Stock Trading Summary

I had been trading on and off this year. I only trade more actively since August 2010 onwards. I had been inactive at the beginning of the year and was interrupted by a project in May and June. Apart from that I had been doing currency trade which was not a very fruitful venture.

Trades Since 01-01-2010	Qty.	Buy	Cost $	Sell	Valuation $	Gain/Loss	Fees	Profit	Dividend	Net Profit	% ROI	Comments	Bought	Sold
Bio-Treat	50,000	0.0650	3,250.00	0.135	6,750.00	3,500.00	58.58	3,441.42		3,441.42	105.89%	Price Sudden Surge, bound to retreat.	16/10/2009	13/01/2010
Yanlord	3,000	2.0200	6,060.00	1.950	5,850.00	-210.00	59.55	-269.55		-269.55	-4.45%	Down Trend.	19/01/2010	21/01/2010
Capitaland	2,000	3.5100	7,020.00	3.780	7,560.00	540.00	60.91	479.09		479.09	6.82%	Market Down Trend	21/05/2010	24/06/2010
ComfortDelgro	5,000	1.4800	7,400.00	1.540	7,700.00	300.00	61.17	238.83		238.83	3.23%	Market Down Trend	20/05/2010	24/06/2010
Bio-Treat	50,000	0.0650	3,250.00	0.080	4,000.00	750.00	57.18	692.82		692.82	21.32%	Price Sudden Surge, bound to retreat.	04/09/2010	13/01/2010
STX PO	1,000	13.6000	13,600.00	14.000	14,000.00	400.00	96.72	303.28		303.28	2.23%		07/09/2010	10/08/2010
Delong	20,000	0.6050	12,100.00	0.658	13,150.00	1,050.00	88.48	961.52		961.52	7.95%	Low volume after long up trend	11/01/2010	20/09/2010
Bio-Treat	50,000	0.0850	4,250.00	0.090	4,500.00	250.00	57.95	192.05		192.05	4.52%	Not for long term.	15/09/2010	24/09/2010
GuangZhaoIFB	100,000	0.0650	6,500.00	0.070	7,000.00	500.00	60.36	439.64		439.64	6.76%	Sell on Fear. Not for long term.	22/09/2010	23/09/2010
Hoe Leong	20,000	0.3600	7,200.00	0.355	7,100.00	-100.00	60.77	-160.77		-160.77	-2.23%	Wrong Entry. Cut loss fast.	23/09/2010	24/09/2010
UETF 50 SSE	5,000	1.9000	9,500.00	2.200	11,000.00	1,500.00	71.84	1,428.16		1,428.16	15.03%	Reasonable gain obtained	07/07/2010	15/10/2010
UETF 50 SSE	5,000	2.0200	10,100.00	2.240	11,200.00	1,100.00	74.64	1,025.36		1,025.36	10.15%	Reasonable gain obtained	21/07/2010	15/10/2010
DMX Tech	20,000	0.4550	9,100.00	0.425	8,500.00	-600.00	62.96	-662.96		-662.96	-7.29%	Based on 2/17 MA. Entry too rush.	14/10/2010	20/10/2010
ChinaGaoXian	30,000	0.1800	5,400.00	0.230	6,900.00	1,500.00	59.75	1,440.25		1,440.25	26.67%	Initial Target Reached	30/09/2010	29/10/2010
ChinaGaoXian	20,000	0.2000	4,000.00	0.230	4,600.00	600.00	57.87	542.13		542.13	13.55%	Satisfied with the profit	20/10/2010	29/10/2010
ChinaGaoXian	30,000	0.2300	6,900.00	0.240	7,200.00	300.00	60.67	239.33		239.33	3.47%	Wait for correction	04/11/2010	22/10/2010
Anchun	30,000	0.2300	6,900.00	0.190	5,700.00	-1,200.00	59.90	-1,259.90		-1,259.90	-18.26%	Stop Out. Poor entry point	04/11/2010	22/11/2010
			0.00		0.00	0.00	0.00	0.00		0.00	0.00%
			0.00		0.00	0.00	0.00	0.00		0.00	0.00%
			0.00		0.00	0.00	0.00	0.00		0.00	0.00%
Total Realised:						10,180.00	1,109.31	9,070.69	0.00	9,070.69	7.40%

Majority Traders Will Lose Money

The market is not a zero sum game. It is worse than that, as rightly pointed out by Edler:

"Markets are like pumps that suck money out of the pockets of the poorly informed majority and pump it into the pockets of a savvy minority. People who service those pumps, such as brokers, vendors, regulators, and even janitors who sweep exchange floors, are paid from the stream of money flowing through the markets. Since markets take money from the majority, pay help, and give what’s left to the savvy minority, the majority, by definition, must lose. You can be sure that whatever the majority of traders does, believes, and says, is not worth doing, believing, and saying. You have to stand apart from the crowd in order to succeed. Smart traders look for situations where a large majority does something one way, while a small, moneyed minority goes the opposite way." - Alexander Elder

The market has a huge overhead in order to support the trading structure. The money they need is obtained from the various traders through various fees.

Forex Trading results 2010-08-17

Last 2 weeks was marked by some losing streaks. See below. There are almost every trade taken has resulted in losses.


Whether you believe if or not, once you are out of sync with the market, you will keep entering at the wrong time and exiting at the wrong time. You would totally lose the rhythm of the market and keep going at the wrong direction. Even though your overall long term trend is correct, your individual trade still can go the wrong way.

The Importance of Discipline and Confidence in Trading

This week (2010-08-02 to 2010-08-06) is marked by many trading mistakes. There are a few lessons to learn from the trading. Even though the result showed net gain for the week, the major win was an over flow from last week's trade.



To summarize, here are some pointers to remember during trading:

• There were still too many times where I was looking at the 5-minute chart after placing a Swing Trade. This has to be stopped.
• Need to ensure entry point is correct for any trade. If missed the point, wait for it to come back or forgo the trade.
• Differentiate between Momentum Scalping vs Swing Trade.
• Trade along MAJOR TREND.
• Ensure CLEAR & GOOD Setup before entering trade. DO NOT Take HALF CHANCES.
• DO NOT OVER TRADE!!!
• WATCH YOUR GOAL AND STOP OR GO SLOW WHEN REACH YOUR GOAL!

The above lists summarizes the mistakes that was made during the week. Many of them were made within one single trade.

Risk Management in Trading & Investing

Everybody talks about the importance of Risk Management. So, what exactly is RISK? To start with, I have very faint idea of how to define RISK at the moment within my trading context. I can only group my RISK into 2 categories: 1) Known Risk. 2) Unknown Risk.

For the Known Risk, there are different ways to handle it and each will depends on the situation. For the Unknown Risk, there is no specific ways to handle it as it is unknown. For me, unknown risk will be group under one item and handle it as one unexpected event based on worst case scenario. In trading, the worst case scenario is to lose everything I have in my account. And my advice to all traders is to always be prepared to lose everything. If you are trading under that pretext, you will not have to worry about any unexpected events.

The rest of the risks which are already known will have a solution to handle it. Each will not be of any worry too. We cannot assume our strategy or theory will always work or even always be able to have an edge. It may turn out that we are having lower probability than 50% chance. The way to handle is to always monitor them.

Some possible events:
1. Complete market crash suddenly
2. Computer Failure
3. Your Broker gone bust
4. Political event
5. Natural disaster
6. War

Either of the event could mean that we cannot take out our money.

Key Trading Component / Concept - Leverage

We trade Forex using leverage. Using of leverage allows us to have exceptional gains when the market moves in our favor. On the other hand, if it moves against us, it will crash us badly. Because of leveraging, we must have stop loss so that we will not be wiped out by just one wrong trade. Not only that, it may end us up in trouble. Fortunately, almost all brokers have internal control where they will close out your position when you fund dries up. This is important in 2 sense. One, it protect the broker itself from unnecessary credit problem. Two, it protects the customer from over committing. This is win-win situation.

The concept of LEVERAGE is very important in trading particularly in Forex. The reason that a good trade can make lots of money fast because of leveraging. Without which, it would not have been possible unless someone has huge capital. The use of leveraging also means the proportional increase of risk.

When you are trading using leverage, you cannot take long term position. The simple reason is that even though you are CORRECT in your LONG TERM view of the market, you may be STOPPED OUT of your position when you are using LEVERAGE. The fluctuations in the market will be amplified by your leverage and you may end up with margin call even though you know that in the long run, the market will move towards your favor.

Because of leveraging, FOREX traders will take short term position up to a few days only. Because of that, it also caused the fluctuations to be rather high. That itself provides ample opportunity for short term traders like day-traders to make very profitable trades (or make huge losses).

In essence, at the end of the day, Profit = Reward - (Risk + Transaction Cost). In order to make a profit, the Reward must exceed Risk by bigger amount. Assuming Transaction Cost is 1% then:

Reward / Risk > 0.51

in order to be profitable.

Forex Trading 2010-08-03

Here is a snapshot of the trading results. After 30th July 2010, I only managed to make 2 trades. The trading strategy is slightly different from earlier trades. Now I focus on taking position instead of scalping trades. First 2 trades were unsuccessful because the price never come to the point that I wanted. So, I canceled the orders.



The first trade taken was shorting USDJPY. This trade was taken based on Fibonacci. Unfortunately, there was statement released by BOJ talking about intervention. This cause the pair to move in the opposite direction. To avoid risk, I decided to cut the losses short.

The second trade was based on pre-ISM news. Based on the market expectation and the major trend, I long EURUSD and held the position over 2 days. It went through very well but a few points shy of the target. After reviewing the chart pattern, I decided to take profit. It may not revisit the point in short term but in the next few days, I believe it will be there again. So, I am monitoring this pair. Over 2 days, this resulted in over 120 pips of profit.

Forex Trading Results 2010-07-30

This week, a new strategy was introduced. This strategy uses daily chart or 4 hour chart to take positions on currency pairs that has potential to move in certain direction. Holding period can last up to a week if required. Only 3 trades were taken resulting in one winning and 2 losing. However, this strategy requires reward/risk ration of at least 2 times before taking trade. That means, I will have less trades taken. Only 3 trades were done within a week resulting in 2 loses and 1 win. However, the winning is much larger than losing trades.



The results is net wining of about 2750. The winning trade is GBPUSD having seen the setup along the major trend and entry was made upon breaking out along with the major trend. The trade lasted more than one day but was taken off after a gain of 140 pips. That was a mistake because it eventually moved further to over 250 pips. I was expecting it to pull back but it lasted longer than expected. The lesson is to listen to the market rather than trying to anticipate based on your own idea.



At the end of the day, rules of trading is important. This is a classic case of not having clearly defined rules of trading or not following rules and let fear overcome oneself.

SSE has turn bullish since early July 2010

Since early July 2010, Shanghai Stock Exchange (SSE) has broken from the down trend channel and it is looking bullish now. This is despite the slowing growth and the various negative rumours of potential financial crisis looming China due to large property bubble and slowing export.

The SSE index is currently around 2570 and the near term resistance should be around 2900 where it is expected to meet the 200SMA. Subsequent resistance at 3150-3300 where one would expect some corrections. (even if it were to advance again)



While the slowing growth due to slowing export is true, the local market and local consumption is picking up. Even though the stimulus effect is waning off, there is still extra inertia from the move and it won't come to halt immediately. Hopefully the recovery in the western world will pick up speed and export will creep back. While slowing GDP is expected in China, the overall growth story is still intact. If the soft landing that China is hoping for can be achieve, the overall long term growth is still optimistic though in a slower pace.

To participate in China Growth while not being able to buy into the SSE stocks, one alternative is to buy through ETF. In SGX market, one can choose United SSE50 China ETF.

Trading Consistency

More trades has been done after the previous post. Based on the log below, as can be seen, the results are no as impressive as before. Many more trades were added but the profit was not as good.



More losses compared to the previous results. Now, let me reflect on what has happened since then:

1. A few hasty trades were put in. Over confidence, greed.

2. After meeting with a friend who does Forex trading for some time, new ideas were added. Testing of new ideas resulted in some loses.

3. New ideas adds to new dimensions to the trades also creates distortions to the existing trading strategy and confidence. Sometimes confusion arise out of new ideas.

4. Psychologically, some complacency might have crept in.

5. Possible Market condition changed. But by re-looking at the charts, this should not have been a main contributing factor. The currency still moves in the same trend on the daily basis and more or less similar pattern on hourly basis.

Conclusion:

1. Do not discuss strategy with anybody. Other traders' ideas may not be suitable for you. Monitor for yourself and feel it for yourself.

2. Keep focus on your strategy that works and do not tweak it if it is still working fine. Doing minor tweak to improve its result is OK but not major switch.

3. Patience is still the king. Do not take any trades that are half chances only. Feel the rhythm of the price movements and always check for margin of error. Only take trades that allows larger margin of error.

4. Avoid counter trend trades unless the movement is clearly a sufficiently deep correction.

China Market still bearish

Since the last update about 2 weeks ago, the SSE has since turned around slightly. I appears that a new trend is form with less steep slope downwards. This could signal potential turn around is near. The prices are moving down in much slower rate and some stocks could be starting to move up. Of course the recent AgBank IPO could also lift the market a little bit. However, recent comments from analyst about the bad practices of local banks could dampen the spirit.



Could see turning around in a couple of weeks if things goes well.

What is important in trading?

Recently, I put my hand on Forex trading. I had tried before and the result was dismay. I started GBPUSD and mixed with EURUSD and USDJYP. My strategy was to scalp whichever that comes with some move. I ended doing too many trades that are not very well setup. That means I took a lot of half-chances and as expected, I missed most of them. Then I stopped for a few months doing other things. Recently, I am back again. This time, I focus on EURUSD and I waited more patiently for setup to appear. Still, my strategy is scalping. The big different is I prepared myself differently in term of psychologically. One, I kept telling myself to be patient. Two, I don't look for big gain. I am not looking to take small gains in a bigger move. That means, I don't wait for the whole move to be complete to get out. I will get out as soon as my target is reach. Three, I lower my targets. The result turned out to be very encouraging.



Now that I have achieve very high return (in % wise), my next question is the most important one. Can I kept my trade consistent? After reading many forums and blogs about trading, I realized that what most traders looking for is CONSISTENCY. Yes, we can make a few good trades here and there but how can we keep getting consistent results?

Taking the above example, the result could be due to combination of the following factors:

1. The market is moving in a certain direction that favors that trading strategy. For example, in a bull run in stock market, everybody makes money.

2. The stake is relatively small and you can be more calm when taking trades.

3. Your state of mind is suitable for that trade at that time. How can you maintain that state of mind? Will you ever get swollen head?

The best thing to do, in my opinion, it to test yourself. Don't increase the stake yet. Do exactly the same thing for another 4-6 weeks to get the consistency first before deciding to increase the stake.

SSE - Bearish since April 2010

There has been so many stories about China Economic growth powering world recovery. But looking at the SSE (Shanghai Stock Exchange Composite Index),the situation does not seem very encouraging.



It appears that the effect of the stimulus package that China had injected into her economy is waning off since mid to late April 2010. Since then, the stock market has been going through correction. The SSE has re-trace 61.8% of the run up from Nov 2008 low to Aug 2009 high. The rally from Nov 2008 to Aug 2009, we saw a 100% increase in the index.

By now, it has given up almost 2/3 of its gains. This is probably the most bearish index compared to Dow, S&P, Nasdaq, FTSE, Nikkei etc. So, how much faith do you want to put into the China growth story?



Dow has given up only about 30% of the gains from Mar 2009 low to Apr 2010 high. Does that mean that there are more to lose for Dow? When would the effect of stimulus package start waning? Will it give up another 30% of the gains few weeks down the road? What will US & Europe do to prop up the market?