Thursday, December 26, 2013

Flash Spike During Holiday Sessions



Copper Futures (HG) and US 30Y Treasury Bond Futures (ZB) experienced flash spike during thin-traded holiday sessions. They adjusted ZB high to 131-12 though. One friend asked how to avoid such trading situation. Well, 食得咸鱼抵得渴. Unless you avoid the market completely, you will probably come across such situation in your trading journey.

How about taking advantage of such occurrence? For example, trade the opposite direction when the minutes candlestick shows "shooting star" or "hammer" or "engulfing patterns"? I don't have the statistics but you may back test on this idea. I remember one day in 2008, FKLI did a similar "flash spike" in a lazy Friday afternoon. Here is the daily chart:


What happened next? The chart speaks for itself.

Happy Holidays!

Tuesday, December 24, 2013

Merry Christmas and Happy New Year!


I wish all of you and your loved ones peace, joy, prosperity and happiness this Christmas and the coming New Year! Cheers!

Wednesday, December 11, 2013

Trend Trading Gold Futures...Reality


Gold futures rallied yesterday. It moved from 1240 to 1265. With tick size of 0.1 and tick value of $10, this 25 dollar move is equivalent to $25 x (10 /0.1) = $2500 per lot. Wow, that is a lot especially if you convert USD to MYR, somewhere RM 8000. Many friends like to say it is so "easy" to make money from trading. If you trade only 2 lots, that easily more than monthly income of many professionals in Malaysia. What do you think, fellow traders?

If that is so easy, nobody wants to work anymore. You can be rich overnight by becoming a futures trader. In this post I am going to show the results of a short term system on how it tackles and captures this $25 upward movement. This serves as a warning for those aspiring traders the reality of trading. It is definitely not that easy, as promoted by many trading system sellers, consultants, gurus etc...

Below are the trades taken for the past 3 days in Gold Futures (GCG14):-

System took 7 trades, with 5 losses and 2 winners, yielding a win rate of 28.57%. Yes, it lost more than it won. Ignoring position sizing factor, it made $11.40 or $1140 per lot, which is significant lesser than $2500 as previously mentioned. Another thing I want to highlight is it took 4 consecutive losses in a row and faced a draw down of $830 per lot ($8.30). After the numbers, do you still think trading is easy?

This is a typical short term trend trading system. System displays some of the trend trading concepts like Cut losses short, Let profits run and Buy high-Sell Higher. Trend trading is difficult because it will show more losses than wins in terms of frequency. Therefore average profit per trade must bigger than average loss per trade. Only then you will be able to come out alive and winning. Please take note also system doesn't set any price target. This is inline with Let the profits run. System followed the market moves beyond unreasonable level (overbought in this case), without any intention to pre-take profits. Finally when market reversed, long positions was stopped out automatically by trailing stop orders. If you cannot take losses, maybe trading is not for you.

FtR Trading System Performance Update: Jan to Jul 17

Rebounding from steep drawdown last month...