恭贺新禧

马年到，新春闹，开开心心生活好;
祝福你，乐逍遥，马到成功喜气到;
扬鞭策马向前跑，年年岁岁吉星照;
马年福瑞长相伴，龙马精神得意笑。

Trading Signals Sharing

I am sharing with you guys my FtR 9.7 Trading Strategy signals.

FtR 9.7 is a swing trading strategy designed to capture "swing movement" in a particular futures market. It typically holds a trade for 1-5 days, depending on market situation. It generates about 5-15 trades per month. I will cover 7 futures products that trade in CME GLOBEX Platform. They are:-
1) Gold (GC)
2) Crude Oil (CL)
3) 30Y US Treasury Bond (ZB)
4) Corn (ZC)
5) Soybean Oil (ZL)
6) Soybean (ZS)
7) Wheat (ZW)

Each trading day, I will email subscribers the trading signals, which includes exact entry and exit orders before market open, that is 7:00 AM (Malaysia Time). The email reads like this:

Below are the trades done from Oct 2013 till early Jan 2014. Is shows the results of one contracts basis per signal generated. Commissions and fees are excluded in calculations.

Here is one trade signal from Soybean Futures (ZS) in Oct 2013.

If you are interested in subscribing to my trading signals sharing or have any questions, don't hesitate to email me at bmdtrader@gmail.com

Order Types and How to Use Them

I am writing this post to explain few types of orders we normally use in trading.

Market - This is the most basic and frequently used order type which tells the exchange's computers to execute your order at the next available price.  If you are buying your fill price will be the next available offer and if you are selling your fill will be the next available bid. To get a better indication of where you might be filled you need to look at the current bid/offer. For example, above is the bids/offers for Crude Oil June13. If you Buy Market 1 lot, you will get fill @ 92.98. If you Buy Market 10 lots, you will get 1 lot @ 92.98 and the remaining 9 lots @ 92.99. The difference between bid and offer is known as spread. In a liquid market like Crude Oil futures, the spread is small, in this case, 1 tick.  The advantage of using market order is that you will certainly get your fill in the fastest possible time. However the pitfall is that in a fast moving market, when liquidity is low, you might get very big slippage.

Limit - This is an order to buy or sell at a designated price. Normally we place a limit to buy is below the current market price, while a limit to sell is placed above the current market price.  For example, you place a Buy Limit Order for Crude Oil futures 10 lots @ 92.00 when market is trading higher (92.97 vs 92.98). All orders are filled on a First In First Out basis (FIFO); your order will be placed in the queue on the exchange’s computers.  Your order will only be filled after those orders in front of yours are executed.

Stop - Stop order are used as stoploss as well as entry for some traders. A Buy Stop Order is placed above the current market price and Sell Stop is placed below the current market price. Stop Order is a price order turn into Market Orders once the designated price trades. For example, we place a Buy Stop Order 10 lots Crude Oil futures @ 94.00, when market is currently trading @ 92.89 vs 92.90. When market trades @ 94.00, our Buy Stop 10 lots @ 94.00 will become Buy Market 10 lots. This means when market trades @ 94.00, we will buy 10 lots Crude Oil at next available offer price. Once triggered, our order will compete with other incoming Buy Market Orders; therefore doesn't guarantee our fill price same as the Buy Stop Price.  The difference between Stop Price and Fill Price is slippage.  

Order Cancels Order (OCO) - An OCO is actually two separate orders that are placed around a position, one of the orders is your Limit order to take a profit and the other is your Stop order to get out at a loss.  The advantage of this order is that once the profit or loss order is hit, the trading platform will cancel the remaining order for you. For example, you buy FCPO @ 2280 and place your Stoploss, a Sell Stop Order @ 2269 and Profit Target, a Sell Limit @ 2300. Once market trades either 2269 or 2300, the other order is automatically cancelled. However, I don’t think Bursa Malaysia Derivative or futures brokers in Malaysia offer this order in their services.  

Trailing Stop - A trailing stop allows you to enter a Stop loss order and have it move as the market moves in your favor based on your preset parameters.  This allows you to lock in a potential profit if the market moves in your favor.  Let say you short FCPO @ 2280, with stoploss @ 2300 and no profit target. When market moves lower to 2250, you can have your stop moved lower down to 2265. You may continue to lower your stops if market moves lower, ultimately when market reverse and take out your stops, you are out with reasonable profits. But don’t forget stops order doesn't guarantee you exit at your designated stop price. There might be slippage.

There are numerous more advance orders that are available in the marketplace but I don’t think they are available in our markets yet. So, I won’t cover here. Now, you know the type of orders. Try to incorporate these orders in your trading strategy and hopefully it helps you in your trading. 

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!

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!

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.

Nasdaq at 13-Year High!

Nasdaq closes above 4000 for the first time in 13 years. This is the headline for many of the financial websites, newspapers, magazines, blogs...at least for today. Well no point discuss about technology stocks here in a futures trading blog. Today I am going to write about E-mini Nasdaq futures (NQ) and the Nasdaq Composite Index.

Nasdaq is trading above 4000 points but why E-mini Nasdaq futures Dec13 (NQZ13) is only hovering around 3450??? What could have been wrong in the market or calculations? Is Sept13 contract at such a huge discount to the cash market? Is there any arbitraging opportunity to profit from the price differences?

Before exploring about the potential trading opportunities, I want to know what is Nasdaq Compositie Index and E-mini Nasdaq Futures contract.

According to wikipedia,

The NASDAQ Composite is a stock market index of the common stocks and similar securities (e.g. ADR, tracking stocks, limited partnership interests) listed on the NASDAQ stock market, meaning that is has over 3,000 components. 

Then I looked for NQ contract specifications from CME website.

Did you notice that the underlying instrument for NQ is NASDAQ-100 Index and not the Nasdaq Composite Index that I've previously assumed it to be? 

According to wikipedia again,

The NASDAQ-100 is a stock market index of the 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index.

I made a blunder here. Ashamed to say that I trade NQ for such a long time but didn't know about the difference until today. This is probably due to the fact that I trade solely based on price action of a particular market without referring to either underlying instrument of the contract or fundamental information regarding the index.This applies to any indices futures trading which includes our very own FKLI and FBM-KLCI Index. My approach contradicts with many traders, who like to trade FKLI based on fundamental info of the 30 stocks in FBM-KLCI. They also like to compare FKLI and FBM-KLCI whether futures is premium or discount against the cash market. There is no right or wrong, as long as they are able to prove that their trading strategy is working and can produce consistent profits.