get pretty intense and may not be suitable for everybody. However I think the technique makes a lot of sense and is pretty straight forward.

Even if we can’t be scalpers, there are a few things we can learn from them. Scalpers are very concern about costs, they have to be. Scalpers are extremely disciplined. They do not let greed overcome them and always take their 1 tick profit. They are equally strict with their cut loss at worst losing 1 tick. A sound technique, a steel mind and good money management, yes that’s what I had learnt from them.

R, a particularly cocky trader friend of mine loves to put down other traders, especially chartist traders. I find it weird though because he trades with charts and has his many screens filled with them.

Well, I was talking about a potential 5th wave for the Nikkei. It did make a top and it did dropped by about 800 points. I told him I was quite sure it was the start of a down trend. But no, Nikkei is now trading at a new high and I have to make a correction to the wave count. I am saying Nikkei is STILL in the 5th wave, being a complex wave; we can’t be too sure about the top.

“This is the problem with you chartists. One day say sell another day say buy. Confusing! Fickle! Worst, you chartists are always chasing the hottest trading methods, always making changes to your strategies. Can’t you make up your mind?” He went on and on. I had to explain to him that Elliott wave counting is subjective and we have alternate wave counts.

“Subjective? Well even if I give you chartists a complete trading system, you will still lose. Remember S?” S is an unfortunate friend of R and R’s favorite case on what’s wrong with chartist traders.

S is not a full time trader. He is a software engineer and a very good one. He had programmed and automated many trading strategies. One which he was particularly proud of is the turtle trading system. It is a complete trading system. You can turn off your brain and trade with it. It will tell you what to buy and sell, when to buy and sell and how much to buy and sell. If S is lucky he would be very rich and would not be writing software for a living. Many markets were very trendy and systems like turtle trading will make a lot of money.

Unfortunately for S, the 1st trade he had made with the turtle trading system, he lost money. The 2nd trade he let his profits evaporate and naturally he began to use the system subjectively and missed the trends.

“If charting is so easy, any monkeys can trade. Just give him a banana. Grab the banana, start the automated trading system and make money!”

“Well just look at your screen, aren’t you a chartist trader?” I laughed.

He looked pissed. “How many times I got to tell you, I am a trader with charts.”

It's the user, not the tool..... :ph43r:

Another arbi today, at least 6-8 ticks per contract. The far month was selling at 272.8, the near month at about 273.5 and the spread at 0.1-0.2. Simple trading method needing only 3 year old maths.

At least 4-5 significant arbi out of 20 trading days, and the month is not even over.

TWF06

10:47:21 1 273.3
10:47:21 1 273.2
10:47:21 2 273.1
10:47:21 5 273.0
10:47:21 3 272.9
10:47:21 5 272.8
10:47:22 2 272.8
10:47:22 2 272.8
10:47:23 2 272.8
10:47:23 5 272.8
10:47:23 2 272.8
10:47:23 2 272.8
10:47:23 5 272.8
10:47:23 2 272.8
10:47:23 5 272.8
10:47:23 2 272.8
10:47:23 2 272.8
10:47:23 2 272.8
10:47:24 5 272.8
10:47:24 2 272.8
10:47:24 2 272.8
10:47:24 3 272.8
10:47:24 2 272.8
10:47:24 2 272.8
10:47:24 3 272.8
10:47:24 2 272.8
10:47:24 2 272.8
10:47:24 2 272.8
10:47:25 5 272.8
10:47:25 1 272.8

10:48:52 5 273.5
10:48:52 5 273.4
10:48:52 5 273.2
10:48:52 8 273.0

(He did it again ?!)

10:48:52 3 272.8
10:48:53 5 272.8
10:48:54 5 272.8
10:48:54 3 272.8
10:48:54 2 272.8
10:48:54 2 272.8
10:48:54 5 272.8
10:48:54 5 272.8
10:48:54 5 272.8
10:48:54 2 272.8
10:48:54 3 272.8
10:48:54 3 272.8
10:48:54 5 272.8
10:48:54 2 272.8
10:48:54 5 272.8
10:48:54 2 272.8
10:48:54 3 272.8
10:48:55 2 272.8
10:48:55 5 272.8
10:48:55 5 272.8
10:48:55 2 272.8
10:48:55 3 272.8

TWZ05

10:47:22 1 273.7
10:47:22 4 273.6
10:47:25 1 273.6
10:47:27 5 273.6
10:47:27 5 273.6
10:47:27 5 273.5
10:47:27 2 273.5
10:47:28 2 273.5
10:47:28 5 273.5
10:47:30 5 273.5
10:47:31 2 273.5
10:47:31 1 273.6
10:47:32 2 273.5
10:47:34 2 273.5
10:47:34 2 273.5
10:47:34 2 273.5
10:47:34 2 273.5
10:47:35 3 273.5
10:47:35 1 273.5
10:47:35 2 273.5
10:47:35 2 273.5
10:47:35 2 273.5
10:47:36 1 273.5
10:47:37 4 273.4
10:47:40 3 273.4
10:47:41 3 273.4
10:47:42 3 273.4
10:47:44 2 273.4
10:47:56 1 273.5
10:47:57 3 273.5
10:48:17 1 273.5
10:48:22 1 273.5
10:48:22 1 273.5
10:48:22 4 273.5
10:48:32 1 273.5
10:48:34 3 273.5
10:48:53 5 273.4
10:48:54 5 273.4

It was reported somewhere that Warren Buffett has lost a billion dollar betting against the USD. He had focused on the twin deficits problem. Unfortunately it was yield differential that ruled.

I was taught that even if you had missed the running train (trend); don't ever stand in front of one. Warren Buffett on the other hand, understood that the market can be irrational at times, or even for a prolong period of time. Therefore he will not join the crowd and will stand his ground and do his own things. Fair enough.

If we want to be successful in trading, we cannot depend on being right 100% of the time. Warren Buffett have made many bad mistakes in his long career but ended stronger. Unfortunately how many of us are just 1 bad trade away from serious trouble?

Doesn't happen everyday. Not sure when it will happen. But it will happen and quite often too. And so some traders just need a day to make their monthly pay :)

TWF06
08:45:00 241 278.9
08:45:00 141 278.9
08:45:00 338 278.9
08:45:00 64 278.9
08:45:01 30 277.0

TWG06
08:45:00 64 276.4
08:45:01 2 276.5
08:45:01 2 276.6
08:45:01 2 276.7
08:45:01 1 276.8
08:45:02 1 276.8
08:45:02 2 276.9
08:45:02 2 277.0

TWF06-TWG06 trading at 0.3-0.4

Some kind soul provided me with the turtle trading strategy.



Interestingly the Nikkei 225 was stopped out with a small profit due to the "livedoor incident" and did not turn short because of the fail-safe rule. We are now waiting to turn long @ 16490 or go short @ 15010.0.

Others that I am monitoring.
(1) Taiwan (long) was stopped out on 18 Jan.
(2) Simsci still long @ 279.3
(3) Gold still long @ 538.5
(4) Oil still long @ 61.9

well, nothing more to comment at this moment.

At a Chinese New Year dinner, a trader had too much a drink and started talking about his war stories. One that is interesting to me is how terrifying it was to be caught long on locked limit down days, how he prayed and sweated it out.

Is is possible to get out on locked limit days ? Chances are you can.

If the cash market is trading, you can get out.

If the spread market is trading, you can get out.

If the options market is trading, you can get out.

If a related market is trading, you can get out.

Of course if nothing works, then you can start praying but I think this is the worst possible solution.

I thought it is mandatory for a derivatives trader to know all these ? Unfortunately no and anyone can be a trader.

Someone asked me if it is possible to trade stocks for a living. Of course you can. But it is not my forte and I can only offer my limited view.

Consider this, the same stock i.e. Microsoft can trade on different ECNs. The price of Microsoft on Archipelago has to be similar to the price of Microsoft on Instinet. If the prices are not similar, there are trading opportunities. But I think this is not the trading you have in mind.

Let’s turn our attention to tonight’s big match Chelsea vs. Liverpool. After due diligence looking at past data, I realized that Liverpool in the past has always struggled at Stamford Bridge. I decided to buy Chelsea for a win for $1000.

In trading terminology, I will cut my loss for $1000 and take my profit at $1890. I have applied my METHOD; have a sound MONEY MANAGEMENT by limiting my loss; a reasonable 1:1 risk-reward and have a sound MIND as nothing will surprise me on the downside.

This certainly passes my crude assessment for a reasonable trade. However the truth is that I am GAMBLING with Singapore Pools.

Back to stock trading. Since I do not have direct connections to various ECNs and I do not enjoy low trading costs, I cannot trade stocks for a living.

*** *** *** ***

Perhaps there are 2 similar contracts. They are similar because they track the same underlying. They are not the same because one is the big one and the other the mini. That is to say the Big Contract = 2 x Mini. The price has to be similar. Things get a little complicated though. Big contract trades in 0.1 for example 100.1, 100.2 and the minis trade in 0.25 e.g. 100, 100.25, 100.5.

If this is what you see

Big bidding at 100.3 offering at 100.4
Mini bidding at 100 offering at 100.25 (but going fast.)

Without considering other factors can you make money? You should.

Say

Big bidding at 100.2 and offering at 100.3
Mini bidding at 100.25 and offering at 100.5

Can you make money? You might. How? I can’t tell you as it is my bread and butter. It is not difficult to figure out how though.

*** *** *** ***

There are many other trading strategies though, but they just get riskier. (But of course you should be well compensated for the risk)

I wanted to buy the Nikkei 225 Futures because I am bullish. There’s a problem. The panic selling by Livedoor’s scandal was fast and furious. The selling at one point was bigger than the post Sep 11.

It settled at around 152** for awhile. I looked at my charts. (Yes I use TA extensively) I decided that I have to long Nikkei with a cut-loss below 15000 (That’s where the turtle would turn short …)

Everything’s fine but I know there’s a big possibility that I need to cut loss. I know I would have no problem cutting at 14995. But if I wake up one morning and find Nikkei trading at 14600 for example, I would have said, “To hell with it, it’s too cheap to cut now, I have to buy more!” I might end up in deep shit!

But I need to trade because it is an opportunity. I decided to trade options. But calls are expensive because the implied volatility is high and higher than my expectation. I decided to buy 15000 calls and sell 15500 calls which is a bull call spread. The rationale is to let time, my directional bias and theoretical edge work in my favour. (Surprisingly I could buy the call at a discount and sell at a premium. My expectations may be wrong though but at that time I though I had the theoretical edge as well). My risk reward at expiration is 1:1.

The CME March Nikkei settled at 16725. On hind side, if I had just long the Nikkei futures I would have easily made 6 times more money. But you will never know.

My point is as the method gets more unsound thus riskier, (i.e. does TA really works??) We really have to be more careful.

PM me for more discussion.

Mr Miyagi

X costs 90 cents, what can you infer from it ?
If I tell you that X has just broken the 20 day high, are you incline to buy it ?
However X is the price of a cup of coffee, does that affect your decision ?
Finally a coffee shop nextdoor is still selling its coffee for 80 cents, is it clearer now ?

Wonderful Stock (WS) is trading at $3, and Wonderful Stock has just broken the 20 day high.
Now a Same Wonderful Stock (SWS) is trading at $1, what would you like to do ?

I been told that trend following system makes a lot of money.

But how do you evaluate trading strategies? Frankly I am a novice but I was told it’s a 3-pronged question.

(1) How does a good strategy compared to others?
(2) What is the appropriate measure or measures we should be using?
(3) How do we know it is not luck?

Suppose you are testing a trend following system, let’s say the dual moving average,
how does it compare to the single moving average or even a counter-trend system?

If one system’s return is 10 times better than the other, it is more superior? Is absolute return a good measure?

And how do we know it is not all luck, and how can we eliminate the element of luck?

The 90 cents coffee tasted good until I found out that the coffee next door is selling at only 80.

It is easy to be caught in the number game.

2006-05-29 weekly chart

IF YOU meet a bear in the woods, try not to panic or scream; on no account should you turn your back and run.
As markets around the world have turned grizzly over the past two weeks, some investors seem to have forgotten the old hikers' maxim.

- May 25th 2006
From The Economist print edition

I have attached a weekly chart of the STI.



From the chart,

(1) The 40 week EMA is a strong resistance for the 2001-2002 bear market,

(2) The 40 EMA is a strong support for all corrections for the bull market that began in March 2003

Now the STI has declined to near its 40 week EMA. If we are still in a bull market, the present set up favours a bounce.

However you should not trust me, because back in May 2004, I predicted an end of the world. But it did not happen.
My advice at that time was "the market is crashing, turn defensive and buy low P/E and good dividend paying stocks. Best if STI components".
Strangely, my analysis on the direction of the market was very wrong but my actions were correct.

Remember try not to panic or scream; on no account should you turn your back and run.

And what do I personally think about the direction of the markets ? I don't really care, I am a spreader.

2006-June-2 Nikkei Stock Average 225 P&F chart

Technically speaking, the worst may not be over.



My analysis at the start of this year, Nikkei 225 is neither going to outperform nor underperform significantly.
It is also likely to be ranged-bounded, from 15000-18000 for the year.

Making predictions however, are strictly for fortune tellers.

Some of my friends say, so you are a day trader. Well I am not, very often my trades last at most a few minutes.

Let's give a impossible situation to make things clearer.
So lets say the Osaka Nikkei is trading 16020 and the Simex Nikkei is trading at 15990. (Impossible lar). You can sell the Osaka (because it is more expensive mah), and when Osaka = Simex = 11000, you will make a lot of money. But if Osaka = Simex = 20000, ahh margin call.

So what is the sure thing here ? Sell Osaka and Buy Simex. As many as you can!! Not 1% of your capital but 1000% if possible.

Oh well, the impossible situation will not happen because the market is really quite efficent.

So we are back to square one.
Ahem, perhaps.

Substance Over Form I

I was at the PC show on the 2nd day and bought some LCDs at a "special" price.

I was again at the PC show on the last day and the LCDs that I had bought 2 days ago were selling at a significant discount.

It appeared that I had paid a premium.
However for my "special price", it included free gifts. And I wanted the free gifts (DVI cables).

The truth is I had a fair deal and those who bought at a discount had a fair deal too, despite the price difference for the same product.

Very often, price is not the best indication of value. We know it through common sense in our daily life.

Sadly, we forget everything when we gamble in the markets (some think they are trading though, armed with their complex strategies).

Substance Over Form II

Dividends are good but again we need to apply our common sense.

This is what Yoshiaki Murakami (The man of the moment in Japan, the same one who paid alot of money for a cosy home in Singapore) had done.

Mr Murakami has been a controversial figure since he led a charge in 2002 against the management of Tokyo Style,
a small clothing company with lots of cash.

He argued that Tokyo Style should return some of the money to its shareholders by paying higher dividends.
Many applauded him for challenging the company's complacent managers,
who were typical examples of a group that has long been protected in Japan by webs of cross-shareholdings between chummy companies.

Yet when Mr Murakami demanded that Tokyo Style raise its dividend to a level that would have left the company with little capital for growth ,
people started questioning his motives.

Mr Murakami lost.

Substance Over Form III

Suppose your intelligent good friend tells you that a certain breakout trading system makes a lot of money.
Will you put in some effort to investigate?

Suppose a talented salesman tells you that a certain breakout trading system makes a lot of money.
Do you understand his motive?

My dear friends, do you understand substance over form?

Suppose you are presented with a business opportunity
but you are too busy with your full-time job and the most you can,
is to invest some money and be a sleeping partner.

How would you value such an opportunity?

Perhaps you would come to a conclusion that the manager is competent and trustworthy.
The business has competitive advantages and good prospect of growth. More importantly,
you are comfortable with the profit prospect; expect a steady stream of profit sharing.
The last thing in mind is how much you can sell the business for in the coming week.

Strangely, when we invest in the stock-market, the first thing in mind is the price.

*** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** ***

A business listed on the stock exchange has many advantages.
Perhaps some may disagree
but I find the price action i.e. technical analysis useful.

As many have pointed out, the price action can reflect the fundamental aspects of a business
and sometime it is easier to observe price action.
If you are observant, price action can lead the fundamental news.

However ultimately when we own a business,
the last thing we want to do is to sell,
unless the business is grossly over-valued.
We definitely do not want to sell because some people are selling. Who are the “some sellers”?

On a chart, it may not be clear if the sellers are “old buyers” taking profit
or “new sellers” who might change the overall trend.

So are we to pack our charts with many indicators
and other nonsense to have a clearer picture?
I like to keep things simple though.

Should we go out and learn the “fundamentals” as to give us an edge?
Again I prefer to keep things simple.

And after all the bull-shit, I have to admit I do not have the Holy Grail.
However while it is hard to pin down the exact value of a business opportunity,
it is not that difficult to spot something grossly under or over valued. We just need patience.

Suppose the father and the son had an argument. Without more information would you bet that they will go seperate ways or make up?

The typical father and son's relationship is so strong that it is reasonable to bet with confidence that all will be forgiven, given time.

But of course we cannot rule out that they will become enemies. But if you are given a chance to bet, which would you choose ?

Imagine Osaka Nikkei is trading at 10000 and Simex Nikkei is trading at 20000. Without more information, We cannot be sure whether the true value of the Nikkei is closer to 10000 or 20000 or neither. But we can be confident that Osaka Nikkei will equal Simex Nikkei, given time.

What if somebody is pricing CapitalLand at $10 and CityDev at $100, without more information, how would you bet ?

Many believe that they can predict the future, especially short term prices. If you can, congrats.

Prices may be erratic and random, but established relationships are stable and predictable.

The trick is then to establish relationships. Does CapitalLand has to have anything to do with CityDev ? I do not have the answer. You have to decide.

Lastly consider X and Y, if X and Y do not have any stable relationship, then when you long X and short Y, you are not doing any spread trading but speculating that X will go up and Y will go down. In this case, all the best to you.

--- ---
Relationship trading is no holy grail and can be as tough as directional trading. Give you an example.

Suppose you are so sure Fed is not going to raise interest rate. It doesn't matter why you are so sure, FED could have dropped heavy hints or the market could have decided.

The short term rate is not going up, but for the immediate future you will not profit from this "so called prediction" because it is already priced.

But will the yield curve steepen ? or flatten ? It is anybody's guess.

--- ---
You may not trade spreads, but I am sure you think spreads. For example Blue chips rallied, your first reaction is to look for laggards.

Of course the laggards can move up or the blue chips can retrace or whatever combinations.

However I am sure your first reaction is to look for laggards.

You may want to buy a Ferrari.
But given Singapore road condition,
you can never experience the true kick of driving one.
If you are going to use a Ferrari like a Vios,
then you are better off with a Vios.

---

There are various ways to view the market.
Be it arbitrage, direction, time, volatility, hedge etc.
But for most people,
when you ask them about their opinion about the market,
the answer is always up or down.

---

Suppose you thought the Nikkei was going up.
And you decided to buy a CALL option on the Nikkei.
Nikkei went up eventually
but you did not make any money.

You did not make money
because you had forgetten about the volatility
(not suprising since we are wired to think about direction only)

You had purchase an expensive call and the volatilty dried up.

Or you had made a misjudgement about the timing.
Nikkei went up, but not fast enough.

Worst,
You were wrong about the direction, which you should be good at,
and set the strike price at a optimistic level.

But the real reason why you are not making money, is,
you are trading options the same way you trade stocks or futures.

---

And you have wised up.

You thought the Nikkei was going up and
bought a bull call spread
(buy a call at lower strike and sell another at a higher strike).

Great, but you still lose money!

And now you are determined to explore the complexities that options combinations can deliver.

But you are not making money
not because bull call spread is the simpliest strategy.
You are not making money because
you are trading options the same way you trade stocks or futures.

---

Many people would not start an option course with the Black Scholes Merton Model.
But the model is the essence of options pricing.
It may not give you the answer
but it will provide you with the understanding.

I started options trading only after I have understand the maths behind options pricing.
The maths are very tough and not the usual graduate maths.
However up till today I do not believe that the advance maths is an edge.

If I have to compare,
trading stocks is like playing Blackjack
and trading options is like Mahjong.

And many make money playing Blackjack.

---

And so driving a Vios is not such a bad deal after all.

In the past when someone ask me about my occupation,
I would reply I am a trader.

And they would go "Wow, you must be making a lot of money."
I find the reaction weird.

Suppose I say I am a sportsman,
will someone assume I am in the class of Michael Jordan.
Or would someone mistaken me for Stefanie Sun
if I sing for a living?

Most likely no.
But if you are a trader,
you must be making loads of money.

Trading is so intimately linked with money,
when you talk about trading,
you have to talk about money.
However it does not equate to alot of money.

Perhaps some new traders will take comfort with what I say,
I know many long time traders,
none are plying their trades in the Premier League,
maybe not even S-League.
But making decent living no doubt.

Now if asked,
I would tell them I am a hard core gambler.
to help them understand why I am a poor man.

--- --- ---

Many traders commented that simsci is hard to trade.
Perhaps they are right.

If you look at the intraday comparison between the cash and the future, does it look messy?



And if aritrage opportunity does not help,
what good are charts and other form of analysis?

In comparison, look at taiwan.



But for some traders their bread and butter is trading simsci.
Because they understand the mechanisms of this market.

And taiwan is not simplier to trade either.
Some refer it as the gangster market.

If i have to choose,
i would trade trade the simsci,
because it is an inefficent market.

This post was moved to the Nikkei 225 thread, see:

http://z7.invisionfree.com/ChartistsUnited...dpost&p=3798597

Raffles Education ?
I never heard of it until today.
It is the best performing stock,
according to the Straits Times.

Make me wonder,
did any chartists caught
the move ?

And I went to Cu's and check out
the posting on Raffles Education,
makes me wonder again.

Surprisingly I have 2 stocks in the "list"
which I have no idea of the prices until
today
(jialat liao now I know the price I scared liao)

and I know I certainly did not buy them based on charts.

I bought it because someone in Shareinvestor said they are good
based on the thinkings of WB, and I like the thinking.

Strangely most of my fellow traders,
seldom hold their futures positions overnight,
are keen on tying up their cash in securities, bills and bonds.

I said before such things can be religious,
and I will not try to change anybody's view.

--- --- ---
Some people are very lucky.
They can lose 80 bucks and still not sacked.
Some can lose until the FED had to step in,
yet keep their nobel reputation and open another fund.

But if you are not so lucky,
then do something that make sense.

I say before and I say again
Mini Osaka Nikkei = Osaka Nikkei = Simex Nikkei

Tomorrow 24 Nov,
Simex will introduce USD-based Nikkei
Dollar based Nikkei will not equal Yen based Nikkei.
But the relationship is very stable.

So now there are 4 contracts moving at the same time yet.
Can anybody move all of them consistently together ?
Ahh thats the fun question.

--- --- ---
There are alot of things that make sense lar,
not just A = B kind of stuffs

If I may clarify
I am an active user of charts,
but I never used it on individual stocks.

TA seemed to work well in FX, indexes etc,
but not stocks.

I am not sure why
perhaps for stocks,
there are people with insider information
that is not fully captured in the price.

For me owning shares means
I am a owner of the company
I will treat it as though the company is not listed
therefore I am not interested in today's price.

The Straits Times Index is at its highest level since 2000.
But for those who had bought the hubris in 2000,
did they make back their losses,
if they had not put in new money ?

Most likely not.
Many many stocks are still stucked
at the worst possible prices.



The lesson here
Never buy lousy companies
regardless of price.

With the aid of a computer and TA,
Chartists can be "expert" in every tradable things in the universe.
and they are blinded by the price.
Does it make sense at all ?

Some traders like to keep 貔貅 (Pi Xiu) or 招财猫 (zhao cai mao) on their desk.

I have a photograph of my family and a poem by Rudyard Kipling.


[IF]

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don't deal in lies,
Or being hated, don't give way to hating,
And yet don't look too good, nor talk too wise:

If you can dream--and not make dreams your master,
If you can think--and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build 'em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on!"

If you can talk with crowds and keep your virtue,
Or walk with kings--nor lose the common touch,
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much,
If you can fill the unforgiving minute
With sixty seconds' worth of distance run,
Yours is the Earth and everything that's in it,
And--which is more--you'll be a Man, my son!

--Rudyard Kipling

I could not help it but took a look at Wonderful Gambling Resort.

Someone, a self proclaimed Casino Expert told me just some time ago this WGR will reached $5.
But he sold it. Why ?
Because everybody is selling. He said it was not wrong to take profit.

Well, many months ago,
Casino Expert predicted that a certain GLC would win the Marina bid.
He betted his entire fortune on the warrants.

But he was wrong.
GLC lost.
That wasn't the killer though.
Market sentiment suddenly turned very bad.
Everybody was selling everything.

But he did not sell.
He said at most he would lose everything.
But everybody was wrong.
The market recovered and he made a nice profit!

The lesson is ?
Unfortunately I am not qualified to comment.

Oh well, we love to look at the past performances, presudo or real,
and if they show profits,
they must be good! Please do not argue.

Make perfect sense of course.

Well, I welcome him to the millionaire club.
He is not even in his 30s.

Foolishly I advised him to stop trading.
Start a seminar on "How to make a million dollar" instead.

Who say making money is difficult?

A friend called me just a while ago,
she told me she will never trade again.
I suspected she lost a bundle on Simsci.

Simsci can be hard to trade.

I pointed out earlier,
simsci does not follow textbook logic.

When 'they' want to buy,
just follow.

For example,
You would think that Simsci is good for a sell today,
Intel result is disappointing,
regional markets are down,

but 'they' decide to buy.

I am not sure why newbies are always encourage to trade Simsci,
If you really want to start dabble in futures,
I think Mini Nikkei is a much better choice,

-- Deleted --

The author feels that his postings are drifting away
from the central theme of this thread.

Picking up nickels in front of steamrollers.
I really like this.

Betting on yield differential is dangerous,
eventually economists will say we told you so.

But they do not understand trading.
A trader trading your money will want bet big,
and soon,
he will be rich,
and you will be poor.

---

A young trader is taken to the harbour.
There are some nice yachts anchoring there.

“Here”, says his boss, “are the partners' yachts.

And over there are the yachts of our bankers.”

“But where are the clients'yachts?” asked the naive youth.

Was chatting with a old trader not so long back.
he told me it is stupid to keep buying.
Because very soon in the future, will die.
However, if we short, we will die on the day we short.

Tell me how to choose ?

Of course we can get excited today,
but remember it is just another trading day.

If I bought some stock at $1,
and believe it will go to $5 in a few years time.

It was trading at $3,
but because of the recent market selldown,
it is now $2.

So does not that I should sell the stock?
Maybe. Perhaps.

But I would rather buy the stock cheaper...

To take part in the selldown,
you can always ..
sell the simsci mah.

So take a hard look at your portfolio.
Are they gems or junks.

Overheard.

:huh:

You cannot hope to win everyday.
But once in a while you are always wrong



(1) Buy 414.5, cut 414.2
(2) Sell 415.8, cut 416
(3) Sell 417.9, cut 418.2

Then perhaps it will be good to go to some nice cafe,
read a book and drink coffee till it's time to fetch my wife from work.

Tonight I will not be able to sleep.
No, not over trading.
But from caffeine overdose.

Hi Undead,

next time, i should join you for a coffee too!

Since the Mar selloff, I have been on the wrong side of the market. Small profit, bigger losses. I was bullish in early March but got into a bearish stock and did not ride the bullwave up.

I decided to halt trading for a while since it will be bad for my wallet if I continue to push further. My odds of pick is extremely bad till the extent I got the 1 decliner against a 3 advancers! Unlucky or un-skill... Have to stop!

After years, I am worst than a rookie!

sure!

But I sincerely hope that if we do meet,
you will find your Midas touch again,
and would not only treat me coffee,
but sandwiches as well!

Trading is always, up and down.
I know you will back winning soon.

Catch the Wave.

Just like a surfer who like to catch the next wave, it pays for the trader to keep a look out for the next one, more precisely the 3rd wave.

Unfortunately, trading is not exactly science. Without a crystal ball, we can only make a best effort guess.



A few strategies to consider.

(1) Buy at fibo support @ 17560. Cut if swing low is taken.
(2) Buy at breakout of swing high, which is also today's high. Cut if swing low at 17550 is taken.

Suprisingly, Nikkei is very well behaved. I had moved my trailing stop to the next swing low @ 17665.

When Nikkei reached the typical target on the projected time, I took most of the profit. The rest I will decide later but definately will be out if 17665 is taken.

---

The point is at 8:05AM, we really do not know what will be coming. But Wave 3 is a possibility, and it is to our interest to catch it.

Why ?
Nikkei's fall yesterday was not justified.
US economic data.
Therefore 17470 low was significant and the retracement (Wave 1 or A) is also significant.

The only problem left at 8 is will there be a 3rd wave.
The only problem now is will there be a 5th wave?



But ah,
there's is also another possibility, to short, especially if other markets fall while Nikkei is taking a lunch time break

With regard to the last post,
as you can see,
I did not even get the wave counts right!

But to me, it's not so important.

8AM
I'm not sure where will the market go
But I know what I want to do, where to take profit and cut loss
These are sufficent conditions for me.
If I'm wrong, then long coffee break again.

9 AM
Again,
I'm not sure how the market will turn out.
But I know where I will exit.

It turned out,
I was lucky again.