Well, well, more and more options for trading education!

• ChampionHub (formerly SmartForex) has  a website at: http://www.championshub.com
• Forex Exchange Trading Education (FXTE) launches forex trading education in Singapore
• Another place to learn technical analysis at v3go
• KAIZEN Trading Systems introduces a new managed account trading service. Started by 2 good friends Seeni and Max. Max develops awesome EAs.
• Found AchieverLife from Facebook ads. Looks pretty new.
• ChartNexus has always been aggressive in giving free courses and at the same time selling their charting software.
• Normally I don’t list brokers as brokers usually only offer education to clients but I notice Phillip Securities is giving out lots of free education!
• SGX Education has always been rolling out education at meagre fees. Recently, the courses taught by ex-SIMEX floor traders Tom Yuen and Leonard Kok caught my eye.
• Ray Barros offers the Habit of Success Webinar but he also teaches in Singapore once a year. This year the seminar is changed to webinar due to personal reasons.
• SIAS has been offering education to its members. Membership fee is only at S$28 per annum. After signing up, we can get access to the education it provides.

Also don’t forget to check out the free Asian Investment Conference this mid July!

So sign up at the top right hand corner of blog to get the latest list of trading courses in Singapore!

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I got to know about Scott Andrews (aka The Gap Guy) from Corey’s blog.

In a presentation I gave to a group of over 140+, I talked about how I sieved out better quality trading resource. Traders who demonstrate success of their trading strategy/system with statistics always catch my attention. Scott Andrew is one such trader. Furthermore, he specializes in something close to my heart - GAPS. Yeap, I traded gaps for over a year before giving it up altogether.

During that time, I also did a fair amount of research on gaps. But I never thought of doing it Scott’s way. Well, in the first place, I was taught to trade gaps in a unorthodox way. Scott fades gaps primarily. He has with him tons of statistical research on which gap patterns are risky and which gap patterns have a high probability of winning. His statistics are significant because of the large sample size. I am blown away.

Now, Scott shares some of his research at his blog - this is free He also runs a paid service at MasterTheGap.com. But allow me to point you to the free Gap Trading Video section where videos related to gaps are posted up daily. A free great learning resource! You may also want to check out his presentation at the Traders’ Expo 2009 that talked about 10 patterns that every trader should know. Also check out his trading results.

I am truly inspired.

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In our search for THE trading strategy, I guess many of us have come across dozens of more conventional trading strategies that made use of:

• technical indicators (ADX, MACD, Stochastics etc)
• price action
• support and resistance lines
• candlestick patterns (doji, harami, evening star etc)
• chart patterns (double top, flags, pendants, cup and handle etc)

As I got more acquainted with expert advisors (EA), I was exposed to some trading strategies, which I termed as “unconventional” trading strategies. Basically,  in unconventional trading strategies, they don’t use any of the things listed above! So allow me to share some of the unconventional trading strategies that I have come across.

Correlation Trading

In correlation trading, people trade base on the relationship between the same or different trading instruments. I ever heard a course out there teaching people to buy a currency and sell another highly-correlated currency. Supposedly, this will cancel the effect of the currency price fluctuations and the profits will come from the swap. Not a bad idea…one don’t have to care about which direction is the currency moving (aka non-directional trading) - provided the 2 currency pairs are REALLY moving in correlation, that is… But my this friend got a hell lot of problem…

Trading mean reversion

My encounter with the PID EA taught me the concept of mean reversion. The main idea is that there is a high chance that price will move back to the average price (more details at investopedia). Interestingly, Dr Brett has the statistics to show that “a disciplined trader can make a living simply trading this pattern“.

Gambling and information theory applied to trading

A online buddy introduced this concept to me recently. I have not really dwell into this yet. Basically, some genius managed to represent gambling concepts mathematically such that the parameters can be manipulated and optimization can be done. Another genius applied this to trading. One such application is in Kelly Betting, that applies to money management.

Trading based on probability or other mathematical models

The Hedgecow EA trades base on a such a probability model. The high level concept is that it is highly unlikely to consistent lose for too many trades. So when there is a lose trade, we will increase lot size for the next trade. More details can be found here.

Disclaimer: I am not recommending any EA here. I am just illustrating some novel trading concepts that I have learnt from some of the EAs that I come across. In fact, PID caused many to get margin calls last year.

in post image by: FriaLOve(out of school!!!!)

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A online friend, Brendan (founder of Tactical Trading Academy), shared with us a valuable insight to a new perspective of using indicators for trading forex. He shared this with us through this blog post using USD/JPY and this blog post using EUR/YEN. Enough of traders that show 1 or 2 examples that indicators work. I think we are beyond that already. Brendan proved his point using historical backtest results (which is my cup of tea ).

In my clarifications, he also mentioned the following points:

• For the charts shown, the same indicators are used for both entries and exits
• The same lot size is used for the experiment
• The timeframe used is the 4-hourly timeframe
• He performs this quantitative test every weekend on a rolling basis. Then he will send the information to his subscribers on Sunday or Monday, equipping his subscribers for the new trading week ahead
• Not all financial products exhibit repeated patterns. In his research, financial products that exhibit repeated patterns are AUDUSD, USDJPY, EURJPY, EURUSD, Silver and gold. USDCAD, USDCHF, oil and GBPUSD used to show repeated patterns but not in recent weeks

The gist of the method that he advocates:

• Certain currency pairs show repeated patterns with certain indicators
• However, the same indicators don’t work forever for the same currency pair
• We can use historical results to determine the indicators to use for the next week or so

I’d also like to highlight some challenges:

•  Which indicators to try next? - I believe it takes a bit of experience here to decide which indicators to try next since there are thousand and one indicators out there
• Subjectivity of backtest result - I queried with Brendan on why he did not select Commodity Channel (to trade with USD/JPY) since its equity graph is also a upward slope. His reply was: “Yes you are right CCI is working well as well but I see that equity values start to fall, this is why I rather not. But then again, it may work next week. I will monitor closely on CCI for USDJPY.”

Then again, I believe, if we do it long enough, we would have the experience to overcome the challenges.

Since Brendan shared such a valuable piece of knowledge with us, I also decided to return him a favour by advertising for his new e-book: “Our Trading Secret: BL TS System“. It is not everyday that one get to read a e-book written by a former bank trader - who else knows the trade more? With the focus on practical trading knowledge, I believe the book is a good read, especially now it is going at a promotional price of US$20 only!

Disclaimer: jmot does not get a single cent from promoting the above merchandise.

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I have been pondering over this for the last few months. So just thought I will share my thoughts and seek some comments and feedback.

Information Overload

With the advert of the internet, web 2.0 and so on, we can find trading knowledge all over the place eg, blogs, forums etc. There are specialized websites that show us thousand and one trading strategies and even which candlestick patterns work better! And if we also look at the number of books, courses and seminars on trading available, we are really spoilt for choice. End up, i believe most of us have spent a hell lot of time reading and testing but yet to find THE working formula.

Teachers teach what work for them only

Then we begin to think: “Hey, perhaps I can spend some money (or a lot of money) to find someone who is already good in the trade to teach me.”. Recently, I realized that most, if not all, of the teachers teach what work for them as individuals, isn’t it? The chances of fully replicating a teacher’s trading style and strategy is near zero due to our unique up-bringing and cultural influences. Chances are one will need to attend a few courses and if he were lucky, he would be able to mix and match, and improvise what he had learnt to find THE WAY. What is needed: more time.

Rogue information

Some of our time are also sucked up by articles or teachers that teach rubbish.

Too many parameters to tune

I truly believe what’s underlying that makes trading difficult is simply because there are too many parameters to tune. By parameters I am talking about:

• type of instrument - options, stocks (local or overseas) , futures, forex, CFD, warrants etc
• timeframe to trade - 5 min, 15 min, 30 min, hourly, 4 h, daily etc
• lot size - a couple of position sizing techniques are mentioned in Dr Van Tharpe’s book
• entry strategy - which timeframe to enter, what and how many indicators to use, which candlestick/chart pattern to look out for?
• exit strategy - we have the same amount of choices as for entry strategy

If you were to mix and match the above, we have unlimited possibilities! Not to mention there are over hundred types of indicators and candlestick/chart patterns! Now, how much time do we really need?

Difficult to discuss

When aspiring traders come together, we usually talk about what work and what don’t. However, because of the short acquaintance, traders usually don’t spell out the entire context. For instance, a aspiring trader sharing with his friend may say: “The MACD indicator works for forex.”. But… in what timeframe, what parameters, which currency pairs etc. I think you know what I mean. And those who are listening to him may take his “recommendation” and go back to do their own testing and wasting time as a result.

When something doesn’t work it is normal

In my personal opinion, this is the most challenging issue to tackle. Let me illustrate with the following scenario:

I backtested a system, and it worked for historical data. And when I traded it live, things don’t turn out as well. Explanation: Well, past performance don’t gaurantee future result, market condition changes, anyway, best traders only have success rate of 60% at best, etc

If I come to think of it, we can’t have a clue to what’s working what not!?!?

Do you have any personal experience to share?

in post image by bensonkua

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