The Black Swan

I'm not in the mood for blogging. Today is the 6th of April 2013 and it marks one of the greatest movement in our local market, FKLI ! I was one of the casualties for my reluctance to cut loss and got stunned by the sudden spike up in price. FKLI and KLCI almost went limit up today.

The market opened at around 1721 and went to the all time high of 1834.5 which was an increase of roughly almost 10% from the closing on last Friday which was at 1680.5 .

I'm fortunate that this has only affected about 10% of my total capital in the futures market and I shall live for another day to fight.

This price movement has only happened once, if I'm not mistaken. That was in the year 1998 at the peak of the economic crisis of Malaysia. I have never seen our index going up more than 100 points before. It is an eye opener !

FKLI Vs FCPO

Just to cut things short. I have been wondering all this while, which market generates higher returns. FKLI or CPO ?

As a futures trader, I am concerned about risk vs reward. Risk vs reward comes from something called " volatility " and volatility can be the best friend or the worst enemy of a trader. I embrace volatility but then, I am quite cautious when it comes to volatility.

Let's look into the history of FKLI .
FKLI is considered to be safe market.. index futures are generally safer than commodity futures because volatility is lower. FKLI was born in the year 1995 or 1996 and if we were to look at the crash of year 1997 and 1998, it offered one of the greatest opportunities ever in the futures market. At that time, I am not sure how much the margin is but money per point was RM100 instead of RM50 as of current.The rebound from 1998 to 1999 was a great opportunity as well.
Eventually in around 2002-2005, FKLI became more and more quiet and as we have seen  in year 2005,the market was moving sideways. That was the time, the margin requirement was about RM 1200 and money per point was RM 50. In year 2006, we witnessed a great bull market followed by the great volatile market in year 2007.
Let's talk about recent movements. In year 2011 and 2012, the market was quite steady and offered great opportunity for futures trader whilst trading with reduced risk.

Let's now look into the history of FCPO.
Nothing much to talk about CPO . The market has changed ever since year 2007 when extreme volatility is seen. Year 2008 was a brutal market that has killed so many traders before the great crash starting from 3700 ( after the great rebound and sideways movement ). Ever since then, volatility remains high while money per point is at RM25. Margin requirement ranges from RM 6000 to RM 9000. At the highest,it has reached to RM 15000( slightly below,in year 2008 ).

Now , to summorize the whole thing . Volatility can be the best friend or the worst enemy of a trader. When volatility increases,risk increases and more capital is required for trading. I repeat, more capital is required for trading.
If we were to look at CPO from systematic trading point of view, we have to look at the potential largest drawdown due to the extreme volatility of the market. This market went from a low margin market of about RM1200 per lot up to about RM 7000 per lot. While FKLI is hovering around RM 5000 per lot. 1 point in CPO is about RM 25 and 1 point in FKLI is RM 50.
CPO costs about RM 50000 to deleverage. FKLI costs about RM 85000 to deleverage.Assuming if we were to hold long positions until the end of the market.
If we were to analyze FKLI and FCPO, FCPO definitely requires a capital of ranging from RM 15k to RM 25K per lot while FKLI requires a capital of about RM8K up to 15K per lot. But in FKLI,we get higher leverage at lower risk. Why lower risk? Because lower volatility.
Yes, in CPO we are able to make 1000 points in a year but how many years can we do so? How much capital do we need to make that particular 1000 points? How about the drawdowns that we are supposed to encounter?

In FKLI our drawdowns are greatly reduced while we are able to fully leverage trading in the futures market.

Honestly speaking, I have gained my trading confidence not by making money in the index futures but by making money in the commodity futures ( CPO ). It has proven that I have a successful method and good market sense.
I would love to conclude that with a successful system or ...a good trading skill...whichever u implement... FKLI will eventually yield a higher return compared to FCPO !

CPO Price Projection

Well,I'm doing this for the sake of fun. This is the weekly chart of CPO. I'm expecting price to go down to the 78.5% retracement and 138.5% projection at around 1900 level. I don't believe in forecasting the market but here is just a rough idea where the market is supposed to go. The market has been going sideways for about 6-7 months and that period of time is a good indicator how powerful the next trend is going to be.

A call from the banker

Got a call from a banker recently and asked me whether I want to take up a lucrative salaried job in one of the major banks originating from Singapore..C'mon lah, I understand she is trying to help but not everybody needs a job. When I needed a job , where the fuck are all the people gone to ? Tarak ! The job market has been cruel to me and I have been extremely disapointed . Honestly speaking , I have given my best even in the sales industry but I didnt earn the income that I deserved. The biggest heart break that I have ever experienced is my failure to perform in the sales industry .....NOT the moments I was forced to quit trading.
I have been out of the market a few times in my life but it did not deter me from coming back because this is my home.

Coming back to the market :

In a bull market, stocks dont retrace much from bad news. After posting negative news on retail sales, the market did not go down much in the Big Apple. Although we have seen the first signal of a major reversal in FKLI , the uptrend stays iintact. What ever dip that we may see, the strategy is to go long or hold long !

A quick one on CPO. The 2335 support remains to be a stubborn one and with the help of overnight markets, I do hope that it can be broken down in the form of an opening gap. The trend is down and position traders should be making money this time. Well, it is time for us to settle this problem once a for all. The market has been sideways for about 6-7 months already !!!!!!! Let's it do , market forces!

The income of RM 2K a month

The average household income in Malaysia is about RM3K a month. To be honest,most of my peers are earning like about RM5K per month because they are degree holders. I am not fortunate like them due to my past mistakes but it's ok. I never blame my lack of degree for the low salary that I command. The income of Rm 2K a month is the basis of everything. Anything lower than RM2K a month is considered to be low. And it also depends on the lifestyle that one is leading. As a non degree holder, my average salary is roughly about RM2K per month and even less ...but as a former sales performer I have even commanded an income of RM10K in a week.I have even earned up to more than RM20K in a month as a salesman . There are so many ups and downs and I would like to say that I can adapt to different types of situation. If you give me an income of lets say, 10k in a month,I'd still maintain my type of lifestyle.Reason is because in the sales industry,nothing is certain. This month I can earn alot, what about next month? We'll never know despite all the confidence that we possess.

I have written this fact and /i am going to repeat this. Our income is in proportion to our own financial blueprint.

"I always knew I was going to be rich. I don't think I ever doubted it for a minute."
Warren Buffett

See that quote above. Thats what we call, " Financial Blueprint . " The word is created by T Harv Ever, a famous motivational speaker.

Warren Buffett is a billionaire when he was only 5 year old. He think like a billionaire and eventually, he fulfilled his destiny as a billionaire.

I have a friend who has been earning about Rm 2K ++ per month ever since he started working and he is a sales person. A sales person should never earn less than RM3K because that is the benchmark allowed. A top sales person should earn more than Rm10K per month. I wonder how does he survive as an outdoor sales person who needs to travel a lot to meet clients and at the same time find it very difficult to hit his target. Honestly speaking, if you give me an income of RM2K I can really survive and still prosper now because I stay at home. But if I constantly travel and spend lots of money, RM2K in a month is never enough.Let's do a calculation. He earns an income of RM2K in a month (without commission coz can't hit target)... and he has a car with some other credit cards outstanding balance to pay.
As we all know sales people love to show off. A car costs about RM800 per month for installment. Debts cost about RM600 per month. Thats like RM1.4K. A gross income of Rm2K is roughly about RM 1800 net income. So, 1800-1400= RM 400. What about your handphone bills,bro? What about your gym or sports commitment,bro? What about your petrol and also your toll bills ? I never look down on people who earn less...in fact I respect them for their ability to save and build themselves up.It's not how much we make that matters,it s about how much we keep and how hard our money works for us that matters.

With all his commitments, I sometimes wonder how a person can survive like that. If I were him,I'll sell off my car, give up my hobbies, cut down all expenses and restart. Our ego will not make us money. Only through giving up what is not needed and living within our means, we can succeed in life. 

From slaves to successful free men

Someone has told me that The Richest Man In Babylon is the best book that he has ever read. I have finally finished the book and understood it. The first time reading was at klcc and I was in a rush so I didn't fully understand the stories written . There is a few chapters in this short book and the final 3 chapters are the best . 2 chapters were describing how slaves turned into great men with the soul of a free man . The book contained all the principles of wealth which are originated from the Jews.

Saving , investing , spending wisely , building an enterprise and working hard .

Overall I give my highest rating to this book and while reading the final chapters, I became so emotional and touched . The first ever book that touched my heart was Rich Dad Poor Dad by Robert Kiyosaki and although I have read so many books in the past , Richest Man In Babylon stands at the top as one of the best books ever written on money.

Professional Trader Methodology Course

Be noted that this is a talk cock sing song session and it is NOT SERIOUS at all.

I'm inspired by the ability of Lee TG to sell his courses to the public.I'm starting to believe that he has great writing skills that he obtained from his MBA qualification.

I would like to share my Professional Trader Methodology Course to all of you.Here are the details:

3 Days Course

The course objective 

- To help traders to develop an edge in the stock and futures market to trade confidently

- To build up the right mindset of applying the system in the market

- To help traders develop a method that suits his or her personality in the market.

- To identify the mistakes that true winners have experienced in their past experience by using real charting history.

Day 1 

Morning Session

- Basics of major chart patterns. Eg: Head and Shoulder, Triangles , Flags etc.
- Basics of major candlestick patterns. Eg : Bullish engulfing, bearish engulfing, etc
- Characteristics and strengths of each pattern explained.
- Major basic indicators of technical analysis. Eg : Moving averages,MACD,Stochastic,Average True Range etc.

Evening Session

-Active discussion on real life application of chart and candlestick patterns.

Note: All basics are good stuffs.

- Strategies to trade based on support and resistance and breakout.
- Real life application on using indicators to trade.
- Learning how to place stop losses and profit target ( trailing loss as well )
- Learning how to scree through bullish stocks by using Metastock Explorer.

Guarantee of the course

I will be your mentor for an unlimited amount of time until you become a successful trader.

This course is not a theory based course as I will be sharing my real life trading experiences to you.





p/s : Arrggghhh.. still not good enough. I'm still not able to use powerful words to attract people.

Disclaimer : It's just a talk cock sing song session and this course doesn't exist in reality.