“Futures look dangerous at first. Nine out of ten traders go bust in their first year. As you look closer, it becomes clear that the danger is not in the futures but in the people who trade them”
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Thursday, August 18, 2011

There Are Always Two Sides to Every Story


Today I am not writing about the market. My opinion is  still the same like the last one. This time I would like to share you a story. Perhaps we could take a lesson from that.:)
I have a friend, co worker friend actually.  He has been in this field for 3 years. One day, when we were having a little chit chat, accidentally he talked about his trading. He was upset because he still could not get sure profit from the market, and some of his investors got loss. From the way I see him, He is a discipline person, put all his time and energy for this work, Not just an ordinary traders, who just come to the office, make some calls, hope their investors buy their advise based on one page of paper only and do nothing for the rest of the day . He spends most of his time to study the market, and keep learning. I must admit he is very diligent. Yet he still cant make sure gain.
As a matter of fact, trading a plan is not only according our plan, but we  also must meet the investors agreement. The hardest thing is to educate them, not about making profit, but to make them knew that the market has no mercy. Unlike any common system, such as in traffic, even when we drive carelessly, another drivers avoid getting crash with us, even they pissed off. But market likes your careless trade, donate our cash to them. No one tell you that your trading pattern is dangerous, as long as you have the equity. you have the right to trade the way you like, even the result is worst.
A couple years ago, I had an investor who played quite big. His trading actually was quite good. The problem was he was very stubborn, and never admit that sometimes our open positions were bad. His pride will not allow him to be wrong.  He liked to trade big, and let the positions floated. Once, when I detected a trouble, when the euro was 1,2500, we were having sell positions at that time, I told him to cut our positions 200 points loss, but he refused. I kept try to tell him the next few days that the euro had broken its resistance and we should considered cut the positions. The answer is still "No". In our unwritten rule, Investors are the king, their decisions are subtle. That is one of the biggest obstacle  for the trader besides good trading, good money management, and good psychology trading. Making profit from the market is already difficult, but sometimes the investors make it worse by their urgency trade. Anyway, few months later, when the euro traded at level 1,4300, which we never expected to go up that far, he began to ask me his positions. Hold or cut? It was the most difficult question for me to answer. When we were behind 200-300 points, I have no doubt to cut the positions, but when they were already 1800 points, cut the positions were not so easy. 
Imagine you are a chef, and some day I cooked food with my own style, then I give it to you when the food is half burnt. If the food is burnt or not well cooked, then you have fully responsible for that. Sounds not fair huh? well, the world is already not fair for too long time, and we often experience that situation.
I am just saying to my friend, that is our cost for being trader. How many times we  becomes a scapegoat for their poor trades?. It was everyone fault actually. But who knows the real truth?. Just keep the coin one side seen, my friend. The important thing we do have a goodwill, keep doing the best and don't care what others said and thought. Trust me, even when you are doing right or doing nothing wrong, there are some people still blame you, but for sure not the wiser ones I guess.  

Monday, August 8, 2011

It's Only the Beginning, It is So Not Over...Yet!

Yesterday, SNP Index pass through 48. Buckle up guys, otherwise u may get kicked out. If you are new visitor, See my article before

Sunday, August 7, 2011

History Repeats Itself?

Just like I wrote on Wednesday  last week, it wasn't good to enter the market. It is still not until now! Forget about the good Non Farm Payroll data (117k, Forecast 89k, previous:46k rev). It was just a number! people did not believe it this time. US always can revise that later.  Also the bearish sentiment was too strong before this Friday.
I was monitoring the SNP Volatility Index, and last Friday it reached 39 before closed at 32. In my opinion if the volatility index breaks through 40 then we have a possibility to face the wild movement from the market just like 2008.
VIX Chart

Now compare it with DJI chart;
DJI Weekly Chart

Take a look at the Gold and Oil Commodity Chart in 2008
Gold Daily Chart

Oil Daily Chart
I guess when the crisis happened at 2008, most people prefer cash to goods, back to basic USD became favorable.Strange thing were: Gold and Oil plunged!  And when it was over, these commodities started to crawl up back. The question is,  If the market becomes very volatile like 2008, Will this pattern happens again?

Seperti yang saya tulis pada hari Rabu minggu lalu bahwa tidak baik untuk masuk pasar saat itu. Sampai saat ini pun masih tidak baik! Lupakan data bagus dari Non Farm Payroll, pasar sudah tidak percaya itu.Lagipula pada hari Rabu dan terutama Kamis sentimen turun sudah terlalu kuat. Ditambah lagi dengan keputusan Standar N Poor yang mendowngrade rating US menambah sentimen negatif.
Akhir-akhir ini saya mengamati Indeks Volatilitas dari SNP. Apabila Indeks tersebut menembus angka 40 bukan tidak mungkin pergerakan seperti tahun 2008 terulang kembali. Jumat kemarin, pergerakan indeks ditutup di 32 setelah sebelumnya sempat menyentuh 39.
Kalau melihat grafik emas dan minyak di tahun 2008, pada saat terjadi krisis, emas memang sempat membentuk new high baru, tetapi setelah itu terjadi koreksi yang signifikan dari $929/troy ounce ke $680/troy ounce. Setelah itu perlahan-lahan emas mulai merangkak naik. Yang terjadi dengan minyak lebih parah lagi, dari $115/barrel di bulan September 2008 turun sampai ke $35/barrel di bulan Desember 2008. Intinya adalah pada tahun 2008 saat terjadi krisis, 2 komoditi ini turun pada awalnya. Baru setelah itu lambat laun menguat kembali. Yang perlu dipertimbangkan adalah apakah pola ini akan berulang, apabila terjadi krisis?






Wednesday, August 3, 2011

HIGH ALERT!


As far as I'm concerned, right now the market is unfriendly. Technical Analysis wont help at this circumstances. I suppose we better stay away from the market, at least until this Friday report (Non Farm Payrolls US) or could be more. Always keep your cash first!

Saat ini sebaiknya kita tidak masuk pasar dahulu, Kekhawatiran ekonomi yang berkembang dari krisis Yunani yang sudah lama dibicarakan, disusul Portugal, Spanyol, lalu overheating perekonomian di China, yang terakhir dampak dinaikkannya plafon hutang US yang menunjukkan belum pulihnya perekonomian. Technical juga kurang berlaku di situasi sekarang ini. Ada baiknya kita melihat perkembangan dulu atau setidaknya menunggu hasil laporan Non Farm Payroll Jumat ini. Mudah-mudahan dirilis bagus. Sementara ini saya masih mengamati volatilitas SNP. Mudah-mudahan tidak setinggi seperti 3 tahun yang lalu. Satu hal yang pasti :Jaga Modal anda!

Monday, August 1, 2011

Don't Sink Your Ship with Only a Few Mistakes

When I was a kid, I used to play a rock paper scissors game with my friend. Rock beat scissors, scissors beat paper, and paper beat rock. Suppose now we play with $1 bet. If I have $100 in my pocket and you have $1000, in a couple hours the condition may still be the same, no one lose or win big. Now let's raise the bet to $20. Is it possible I lost my $100? Yes it is, because five strings of losses likely could happened than fifty strings of losses.

The same thing happens in trading. When you start to trade, you must plan how much loss you can bear and always put a risk small compare to your equity. We call it a stop loss. Some books recommend 2-3% loss  in each trade. I usually use 4-5%. I guess that depends on the market you trade and equity you have. 
The problem with using a stop loss is oftenly after the stop hit, the market goes back to our favor, Isn't it? :).  In this case, then we have to improve our methods. A stop loss is not a perfect tool, but it is the best defense we can have. 
Imagine a big ship with only one or two leakage chambers. No matter how big the ship, one little accident can drawn it. Limiting risk prevents a great damage to our account. Five or more strings of bad luck cannot make us kicked out from the market if we have a tight stop.
One more thing we should remember if we cannot afford to lose then we never can trade. There is always a risk in every occurrence. From the beginning we enter a position we already lost with the slippage and commissions. To cover that, the comparison between  the reward and the risk must be greater.For an example : If I plan $20 profit and $5 loss in each trade, with 4 times wrong and only 2 times right, I will still make money. This Idea is good but is very hard to implement. Well I won't object that, but if you see my walking text above, I would rather be the one than the nine. :)

Di masa kecil, saya dan teman-teman seringkali bermain permainan gunting kertas batu. Gunting mengalahkan kertas, kertas mengalahkan batu dan batu mengalahkan gunting. Misalkan sekarang anda dan saya bermain hanya saja kali ini memakai taruhan $1 setiap putaran. Dengan $100 di kantong saya dan $ 1000 di kantong anda, beberapa jam kemudian saya yakin hasilnya uang kita akan kurang lebih sama, tidak ada yang menang atau kalah banyak. Lain halnya kalau seandainya taruhannya dinaikkan menjadi $20 setiap putaran. Mungkinkan $100 saya dapat habis? Mungkin saja, karena kejadian 5x kalah berturut-turut lebih memungkinkan daripada 50x kalah berturut-turut.
Hal yang sama juga berlaku pada saat kita trading. Ketika anda mulai bertransaksi, anda sudah harus memiliki rencana seberapa besar resiko yang anda dapat tahan. Anda harus selalu membuat resiko yang kecil dibanding dengan jumlah modal anda. Kita biasanya sebut dengan Stop Loss. Beberapa buku merekomendasikan 2-3% resiko dari modal pada tiap kali transaksi. Saya biasanya menggunakan 4-5 % karena saya pikir hal ini tergantung dari pasar apa yang kita masuki dan seberapa besar modal yang kita miliki.
Masalah yang sering timbul dengan menggunakan stop loss adalah seringkali setelah menyentuh stop loss, harga kembali menuju level yang sebelumnya sudah kita prediksikan. Dalam hal ini kita perlu meneliti kembali metode/ analisa kita dan jika diperlukan membuat adjustment pada pola trading kita. Stop loss bukanlah alat yang sempurna, tetapi merupakan alat yang terbaik yang kita miliki. Bayangkan sebuah kapal besar yang hanya memiliki 1 atau 2 bilik kebocoran. Satu kebocoran kecil dapat membuat bilik itu dipenuhi air dan menyebabkan kapal tenggelam. Sama juga dengan account kita, satu kesalahan posisi dan kemudian membiarkan tanpa adanya stop loss, dapat menghancurkan account kita. Membatasi kerugian dapat menghindarkan kita dari kerusakan parah terhadap account kita. Lima atau lebih kesalahan berturut-turut tidak akan membuat kita terlempar dari pasar bila kita menggunakan stop loss.
Satu hal lagi dalam bertransaksi jangan sampai anda takut untuk rugi atau anda tidak akan pernah dapat bertransaksi. Pada setiap peristiwa selalu ada resiko. Menjual buah pun juga beresiko, akan selalu ada buah busuk yang harus anda buang tiap harinya yang berarti itu kerugian buat anda, tetapi selama jumlah buah yang anda jual jauh lebih besar daripada jumlah buah yang anda buang secara kumulatif, anda masih mendapatkan untung. Misalkan dalam trading kita menerapkan $20 profit dan $5 stop loss, dengan 4x prediksi keliru dan hanya 2x  prediksi benar, kita masih menghasilkan uang.
Ide ini sepertinya sangat bagus, tetapi dalam prakteknya tidak sesederhana yang dibayangkan. Hmmm... saya tidak akan menyangkalnya, tetapi jika anda lihat teks berjalan saya yang ada di atas, lebih baik saya berusaha menjadi yang satu daripada masuk di antara yang sembilan. :)