My 2009 trading journey recap:

• It is NOT possible to trade small timeframes when holding a full time job. Nope, not even the hourly or four-hourly timeframe. The psychology burden to get to the charts when the time calls for it is simply too tremendous. Whenever I need to access my charts, my boss is always asking for me. Murphy’s Law at its best.
• Some daily timeframe forex trading systems have their own set of problems.
  • Firstly, different closing times for the daily candle for different brokers.
  • Secondly, for my brokers, the daily candle either closes when I am still in the traffic jam on the way to the office or during office hours (again!).
  • Thirdly, when trading daily charts, trade opportunities come far and between. I got to monitor more forex currency pairs (and make sure they are not correlated). It is even better if I can monitor more markets.
• Started to use EA for backtesting
• Thanks to Max’s sharing, I have acquired many new and important concepts in trading from his amazing research in expert advisors.
• Well, learning how to trade is still tough and I tried to identify the challenges.
• Ah, I also attended 2 low-cost courses - 1 by Tom Yuen and 1 by Ray Barros.
• The best trading book I got my hands on this year is undoubtedly “The Way of the Turtle“. The concept of “trading edge” illustrated at its best.

Some burning unanswered questions:

• I am still trying to figure out how successful traders like Edward Ponsi, Tom Yuen and coconut trade in such a “carefree manner”. Edward Ponsi and Tom Yuen don’t even keep track of the success rate of their trading strategies.
• Scale in - I cannot understand under what circumstance can a trader be confident enough to scale into their positions and how money management comes into the play when a trader is scaling into existing positions.

Looks like I still have more work to be done next year. Success always feel so near yet so far.

As the new year approaches, I’d like to wish you a  FULFILLING NEW YEAR and MANY HAPPY 2010 PIPS AND TICKS!

inpost image by Normaron Fishion

• Everyone’s psychology makeup and environment is different. The trainer is only teaching what works for him and makes him successful given his environment and psychological makeup. Most trainers miss out the following considerations:

1. • Trading timeframe/execution must match your lifestyle and must not be stressful (ie, monitoring and trading during office hours is no no)
   • Comfort with trading system/strategy. Is your trading system/strategy aligned with your beliefs? eg, for someone who don’t believe in indicators, he is better off looking at price action strategies.

• Courses are overpriced - need I say more? Most, if not, all of the info is available on the internet and books! Sometimes the info may even be presented in the wrong manner in the courses ie, misinterpreted!

• We form trading groups after attending courses. But trading groups don’t work out - I have been in and out many trading groups. Somehow the synergy is missing. I have written about my idea of effective trading groups but I have yet to find one. I don’t know if I will ever find one.

• Most courses gravitate towards focusing on strategies because it appeals more to the masses. But we know that trading is not just about strategies. We’ve got to face it. The courses out there are made for the masses and they are out to make a tidy profit. They cannot just cater to individual’s needs.

So…no more courses for me. Well, but if there comes along one that is taught by a true blue trader and is cheap (or free), I still don’t mind attending to hear how he trades, his thoughts during trading, how he approaches the market and other trading stories Other than that, just talking to a trader may be a better way of learning.

Early this year a group of over 40 Freely students filed claims for the fees that they paid for his options trading course at the Small Claims Tribunal. The claims were filed on account that they signed up for the course because of his trading-related PhD. Subsequently, it was discovered that his so-call PhD is from a degree mill. Mr Clemen Chiang appealed to the High Court eventually. But ultimately, he still lost the case.

I guess appealing to the High Court was the only thing he can do. I heard that refunding the 1st batch of students asking for refund will open the floodgates to the rest of his 6,000+ students. There are already another 400+ students waiting at the Small Claims Tribunal for refund already.

Come to think of it, he is really plain unlucky. There could easily be over 90% of students from any trading school who cannot trade successfully after attending the school. In this business, it really doesn’t matter if your students don’t make it eventually. They always put in caveats, don’t they. It is not like the traditional education. I even know of worse trading schools and they are still running strong! Things may have turned out better if he hadn’t market his course with his PhD. He may still lose his business but at least he will get to keep his earnings so far…

You need to have “spare” money

Well, how young one may start to learn trading depends on when he can save up the capital to start trading. Nowadays, this barrier is lowered greatly with forex brokers that allow trading of nano lot sizes. A broker I know of allow trading of any lot size and this allows starting capital of US$500 and still allow proper money management to be applied.

It is easy to lose everything

This is up to individual. I was thinking some parents may like to let their children understand the risk of trading. Let them start trading without any rules. Let them fiddle and familiarize with the trading platform. Let them experience margin call, let them experience account blow-out. US$500 is cheap to learn all that.

You’ve got to execute the trades without fail, even if you’ve lost the last 10 trades!

After that, I would give my girls a decent trading system (including money management rules) that they can trade without interfering their studies (and their studies also don’t interfere with their trading too!). I would monitor that that trade the system consistently even if they experience losing streaks. Children are unpolished gems. I would think children are more likely to follow trading systems.

Side dish

Also, importantly, treat it as a means of bonding with our children, a game that we can play together!

Is this how you will teach your children how to trade? Or would you even teach them at all?

inpost image by yomi955

Fade false breakouts

Dr Elder mentioned in his book that professionals love to fade false breakouts. In fact, he also provided a strategy for fading false breakout. Subtly, Tom Yuen also showed some trading examples fading false breakouts. This was brought to my attention because I asked him why was he not following the trend (though he preached never to go against the trend)

Try more than once to find the right entry

This was also from Dr Elder and Tom. This is really intriguing to me. I am still trying to figure out how to determine the “right” entry.

Keep good records

I believe almost all successful traders advocate this. Dr Elder said he can tell if a trader is good or not by looking at his records. Ray Barros cannot emphasize this more enough. I was overwhelmed by the amount of information that he maintains for his record.

Adds on to winning position

I got this from Tom during his course. But he can’t really answer me on what makes him decide that he is going it. I guess it has to do with experince…

The trend is your friend, until it bends

This is also all trend-following traders’ advocate, be it using indicators or from the price itself.

Do note that when people talk about “professionals”, you may want to find out more. Professional traders can be pit traders, institutional traders, bank traders, full-time retail traders etc

Have you come across things that professional traders do to share?

in post image by sndrspk

If you came across any, don’t hesitate to share it with us! Just drop me a email!

In future, I will be posting when the “Free Education” page is updated, so that my RSS and email subscribers can instantly be informed of new free trading education. So if you wish to be informed, subscribe to my blog via RSS or email today!

Hey Friends!

I have updated the “Trading Courses Comparison Table” with the latest trading courses that I have attended:

• Applied Technical Analysis by Tom Yuen (YCK)
• Habit of Success Webinar by Ray Barros

Also added 2 news courses to the “List of Trading Courses in Singapore”:

• Mastermind Trader by Colin Seow
• The Alchemy Workshop Series by John Lok

Seems like the number of trading courses in Singapore has reached equilibrium

Sign up at the top right hand corner of my blog to get the latest list!

I chanced upon the audio book and after listening to it, decided to get the book.

It is an easy read (if you less the formulae presented in the book). I’d like the way Curtis highlighted what was really important to the turtles that brought them trading success. In a nutshell, what really brought them success had to do a lot with their mentality - to follow the trading system consistently, to not focus on the immediate trading results but look at the long haul etc. Curtis also highlighted the importance of the money management rules - position sizing based on the violatility of the instrument, position size limitation based on market correlation etc. The above 2 aspects were more impactful to the Turtles’ trading success than the trading system itself. That’s why the rules of the trading system are revealed in entirety in the book.

“…The funny thing is that most of the principles that Richard Dennis taught us were not new. Some were basic principles that had been espoused by other famous traders since before Richard was born. Yet the very simplicity of the principles we were taught in some respects was a hindrance for those of us who tried to follow them in those initial months. People have a tendency to believe that complicated ideas are better than simple ones. Many find it hard to comprehend that Richard Dennis could have made several hundred million dollars by using a handful of simple rules…”

However, Curtis did highlight that the Turtles started off not having to worry about the trading system mainly because it came from the legendary futures traders . The Turtles trusted that their mentors had done the necessary system testing and had passed them a profitable trading system. So the Turtles just had to focus on their psychology and follow the money management rules strictly, which could explain why they became so successful in such a short time.

“…If I had to pick the single X factor most responsible for our success
as Turtles, it would be the fact that we were taught by a legendary
trader. This knowledge gave us a faith in the methods that
Richard taught us, making it much easier for us to follow his rules
consistently and persistently…”

Because of Curtis’ background in trading system testing, he also shared metrics for measuring the performance of a trading system (even how to identify if a trading system has an edge), how to do proper backtesting and pointers on how to make a trading system robust. Along with the interesting Turtle trading stories, I definitely find this book a good read!

inpost image by turtlemom4beacon

I am backtesting a trading system with daily charts - manually.  I have to do it for over 5 instruments. I confirm that it is tough to do manual backtesting Tough not in the menial way but mentally. As I am working my way through the charts, I keep thinking of the following:

I can only carry out limited testing

I am only backtesting the trading system itself - the entry signal, the entry, stop loss and profit target. What I did not include is money management and my psychology.

Well, it is still possible to simulate money management. Just that it will take even longer for the backtesting. As I am trading more than 1 instrument, my money management has to take into account for which instrument the entry signal appear first. You can imagine I switching between 5 charts and determining if the entry signal has appeared. Hence the longer time for backtesting.

It is not possible to stimulate the psychology part though. For example, I may choose to skip a trade because I have quarreled with my wife… for instance only

What can I tell from the backtest results then?

Since I am not able to simulate money management and psychology, what can I get out of my backtesting? We all know that most trading systems have success rate of around 50%. Am I to just prove that my trading system is near average?

How much history data to use for backtesting?

Ray Barros suggests that he would backtest 5 years worth of downtrend data, uptrend data and range data. I found that amazing. Firstly, I have to determine uptrend, downtrend and range data accurately. Then it is the painful process of working through the data! Tough job!

Which instrument to backtest?

Do I want to trade with instruments that are uncorrelated? How can I be sure that the instruments that I have chosen are uncorrelated.

Will backtesting using different charts reap the same results?

For instance, the daily candle on InterbankFX chart closes at 8 am SGT while the daily candle on Oanda closes at 10 am SGT (if I remember correctly, anyway, they definitely close at different times). Will I get the same backtesting results with the 2 different charts?

Then again, would I want to do my homework now or do I prefer to pay the market to learn? Meanwhile, the backtesting continues…

刘谦 (Lu Chen) - a magician from Taiwan gained popularity among the Chinese community rapidly after he performed a magic trick that involved “putting” a ring into an egg on China National TV early this year. After watching his interview (another section of the interview here) on how he got started in magic, it sets me thinking: How different is learning trading from learning magic?

Lu Chen started to learn magic as young as 7 and become successful at the age of 30. Some aspiring traders can be at it for decades without any success. Seems like he has a much higher chance of success as compared to if he had learn trading instead