Lessons from get-rich courses

This article was published in The Sunday Times on October 4, 2009. Of course, due to the copyright reason, I am not able to re-produce this article. If you are interested, you can always grab an electronic copy if you are a subscriber of the Straits Times. [By the way, I am aware that many bloggers will simply copy and paste the article in their blogs. This is in breach of copyright under Singapore Copyrights Act. That is, there are legal consequences to copy and paste the article in their blogs without seeking either permission or waiver from SPH.]

The learned author shared with her experience in signing up a 4-day course on options trading and having paid > S$5,000 for this course. She concluded that she did not benefit from this course by objectively giving her reasons. This is good. She did not blame the trainer or the organization providing the course.

"Maybe it's because I was not hungry enough or I was just too busy with my work and family. It did not help that I fell ill immediately after the course"

"To be fair, XXX still invites me for refresher talks and is willing to sit me through a one-to-one mentor programme, but I cannot find the time."

So, the learnt author has correctly pointed out some critical success factors as to how one can benefit from these courses:

1. Be realistic
2. Setting aside time to learn and practise
3. Track record of the training firm and trainers.
4. Don't invest more than what we can afford to lose

No doubt the trainer undertakes to teach whatever he/she can teach. The students have to play their part and not to expect miracles. In other words, if the students' mindset is to go for the course once, and expect that they can trade and make tons of money in the market, perhaps they should not have had signed up for the course. Trading is a craft, and it will take time for us to practise the craft. And because each of us has different time commitment and other obligations, our learning curve will be different. Let's face it. If we spend only 30 minutes a day to practise, are we realistic to make money within a month or two after completing the course. Go figure.

Instead, Singaporean mindset is like this - they first of all will blame the trainers. They will conclude that the trainers are suckers and the public are the poor sheep. Is it fair to blame all the trainers that they have only one motive, i.e. to make money out of students because they cannot trade well. It also appears that the public have this perception that people who teach cannot trade, or people cannot teach and trade at the same time. I am not sure how this comes about because I have quite a number of trading buddies who can teach and share their ideas, while they are trading pretty well. So, if we are listening to hearsay, without going to look for counter examples of such limiting belief, who are we to judge at the end? Go figure.

Finally, teaching is not an easy task I must say. As a trainer, whenever I am asked to teach a course, I have students interest first. I will find out what they want to hear from me, and gauge their levels to make sure that they know how to look for the answers.

I hate to spoonfeed people. If a student comes to me and is basically looking for fish, my heart will go away. If a student has done his homework beforehand, I am happy to share my experience and direct the student to what he is looking for. In other words, if you give 200% and are committed to do the best, trainer like myself will likewise give our 200%.

To end on this note, I would like to share with my readers a recent response to a student who is dyeing to recoup his tuition fee in four months' time, and he is literally looking for quick tips to recoup his money, and showing no sign to respect trading as a business. Here you go:

1. My philosophy has always been that trading is a business, and it will take time for beginners to master the craft. There is no magic overnight nor miracle. It also depends on how much time we are committed to invest, regardless of our other family or personal obligations. It's like driving. The more time we spend on learning how to drive a car, the faster we get our license to drive on the road. It does not mean that we become a professional driver on the road. Beginners have to put on a P-plate and will be frowned upon by other road users (me included). Yet, having been driving for two decades on the road, I still cannot beat Lewis Hamilton because he is a professional F1 racer and he is of another level of skillset. Understand that trading is the same. It depends on how much we are committed. I told my students during preview very frankly if they are after recouping the course fee, they should not have signed up for my course. They should not even go for another course and simply forget about trading. Carrying this mindset is dangerous because it will sabotage that person. Let's be frank and honest here. There won't be a magic and whether you perceived it to be a misunderstanding or misrepresentation, in one way or the other, by Optionetics or any other people around you, I will assure you that this is my guarantee - if you are willing to give you 200% to invest time to perfect the craft, the instructor team (me included) will give you our 200% to assist you.

Virtual trading is a good start and from a trading psychology viewpoint, you have to do what you are comfortable in trading. So, what is the deal if you are trading spread using Jan 2010 options? Are you going to force a trade using near month option and yet if you are not sure what it means in terms of risk, you are going to lose even more. Assuming that you are getting refunds from Optionetics, if you continue to trade that way, you will be bound to lose a lot of money in the market, and no one is going to refund you. Have you considered this potential danger? Are you going to get refunds from Optionetics and call it a day? If so, why would you sign up for the course in the first place? So, I see a lot of internal conflicts and I can feel your frustration. My experience of you is that it may be the appropriate time for you to reflect on yourself.

2. Optionetics does not encourage one to daytrade. It's been clearly explained in 2-day seminar. Of course, we cannot stop anyone from doing daytrade if he/she chooses to, and he/she has to take 100% responsibility for his/her own conduct. Yet, in reality, a lot of people will choose to be blamer (one of the 5 recognized categories by Virginia Satir - go and google this lady if you are interested). I would encourage you to do whatever it takes to shift your mindset by taking your time to perfect the craft. It's not about reading another book, or going for another course, or learning from another person. Trading is a very personal thing and is a lonely business. We do a lot of self-talk everyday. There is this saying that we talk to ourselves 60,000 times a day. In trading, I will double or even triple this number. Do you realize that you are actually talking to yourself now? So, my experience of you is that you've got to know who you are, not as a person, but as a trader.

3. So, in the moment of time but not future, ask yourself these questions: have you done up a trading business plan? Have you found out your preferred markets, strategies? Have you figured out your risk appetite, and the rules applicable to money management and risk management? How do you manage your discipline if your internal voice is telling you to be "naughty"? What is your proposed research & development (i.e. continuous educational development) expenditure? I seek your understanding that Jack spent one whole year in the US just to learn all these from his mentors before he sees the exponential growth in his trading performance. Without a business plan, we will always be making unnecessary time wasting roundtrips.

4. While it may sound disappointing to you whether it is true or not, I seek your understanding that if we respect who we are as a trader, we will grow as a trader. The moment we have self-doubt, we will not behave as a trader but just another person on the street who is looking for another advertisement about someone selling a trading course and alleging that his/her students make 7000% in a day. There are too many blacksheep in Singapore who are selling us dreams. Trading success is not about knowing one or two strategies. All my successful trading buddies subscribe to one common theme - managing our risk and getting to understand trading psychology. On trading psychology, it is a self-experimental exercise, which means that you have to practise on your own. No one is able to teach you this. In terms of good reference books, I will recommend you to read "Trading for a Living" by Dr. Alexander Elder and "Trading in the Zone" by Mark Douglas. These two books are on the top of my list in terms of trading psychology.

5. Finally, understand that trading is not a QTBR scheme (i.e. quick to be rich scheme). If a neuro-surgeon has to master the craft for a decade, what makes us think that trading is not the same? In other words, are we able to succeed so easily by reading a few books or going for one course, and then we can trade like a pro? Unfortunately, many other course providers are selling us this dream., and suck our money. If you have a chance to talk to me in the next 2-day class on 19-20 Nov, I am happy to elaborate this further.

6. Now, I want you to reflect what you have done since the last 2-day class. Have you been following the markets day in day out? Have you finished reading the Home Study Course for 10 times? Have you watched all DVDs / listened to the CDs? Have you been reading articles in Optionetics.com everyday? Have you exhausted available resources like going to my discussion board to ask me question? Ask yourself whether you have given your 200% here. I am not saying that you haven't. I seek your understanding that if you can give yourself a true and honest assessment on what you have done, it will answer a lot of questions you might have.

Example of FTM's Breakout and Momentum Methods on Non-Farm Payroll Night (2 October 2009)

It's always interesting on the day when US Non-Farm Payroll is announced (at 8:30am EST). The bar set for NFP to me was pretty high and in view of the ADP announcement made two nights ago, it is quite ambitious for the actual NFP number to beat the forecast (or even touch the forecast number). So, a negative 263K number with a 9.8% unemployment rate should be bad enough to cause the market to tank. Indeed, futures were sold off here immediately after NFP number was announced. When the cash market was open at 9:30am EST, it did pretty much the same thing.

Here is where a professional trader will do as opposed to an amateur. When everyone feels that it is bad enough, it's time to go for contrarian trading idea. When the number is bad, normally one will expect that people go long USD and JPY because it's logically sound. People are risk averse and hence they will go for risk aversion currencies. As professional trader, on the other hand, we are trading based on what we see and not what we think.

From my major 12 using Jimmy's Band (taught in FXTE's Trading Tactics Coaching Class), I saw that there was a reverse situation when USD and JPY were sold off instead of the other way. Hence, it's time to get ready to do some long trade against USD and JPY. So, I used Jimmy's Band to identify the pairs I am choosing. USD/JPY was going up, and hence it is logical to choose Yen pairs to go long to achieve a better bang for the buck!

Breakout Method

Here is the FTM Breakout Method on EUR/JPY 30 min chart.


The set-up bar was formed at 10:00am EST, and we would enter a long EUR/JPY based on FTM Breakout method at 10:30am EST. By following this simple trading method, we would have easily made 90 pips within 30 mins which is US$900 on a standard lot.








Momentum Method

Now, let us look at another trade using FTM's momentum method. Again, the idea originated from Jimmy's Band as discussed above. The following is a 15 min chart on GBP/JPY and a set up bar was formed at 12:45pm EST and we would go long on GBP/JPY at 1:00 pm EST. The tricky thing is that it was a Friday night and the European Market was closed at that time. Hence, there was some internal conflict to choose a longer than hourly time frame to trade. Therefore, scalping using a 15 min chart made perfect sense in this situation.

If one were to study the FTM Momentum method closely, he could argue that this set-up bar was not really a set-up bar. In my opinion, it is true if we strictly follow the method. However, this is where the flexibility comes into play as a professional trader. Isn't a set up for Forex Nitty Gritty's method? Yes, indeed. Can we combine FNG and FTM's Momentum method here? Yes, we can. So, here is my answer.

So, a nice 25-30 pips within the next 15 mins were made. If one followed closely, there was a proper set-up bard at 2:00pm EST using strictly the FTM momentum method. Well, by that time, I went to bed and sweet dream. Hence, leave it to folks who could stay up. Trading should be less stress exercise and thus, if we can't trade at that time, then do something else.

An Example of FTM's Breakout Method

Early this morning, there were many opportunities available in my major 12. However, the better one will be using FTM's Breakout Method. The following is a snapshot of EUR/USD hourly chart which demonstrated a probable set-up using FTM's breakout method. A long trade can be initiated at 14609 with a stop loss of 1.4577 (i.e. 31 pips risk)



The trade is still ongoing and currently, using the breakout method, it is a risk-free trade. Let's see how it goes.

Another Example on FTM's Breakout Method

This is a bearish set-up on EUR/USD hourly chart based on Forex Time Machine's Breakout Method.

Based on the entry set-up rule, a short position was placed at 9:00am SG time and within an hour, TP1 and TP2 were hit. I applied a different methodology here because I like the 3x multiple lots systems which I learnt from Ross Beck and Jimmy Young in the FXTE program. At this point of time, there is a gravy train on the last lot that is being operating. The trade yielded 62 pips after hitting TP1 and TP2, and this means that it is $620 per standard lot.

Fundamentally, I am bullish in US$ and bearish in EUR. So, the fundamental understanding I have helped me to identify this trading opportunity.

Does it look familiar?

Talking to my trading buddy, Conrad can be quite fun sometimes because this fellow has very strong insight in reading the market. Each time when I talk to him, he will put some money in my pocket. He has directed me to read some mind-blowing books which I told him I would do it in the following days. In the meantime, let me put up a chart showing what I have learnt from the Ultimate Gann Course so far from Safety In the Market

Here is the daily chart of DJ-SpotV. It was about 227 days from 14 July 2006 to 20 Feb 2007 (i.e. Points A and B). Using simple ABC set-up analysis and the Balance Time Tool in SITM Module in Profitsource, the projection of another top would be around 11 Oct 2007, and that was the day when INDU reached the all time high. It's amazing and blowing my mind when I was doing these projections myself.

From the Ultimate Gann Course, I also learnt to draw Fibo using calendar days and using this technique, it helps to identify whether there are possible signs that there would be a change in trend. Again, it's mind blowing stuff.


Now, here is my projection and firstly, I am not providing any advice here. I am doing what the tools are telling me to do, and plot my lines accordingly based on the rules and guidelines. So, if the market chooses to prove me wrong, I am wrong and it is ok to be wrong.

At this moment, INDU continues to show an uptrend, and it will remain intact if the Fibo calendar days support this view (and so far, this guideline has yet to be violated). Using ABC set-up, there is a reasonable time around 9-10 Oct 2009 where INDU will finish up to 10400-10500. Keep in mind that this day is the 2nd anniversary day (approximately of course) of INDU's all time high. So, will history repeat itself?


It's just amazing that the more I learn Gann stuff, the more I discover on the history. Gann believes that history repeats and the tools are helping me to discover the history.

Let's see what happens when the 2 yr anniversary is approaching.

Forex Time Machine (Review)

http://www.theforextimemachine.com/home_200909.php

Someone in my discussion board asked whether it is worth paying a few thousand dollars for getting the proper investment education. I was happily explaining to this person that when it comes to investing in myself, I need not think hard because I know before and now, and even after that investing in myself will generate a huge return in the long run. So, what happened was that I grabbed a copy of Forex Time Machine and studied the methods in about two days.

As a professional trader, grabbing the methodology of the three methods in FTM is quite easy. Like Bill nicely put in his Q&A upon the launch of FTM, experienced traders will still benefit from the course because it is perfectly fine to add on additional tools and trading methods to their toolboxes, and this means that these experienced traders are armed with more weapons and are flexible to trade the ever-changing market.

FTM discusses three trading methods - Breakout, Momentum and Spring. Spring method is also part of the previous course "Forex Income Engine 2.0". The interesting part to me is therefore the breakout and momentum.
Momentum method


Imagine that this is the set-up of the momentum method as discussed in FTM. There are just a few technical indicators in the chart. For me, I prefer to trade currency using hourly chart although FTM methodology is fractal in nature which means that you can use it for longer and shorter time frames.

Although it is not part of the requirement to understand the fundamental, by combining what I learnt from Jimmy Young of FXTE pertaining to how to read the market from a top-down approach, picking up a bearish trading opportunity in GBP/USD is no brainer, to be frank with you.

So, based on the momentum method, we will enter a short GBP/USD position at around 16192, and within two hours, we should be able to close this position around 1.6000. That's like 192 pips more or less, and just one trade using standard lot, the course fee has been recouped.

Breakout Method

How about the breakout method? Here is just another example of the breakout method set-up.

As you can see from the chart on the left, there are just a few technical indicators to be used. However, while it is not discussed in the course, I believe it is important to understand the fundamental. So, Jimmy's insight in reading the market helps me to determine that when the market is weak, USD is up because of a strong correlation over the last two weeks, and an inverse correlation with the commodities such as gold and oil, shorting AUD/USD is again a no-brainer job.

See we don't need to follow 100% what the course discusses. The key point as a trader is to understand our own trading preference and psychology, and copy & paste what seems to work for us, and that's is. This is why it is so hard for a newbie to make money immediately because he has yet to develop the craft. It does not mean the course does not work. It works, and yet it works because we understand how to trade the methods and apply what suits us.

For this trade, we should be able to make around 30 pips within an hour or US$300 using one standard lot.

Unfortunately, I understand that the launch has come to an end. For those who procrastinated or were skeptical about paying a few thousand dollars, sorry to hear that. It's normal for human beings to be skeptical. You may need to wait for the next launch then.

I mentioned to this person that there is actually nothing to lose because the course provides MBG (Money Back Guarantee). So, if we are not happy with the course, we can return it to Bill and incur at most administrative fees on shipment. At least we give ourselves an experience to find out if the product works for us. Again, human psychology tells us that most of us will not even dare to make this move - hence explaining why for every thing the mankind do, only 5% of the people will eventually be the Elite Club.

Will I be able to make tons of $ after attending a $6k course?

Is it the follow-thru impact after my InvestFair 09 talk two weeks ago? I got frequent questions from a number of people who are asking for my opinion on options courses that are being run in Singapore.

If you are in a rush to pay $6k to attend a 2-day or 3-day options trading course, and your objective is to make quick bucks in the shortest time frame possible, I would urge you to donate the same sum to charitable organizations in Singapore because you can get 2.5 times of deduction against your income in 2009, and you will help other folks.

The market is cruel. However, what makes us think that trading is as easy as writing "ABC"? What makes us think that by putting $6k with someone, we can make quick bucks in the short period of time. Is this guy selling us a dream?

Options trading is a tough game, and yet it is possible to make money when one is committed to learn in the manner in which professional options traders are trading. For every hour of actual trading experience one can clock, he/she would have to put in at least 10 times of the effort.

In some of these advertisements in the Straits' Times, it was alleged that one can spend only 15 to 20 minutes a day to do trading. While I don't deny the correctness of this statement, it must be read in the right context. It is true if we are referring to people who have been in trading business day in day out. In other words, we are talking about seasoned traders. It cannot be applied in my opinion to newbies.

If you think by putting $6k with a trader who is teaching you how to trade options successfully and allow you to make lots of money from options trading in a short period of time, please do your due diligence by asking this person a couple of things. You are doing yourself a favour by asking these questions so that you know this "teacher" is not selling you a dream which is not real in the real world (perhaps it is true in lala-land).

I have nothing against anyone who is committed to learn and master options trading. However, I continue to stress that one should learn the stuff from someone who is ex-floor trader or at least has been trained by ex-floor trader. if whoever taught you cannot explain the things I wrote in my blog, and is however telling you that you must believe in those myths, please re-consider.

Whoever told you that you need not study delta, gamma, theta and vega, and you don't need to pay attention to the volatility, and whoever told you not to buy out-of-the money option without explaining in maths why this is the case, you know what to do.

Whoever told you that you must be options sellers because 80% of the options expire worthless, and whoever is teaching you to do high risk high probability trade without explaining profitability versus probability, you know what to do.

Finally, if whoever is telling you to do short-term trading (like intraday trading), and if he fails to explain to you the PDT rule, you know what to do.

Trading is not as easy as what the public might think, I reiterate. Trading consists of hard work, and is an art. If we are willing to spend time and treat this as a business (I have discussed this in my Optionetics February 09 monthly online forum), then it is possible to survive in long run. If we are not prepared to spend that kind of hours, I would recommend that you forget about trading, and you pass me the money instead and I will spend it for you.

Good luck for those who have read the ST and are about to pay $6k for an options course thinking that they can attack the market immediately. We love you!

Myths on Options Trading (Part II)

1. One loses money on a long straddles for one and only one reason - i.e. because the underlying does not move.

Does the trader ever bother to understand how vega will hurt or help a long straddles?
Does the trader know how gamma works to allow him/her to profit from a long straddles?

2. Options are very risky .... they are like gambling

Do we know that options can be used as a protective tool, thereby allowing us to protect our valuable assets?

3. Options are not easy to trade

Well, are we blaming others or ourselves if we are not committed to trade options properly. Are we complaining about educational providers who are selling expensive courses? Are we constantly looking for the Holy Grail, i.e. the free and most effective resources? Does information come free every time?

4. Some traders believe that the Put/Call Ratio is a measure of market sentiment. It is also believed to be a contrary indicator.

Well, do we ignore synthetics completely? Selling a put is equal to long stock and a short call. Buying a call is synthetically the same as buying the stock and a put. So, if you already own the stock, and you buy a put to protect it, the PC Ratio will go up, ceteris paribus. Does it mean that you are bearish?

More to come!!

TRUE OR FALSE

If you can answer all questions correctly, you know your stuff well

1. Being assigned on a short option causes you to lose money.

2. Being assigned increases your risk.

3. The use of market orders is discouraged because market makers will move the market when they see your order.

4. Market makers match buyers with sellers.

5. Implied volatility is based directly off of the historical volatility.

6. Open interest is important.

7. Daily option volume is important.

8. Credit spreads and debit spreads are the same thing.

9. Market makers purposely over/undervalue options from time to time.

10. Risk free trades can be created and opened in one trade.

Source: http://www.optionetics.com/forums/topic.asp?fid=136&id=51766&page=6

More Myths on Options Trading

Options trading business can be a viable business, and yet it's been tainted by many blacksheep in the Singapore market whereby public associated with options trading as risky, and options traders (especially those who teach as well as trade) are selling dreams to the poor public.

I walked past a bookshop last Sunday and happened to see a book written by a learned author who is selling his options seminar in Singapore, Malaysia and Indonesia, and I admired this fellow who claimed that he has been in trading options for more than 10 years, and he is advocating "non-directional trading". So, I read with interest on this book (and it cost me some S$20) and here is what I found:

a. options selling is better than options buying because 80% of the options expire worthless.

The learnt author said "This is a proven statistical fact. Statistics shows that 80% of options expire worthless. If you buy an option, your chances of winning are only 20%. If you are a seller of an option, your odds of winning are 80%."

First of all, I am not sure where the source of this so-called statistics. Even though this is only my sixth year in options trading business, I already knew this myth some three years ago whereby the so-called "80%" thingy is really a myth.

In an article written by Albert Brinkman published in Summer 2007, he quoted the OCC's 2006 statistics which showed that 31% of the options were unexercised at expiration, 17% were exercised and 52% were closed out prior to expiration. So, where does this 80% thingy come about?

Ok, if you are still in doubt, think about this, just pull out any option chain of your favourite stocks. Regardless of what the stock does, for every put that goes in-the-money, a call will go out-of-the money. So, if someone like this learnt author tells you that 80% of the option expire worthles, you must do one thing - question his math and/ or logic. Ask for official proof rather than hearing him say according to someone ...

b. Always be options seller and never be options buyers

The learnt author also advocates that options sellers will always win and thus we should never become options buyer. True enough, if we sell every option and the stock does not move, the only way we will fail to make money is if all options traded solely for real value. However, stocks do move, and options have to account for that movement through addition of extrinsic value. This value is necessary since if it did not exist, it will be true that options buyers can devise strategies to always make, or at least never lose money.

Options sellers may make money more often than options buyer. However, everything happens for a reason. When sellers lose, they lose far more than what they tend to make on each options sale. On the contrary, buyers may lose more often but each win may return more than several losses. This therefore leads to the point where people tend to confuse something that works most of the time without something that is safe. Obviously the two are not equal. Russian roulette works 5 out of 6 times. With such a high probability, do you want to play now? It is quite safe to cross the road when you see green man. Does it mean it is guaranteed safe? What if you encounter a reckless driver who fails to see the red light or ignores the red light, just shoot it?

So, these two points to me are myths - and if they are not clarified in the books, it is as good as another monkey selling dreams to the public.

Then, what happened today is that I was clearing my old stuff since I am going to move house next month. And I found something that excited me a few years back about options trading, and now to the point where I am, I could not help but laugh harder.

The following represent extracts of a guru's teaching materials, and let's see what is wrong with these statements:

'So, what volatility should options have that allow us to capture the desired movement of the option. We would like to see volatility no greater than 65%'

Guru is teaching us that we should look for THE SWEET SPOT on volatility. So, now many gurus are telling us that there are THE SWEET SPOT on delta, and this guru added THE SWEET SPOT on volatility. If we compare the IV on the options on Pharma stocks and that on the large cap stocks, are we suggesting that we should forget Pharma stocks since the IV can be > 65%. Should IV be a relative number rather than an absolute number? Folks who have our Optionetics Platinum should be able to debunk this myth easily.

'Refrain from buying options that are OTM'"

I did not take this statement out of context but this is exactly what the guru said in the manual. Keep in mind that there is always a trade-off between time and profitability. OTM options exist for its own reason. Just like there is something for options seller to grab and options buyer to grab. Again, the guru is advocating the purchase of only ITM/ ATM options? Folks who have done our two day intermediate class know that OTM options happen for a reason.

'look to purchase ITM or ATM options that have a minimum of 6 to 8 months to expiration. Once we have been filled, we will then look to sell the front month ATM or OTM options.'

The guru advocates this strategy on DIA and QQQQ as strategy for longer-term trades. However, traders should be mindful with how sensitive these longer-term options can be to volatility. So, what if there is a drop of IV on the longer-term option, the traders can be hurt. Folks who have done time spread strategy in a professional way will only that it is far more effective, and mathematically proven that time spread should be constructed using back-to-back basic by selling the front month option and at the same time, buying the immediate next month option, since time spread if done on ATM basis is after theta decay.

So, knowing the open interest of an option being considered for trade, is critical!

It's been again and again debunked by our instructor team that open interest has nothing to do with liquidity. Obviously, we want to get into an option easily in and out but this is governed by liquidity of the option, and it has nothing to do with OI, which is a totally different matter. Liquidity of the option is governed by the bid-ask spread. Are we suggesting that we should not be the first buyer of JNPR Oct option when it is launched next week because OI will be zero? So, go figure.

So, guys, the moral of the story is that when you are listening to a person who claim to trade options successfully, he/she may be doing it in a consistent way and fortunately within a certain period of time when the market condition remains unchanged. Having said that, if we wanna learn options properly, ask the person where he learns options and whether the person teaching him/her knows the options mechanics in a professional way.

So, when choosing an options trading course, if the person does not cover the greeks, and when asked why 2+2 must be 4, he fails to explain, you know how "GOOD" that person is.

I will be speaking on 23 Aug 2009 at InvestFair 2009 for Optionetics. The chosen topic is about building our edges in finding limited risk options trades. In order to allow us to do this, we have to have the proper knowledge in options trading. What I propose to do is to take the advantage of this session to demystify certain myths that exist in the public domain.

Myth 1 - Are puts and calls the same? Why would someone suggest to track Put/Call Ratio?

Myth 2 - We should be credit spread specialists because we can get paid to initiate such trades

Myth 3 - There is always THE BEST sweet spot (i.e. the BEST delta) for every option trade. Delta 25 is the best. No, Delta 75 is the sweet spot. Who is right and who is wrong?

Myth 4 - When you sell an option whose premium is above $0.25, you won't be assigned. Are you sure?

Myth 5 - Debit spread is easier to understand than credit spread because credit spread has margin to deal with. So, are debit spread and credit spread not the same?

There are many more myths I can find. Let's do my part to demystify at least the above, as there are so many monkeys teaching options in Singapore who know nuts about options. They only know how to sell dreams to the public.

So, interested to listen to me? See you on 23 Aug 2009 at Suntec City Convention Center.

Optionetics Expert Seminar - Live in Singapore (12-14 August 2009)

Once again, the annual Expert Seminar featuring Tom Gentile will be live in Singapore from 12-14 August 2009 at Furama City Center, Singapore. Nick Gazzolo, one of our senior instructors will be the co-instructor with Tom.

For the first time in history, Expert Seminar 2009 offers to both Optionetics and non-Optionetics students. In this seminar, participants will be exposed to Tom Gentile's world of system trading. Also, detailed discussion on certain advanced strategies such as Collars, Broken Wing Butterflys and Tarzan Loves Jane will be included.

Seats are filling fast, and there are limited seats offered to non-Optionetics students at a discounted price. For details, please visit the following link:

http://fxtrading.na3.acrobat.com/p51612760/

and do contact Optionetics Singapore office at http://www.optionetics.com.sg for details.

Recent Update

Hi folks, I have been absent for a while as there are a number of projects I have recently embarked on and thus have yet to update anything in my blog.

Quick Update:

Monthly Forum

I am helping Optionetics Singapore to run the monthly online forum which should be every third Thursday of the month. Watch out for an e-mail blast from Optionetics Singapore two weeks before the forum. If you are not on the list, please send an e-mail to classes@optionetics.com.sg or classes@optionetics.com.hk. Of course, I will post the information regularly on my Facebook. Keep a look out of that.

What has been discussed since Feb are:

1. Creating a business plan and trading psychology
2. Identifying Trading Opportunities using seasonal patterns
3. Identifying Trading Opportunities using sector rotation concepts
4. Identifying Trading Opportunities using Profitsource as a tool

The last forum was in particular interesting because it unlocks many folks' limiting belief that they are not able to trade Wave 3 because many instructors have told them this is not possible. Well, I have already demonstrated in my forum how to look for Wave 3's price target and created a few a-ha to the folks. Well, I promise to the folks that in the future runs, I am going to do more on Fibo time analysis and right now, I am running practical test intensively to train myself to identify Gartley Pattern. Why is this important? We are in the trending market and therefore, these stuffs become important in my trading toolbox.

Advanced Coaching Online Classes

For advanced Optionetics students who recently did ICT, ITT and Master ICT Classes in Singapore and Hong Kong, you will have the opportunities to meet with me online three times starting from next Thurs to refresh what we have learnt in these classes. They are only open to a privileged group of students who have committed to advance their education. It's also a gesture from my viewpoint to express my gratitude to these students who allow me to share my experience with them. The class will be 1.5 hours and will be in the usual "trading out loud" format. So, there won't be any slides or presentations. We go straight to analyse and discuss real trades for education purposes. Honestly I am looking forward to it.

Forex Education

While I told myself my R&D budget for 2009 will be frozen, I decided to invest in two forex courses to continue to enhance my knowledge.

1) OU Forex

I have signed up for OU Forex with a view to getting another perspective of forex trading. I must say that there are lots of materials to read everyday. In fact, it's a standard for me to spend at least an hour every morning to go through the new stuff and market analysis. Over the weekend, or on my off days, I will have to catch up with the daily webinar by Forex Joe and Sunil. Oh well, I have learnt a lot because Sunil has discussed how to use FIbonacci as a trading rule and of course, he shared with us his specialty - Harmonic Pattern. This impresses me a lot. The exclusive forum also contains very rich information from traders from different part of the world.

2) Forex Nitty Gritty

Again, I signed up for this because the fee is pretty cheap, and it happens to provide me with a very simple trading method which compliments with FXTE's momentum trading system. I am not able to share with the simple method is from FNG. However, I will say this it is a fairly simple method, and if one is correct in the fundamental outlook - e.g. Bearish on USD or JPY, he can start using the simple method to profit from the market. Incidentally, I started with FNG's simple method this Monday (well, because I am not a FX newbie), and the trades I put just on Monday has already covered me 10 months' of FNG"s subscription. It's awesome.

What else am I doing?

Nothing much really. There won't be any workshops or coaching to do at AKLTG until July. Also, I am not going to OASIS at Santa Clara this year for personal reasons. So, it is a good time for me to rest my body because July will be a crazy month in view that Wealth Academy 18 and Patterns of Excellence Whoosh 28 (Mod 1) are coming.

Till then, take care.

Official Launch of FXTE Program in Singapore

Today marks the beginning of Quarter 2 of 2009. The fact is we are all excited about the official launch of FXTE Program in Singapore. FXTE is a US educational institution providing forex trading education worldwide via physical seminars and online courses.

On 25 and 26 April 2009, FXTE's Forex Trading Essential Course will be offered for the first time in Singapore at Furama City Center. Two of our FXTE instructors, Jimmy Young and Steve Nurre, will be flying 10,000 miles to the Lion City to teach this course.

What you will learn in these 2-days are

1. How the SIMPLICITY of the FX market removes the clutter often found in the stock and options markets and allows you to focus on the most important thing - MAKING MONEY!

2. That the FOREX can be traded 24 hours a day, 5.5 days per week so you can always find a time to trade - even with your busy schedule. (see - we are very honest - we know what we are talking about. Who said FX is 24 by "7"?)

3. The simple approach to trading Forex - created by a 20 year bank trader for people just like you, that can INCREASE your PROFIT potential by changing how you view the news.

4. How Forex can provide all the upside of trading the equity markets but with LESS RISK.

For further details, click this link - FXTE 2-day class

The course is being offered for only SGD188.00. There is no typo. It's really SGD188.00. You will get 2 full days of forex education. For those who want to gain exposure to the forex market for the first time, or want to learn more how to trade forex, this is a golden opportunity that you should not miss.

How to Read a Chart & Act Effectively
by Jimmy Young, CTA

Introduction

This is a guide that tells you, in simple understandable language, how to choose the right charts, read them correctly, and act effectively in the market from what you see on them. Probably most of you have taken a course or studied the use of charts in the past. This should add to that knowledge.

Recommendation

There are several good charting packages available free. Netdania is what I use.

Using charts effectively

The default number of periods on these charts is 300. This is a good starting point;

Hourly chart that's about 12 days of data.
15 minute chart its 3 days of data.
5-minute chart it's slightly more than 24 hours of data.

You can create multiple "tabs" or "layouts" so that it’s easy to quickly switch between charts or sets of charts.

What to look at first

1. Glance at hourly chart to see the big picture. Note significant support and resistance levels within 2% of today’s opening rate.

2. Study the 15 minute chart in great detail noting the following:

* Prevailing trend
* Current price in relation to the 60 period simple moving average.
* High and low since GMT 00:00
* Tops and bottoms during full 3 day time period.

How to use the information gathered so far

1. Determine the big picture (for intraday trading).

Glancing at the hourly chart will give you the big picture – up or down. If it’s not clear immediately then you’re in a trading range. Lets assume the trend is down.

2. Determine if the 15 minute chart confirms the downtrend indicated by big picture:

Current price on 15-minute chart should be below 60 period moving average and the moving average line should be sloping down. If this is so then you have established the direction of the prevailing trend to be
down.

There are always two trends – a prevailing (major) trend and a minor trend. The minor trend is a reversal of the main trend, which lasts for a short period of time. Minor trends are clearly spotted on 5-minute charts.

3. Determine the current trend (major or minor) from the 5 minute chart:

Current price on 5-minute chart is below 60 period moving average and the moving average line is sloping downward – major trend.

Current price on 5-minute chart is above 60 period moving average and the moving average line is sloping upward – minor trend.

How to trade the information gathered so far

At this point you know the following:

* Direction of the prevailing trend.
* Whether we are currently trading in the direction of the prevailing (major) trend or experiencing a minor trend (reaction to major trend).

Possible trade scenarios:

1) Lets assume prevailing (major) trend is down and we are in a minor up-trend. Strategy would be to sell when the current price on 5-minute chart falls below the 60 period moving average and the 60 period moving average line is sloping downward. Why? Because the prevailing trend is reasserting itself and the next move is likely to be down. Is there more we can do? Yes. Look for further confirmation. For example, if the minor trend had stalled for a while and the lows of the past half hour or hour are very close to the 5 minute moving average then selling just below the lows of the past half hour is a better place to enter the market then just below the moving average line.

2) Lets assume prevailing (major) trend is down and 5-minute chart confirms downtrend. Strategy would be to wait for a minor (up trend) trend to appear and reverse before entering the market. The reason for this is that the move is too “mature” at this point and a correction is likely. Since you trade with tight stops you will be stopped out on a reaction. Exception: If market trades through today’s low and/ or low of past three days (these levels will be apparent on the 15 minute chart) further quick downward price action is likely and a short position would be correct.

3) A better strategy assuming prevailing trend down, 5-minute chart down, and just above days lows is to BUY with a tight stop below the day’s low. Your risk is limited and defined and the technical condition (overdone?) is in your favor. Confirmation would be if today’s low was a bit higher than yesterday’s low and the price action indicated a very short-term trading range (1 minute chart) just above today’s low. The thinking here is that buyers are not waiting for a break of today’s or yesterday’s low to buy cheaper; they are concerned they may not see the level.

4) Generally speaking, the safest place to buy is after a sustained significant decline when the bottoms are getting higher. Preferably these bottoms will be hours apart. By the third or forth higher bottom it is clear a bottom is in place and an up-move is coming. As in the example above your risk is limited and defined – a low lower than the last low.

5) The reverse is true in major up-trends.

Other chart ideas

There are always two trends to consider – a major trend and a minor trend. The minor trend is a reversal of the major trend, which generally lasts for a short period of time. Buying above old tops and selling below old bottoms can be excellent entry levels; assuming the move is not overly mature and a nearby reaction unlikely. When a strong up move is occurring the market should make both higher tops and higher bottoms. The reverse is true for down moves- lower bottoms and lower tops. Reactions (minor reversals) are smaller when a strong move is occurring. As the reactions begin to increase that is a clear warning signal that the move is losing momentum. When the last reaction exceedsthe prior reaction you can assume the trend has changed, at least temporarily. Higher bottoms always indicate strength, and an up move usually starts from the third or fourth higher bottom. Reverse this rule in a rising market; lower tops… You will always make the most money by following the major trend although to say you will never trade against the trend means that you will miss a lot of opportunities to make big profits. The rule is: When you are trading against the trend wait until you have a definite indication of a selling or buying point near the top or bottom, where you can place a close stop loss order (risk small amount of capital). The profit target can be a short-term gain to nearby resistance or more.

Consider the normal or average daily range, average price change from open to high and average price change from open to low, in determining your intra-day price targets. Do not overlook the fact that it requires time for a market to get ready at the bottom before it advances and for selling pressure to work it’s way through at top before a decline. Smaller loses and sidewaystrading are a sign the trend may be waning in a downtrend. Smaller gains and sideways trading in an up trend. Fourth time at bottom or top is crucial; next phase of move will soon become clear… be ready.Oftentimes, when an important support or resistance level is broken a quick move occurs followed by a reaction back to or slightly above support or below resistance. This is a great opportunity to play thebreak on the “rebound”. Your stop can be super tight. For example, EURUSD important resistance 1.0840 is broken and a quick move to 1.0860, followed by a decline to 1.0835. Buy with a 1.0820 stop. Themove back down is natural and takes nothing away from the importance of the breakout. However, EURUSD should not decline significantly below the breakout (breakout 1.0840; EURUSD should not go below 1.0825.

After a prolonged up move when a top has been made there is usually a trading range, followed by a sharp decline. After that, a secondary reaction back near the old highs often occurs. This is because the market gets ahead of itself and a short squeeze occurs. Selling near the old top with a stop above the old top is the safest place to sell. The third lower top is also a great place to sell. The same is true in reverse for down moves. Be careful not to buy near top or sell near bottom within trading ranges. Wait for breakaway (huge profit potential) or play the range. Whether the market is very active or in a trading range, all indications are more accurate and trustworthier when the market is actively trading.

Limitations of charts

Scheduled economic announcements that are complete surprises render nearby short-term support and resistance levels meaningless because the basis (all available information) has changed significantly, requiring a price adjustment to reflect the new information. Other support and resistance levels within the normal daily trading range remain valid. For example, on Friday the unemployment number missed the mark by roughly 120,000 jobs. That’s a huge disparity and rendered all nearby resistance levels in the EURUSD meaningless. However, resistance level 200 points or more from the day’s opening were still meaningful because they represented resistance to a big up move on a given day.

Unscheduled or unexpected statements by government officials may render all charts points on a short-term chart meaningless, depending upon the severity of what was said or implied. For example, when Treasury Secretary John Snow hinted that the U.S. had abandoned its strong U.S. dollar policy.

100 Points
by Boris Schlossberg and Kathy Lien of GFT Forex

"You guys suck," is refrain I hear often."100 points a month?! I could do that in my sleep. You should be doing 100 points a week at minimum!" Well, I try to point out we the game is a lot more difficult than you think, but the critics do not want to hear it. They proceed to tell me all about their marvelous trading exploits showing me how they just picked a turn to within a pip of the bottom and then went on to bank a thousand points in the trade as they "let the profits run."

My favorite of these demo billionaires was guy who used to write to me with the sole purpose of telling me how stupid our latest trade idea was and how trading was so easy that he was making thousands of pips week. I finally relented and asked him top show me his "portfolio of trades." The guy proudly wrote back that he was was long a wide variety of pairs such as EUR/JPY, AUD/JPY, GBP/JPY and NZD/JPY. I did not have the heart to tell him that this was the same trade levered four times the maximum risk he should have been taking. A few months after that conversation the carry trade collapsed and I never heard from him again. Another trading master of the universe relegated to the dustbin of market history.

They say that you should never watch how sausage or politics are made. To that old adage I would also add investment returns. Since most people only look at year end numbers they are convinced that trading returns accrue with the consistency of a weekly paycheck rising in a straight 45 degree angle towards ultimate wealth. Nothing of course is further from the truth. Take a close look at the audited records of any hedge fund and in fact you will see many months of losses punctuated by a few months of gains, that hopefully eke out to a net positive number at the end of the year.

Investment returns are notoriously lumpy not only on a month over month basis but even on year over year basis. Witness the two of the very best hedge funds in business -Citadel and SAC - posting double digit losses this year. Someone the other day reminded me that despite George Soros vaunted $1 Billion win in the GBP/USD in the early 1990's, a few years later he managed to lose $600M in the yen trade not once but twice in the same year. Everyone remembers the wins but forgets the losses.

One of the nice side benefits for those of you who trade with us at BK is that you get to see how investment returns are actually made on trade by trade basis in real time. As many of you can attest it is hardly a glamorous affair. The reason why trading can be so trying is that you are always operating in an environment of complete uncertainty. You can fail by making a bad trade selection (something that we all fall victim to far more than any of us care to admit) but you can also fail even when all of your analytics are absolutely correct.

K has a marvelously understated term for it. She call it market activity. Market activity can encompass anything from some large player dumping a yard worth currency during the illiquid early Asian session irrespective of price as he hurries to leave the office for tryst with his mistress, to some political official making an offhand remark (see Timmy Geithner) that gets spattered on the Bloomberg terminal a second later. All of this "market activity" can wreck havoc with your best laid plans stopping you out before your trading thesis has a chance to play out.

That's why 100 points a month is not bad at all. 100 points a month is 12% per year. Drop $20,000 into your retirement account each year and compound it at 12% and after 20 years you have 1.8M. After 30 years you have 6M. That's hardly a plan to becoming a baller overnight, but that's how real money gets made.

Official Launch of FXTE Program in Singapore

Today marks the beginning of Quarter 2 of 2009. The fact is we are all excited about the official launch of FXTE Program in Singapore. FXTE is a US educational institution providing forex trading education worldwide via physical seminars and online courses.

On 25 and 26 April 2009, FXTE's Forex Trading Essential Course will be offered for the first time in Singapore at Furama City Center. Two of our FXTE instructors, Jimmy Young and Steve Nurre, will be flying 10,000 miles to the Lion City to teach this course.

What you will learn in these 2-days are

1. How the SIMPLICITY of the FX market removes the clutter often found in the stock and options markets and allows you to focus on the most important thing - MAKING MONEY!

2. That the FOREX can be traded 24 hours a day, 5.5 days per week so you can always find a time to trade - even with your busy schedule. (see - we are very honest - we know what we are talking about. Who said FX is 24 by "7"?)

3. The simple approach to trading Forex - created by a 20 year bank trader for people just like you, that can INCREASE your PROFIT potential by changing how you view the news.

4. How Forex can provide all the upside of trading the equity markets but with LESS RISK.

For further details, click this link - FXTE 2-day class

The course is being offered for only SGD188.00. There is no typo. It's really SGD188.00. You will get 2 full days of forex education. For those who want to gain exposure to the forex market for the first time, or want to learn more how to trade forex, this is a golden opportunity that you should not miss.

Fast and Furious Trading

In this week BKT Weeks Video, Boris Schlossberg continued his discussion on the 10 pips strategy. This link (Fast and Furious Trading) will direct you to his YouTube video.

His rules are as follows:

1. Look at 5 min charts - on EUR/USD and USD/JPY
2. Sell 2nd candle close above 2nd SD Band (for Sell Trades) or close below 2nd SD Band (for Buy Trades). Exception is 00 and 05 level.
3. Trade on all sessions using EUR and JPY
4. 10 pips stop; 7 pip limit

There are some interesting observations:

1. Boris stressed that this is not a strategy that can be automated. So, he believes that if someone designs an EA on this strategy, it will fail as there is discretion as to whether the rules should be implemented.

2. This is not a Holy Grail. There will be losing trades. I have personally observed the strategy and interestingly, it is more likely than not making money.

3. In this version, Boris did not cover the use of GBP/USD although in his video last week, he said GBP/USD may be incorporated into this system to improve the equty curve of the entire system.

Winning by Losing
by Kathy Lien and Boris Schlossberg of GFT Forex

"The key to succeeding in trading is to lose well. It doesn't matter if you are a die hard fundamentalist who thinks that chart reading is akin to astrology or an unrepentant technician who thinks that all news flow has less value than celebrity gossip. Every great trader I ever met knew how to control risk which is simply a polite way of saying that they knew how to take losses.

Of course losing is not what every newbie trader focuses on. Everybody wants to win big. Everybody approaches trading as though it was a lottery not a business. I am always amused by new traders who email me for the next 10 point trade and the next one and the next one after that thinking that the FX market is like a massive ATM machine. Those traders usually have a shorter shelf life than a half eaten apple.

On the other hand, traders that approach the market with a much more cautious attitude tend to do better. They soon learn that in trading losing is the only variable that you can control. Winning is frequently a function of luck, but losing is always a matter of skill.

Everybody hates stops. What's even worse is to be stopped two, three, four times in a row. In a debate between tight stops and wide stops I used to always hear "You don't want to die a death of a thousand cuts!" Well actually I do. After years of trading I came to the conclusion that tight stops will keep me in the game. I may be bloodied, I may be hobbled but I will remain alive to trade another day. In a choice between taking many small measured stops versus a few very large ones I will always choose the former because large stops can frequently turn into catastrophic losses, and much as it is unpleasant to lose money, it is always easier to recoup a series of small losses rather several huge ones.

Recouping is what trading is actually all about. Everybody who begins trading envisions an ever climbing equity curve that builds with the consistency of a weekly paycheck. Nothing can be further from the truth. In reality trading is always the act of giving money back to the market and then trying to claw it back.

Trading is tough precisely because it is so brutal. Unlike a job that pays us even if we are sick or distracted or simply not in the mood to do our best, trading promises you nothing. You lose, you don't eat. That's why I have such enormous respect for those traders who make their living solely from the market. They are the gladiators of modern finance and the ones that survive always know how to take a stop. The rest of us must learn those skills.

The need to build wealth through trading is greater now than at any time in the past 50 years. Does anyone who is 40 or younger believe that Social Security will pay them anything? How about your decimated 401K plans that are likely to range trade for the next 10 years as stocks cycle much like they did in the 1970's? Bonds? Good luck trying to fund your retirement with 2% yields.

Bottom line is that in the next decade trading may be the only avenue left to build wealth with your savings. That's why it is more important than ever to master key principle of the game - in order to win in trading you must learn how to lose properly."

What a timely reminder to many aspiring traders who think that traders have easy life and trading is as simple as ABC. Also, this article serves to reiterate that professional traders approach trading in a completely different way compared with amateurs. Professional traders always deal with the risks and profit target is the second. In this case of Kathy and Boris, they always talk about hitting T1 and move the stop to breakeven, and let the remaining lots do what they are supposed to do. They make they make. They don't make, it's fine. At least risk has been removed after hitting T1.

That's why I subscribed to their mode of trading completely, and it makes perfect sense to me. So, if one feels that forex is an ATM machine, and he can learn the tricks by attending courses but no practices after that, he may wish to spend to money to buy me kopi instead.

Trading 'expert' ordered to refund fees

I am sure many folks in Singapore are bombarded with the recent case of Dr. C who was successfully sued by a group of students. See this Link.

The basis of the claim lodged by the complainants is that Dr. C misrepresented to them on his qualification. Is it a joke? Yes, at least to me. When a self-proclaimed options guru markets his course, the participants relied only on his academic qualifications. Well, there is a big difference between academic qualifications and practical / experience qualifications.

Lecturers (or nka Assistant Professors) are all assumed to have at least Doctorate Degree, and it is a requirement. Do they necessarily possess practical experience? Not really. They need to be exposed to the development outside the campus in order to understand what the heck it is going on in the world. Having a paper qualification is good but it does not mean that this person is an expert.

If we all respect trading as a business, and is a skill we need to practise in order to get better and better, we just have to do and learn from someone who does it professionally and day in day out. Learning trading from a PhD will give us very good textbook knowledge. In this case, of course, I have the privilege to speak to Dr's classmates many years ago and understand his background and his trading journey. From what I was told, I did notice immediately that this guy is going to be in trouble one fine day. It's just a matter of time. Why? It's because when he is teaching someone options, he does not even bother (or should I say he knows?) talking about volatility and Greeks. He simply asked his students to have "faith" on him (btw, what faith is he talking about?). He also taught my good friends a 911 strategy which clearly does not make any sense as he did not reveal the entire risk of making that particular adjustment.

On the brighter side, without him in this market for the last few years, options won't be a popular subject at all. Most of my friends would probably not wake up and still live in the dream of knowing the so-called most powerful strategy in the Planet, which after I had a chance to look at it, is merely a pure gambling on direction without regard to volatility at all.

So, Dr. , you have done a few good deeds. Kudo to you! Salute!!

Common Flaws found in Free Breakout Forex System

I have been a big fans of forex breakout system because it is a no-brainer and is fairly easy to implement. It is also uncommon that one can find breakout trading systems free in the internet.

This is an example:

*******************************************

-Determine the 08.00 – 12.00 GMT (0:00am to 4am EST) High Low on EUR/USD and GBP/USD
-Determine the 12.00 – 16.00 GMT High Low on EUR/USD and GBP/USD

-Set Buy Stop at High + 5 pips and SellStop at Low - 5 pips for both time frames and both currencies.

-Set Target Price at entry + 80 pips for EUR/USD and entry + 120 pips for GBP/USD

-Set Stop Loss at entry - 50 pips for EUR/USD and entry - 70 pips for GBP/USD.If the other side of the breakout is within 50 pips for EUR/USD or within 70 pips for BP/USD then the Stop Loss will be that level.(Longtrade:

SL = Low range - 5 pips = Sell Stop; Short trade: SL = High range + 5 pips = Buy Stop)

-Move the SL to breakeven after a gain of 30 pips for EUR/USD and a gain of 40 pips for GBP/USD.

-If a certain position is taken and price turns against you and it breaks the other side of the breakout channel then turn. If the breakout channel is broader then the stop loss first the stoploss will be hit. If the breakout channel is narrower then the stoploss then hitting the other side means that you have to turn your position.There is only one turn per time frame possible .

-At 24.00 CET all orders expiring and close all trades at market On Friday we do the same at 23.00 CET.

Note :

6 – 10 CET or 8 – 12 GMT

10 - 14 CET or 12 - 16 GMT

********************************

Sound easy to implement, huh? However, contrary to free information, no one seems to discuss a big flaw in this type of trading system.

Let me give you an example:

Suppose you have a set-up to buy EUR/USD

EP - 1.2959
PT - 1.3059
SL - 1.2859

Risking 100 pips for 100 pips profit (or RRR 1:1)

Some people will place the system diligently without asking any further questions. Some "smarter" ones will tell you that you should check the range - if it is 80pips or more, the set-up fails. So, you will ask "why 80 pips or more?" You get a response that it has been backtested.

While I found all these craps in the internet, we at the same time realize that market conditions do changes. So, we must be nimble and adaptive to the changing market conditions.

Have you ever wondered that EUR/USD can make 200 pips daily move consistently since last month? This was definitely not the case in 2008. So, relying on 80 pips as a gauge is a complete disregard of the current market conditions. Anyone talking about 80 pips does not know what he is doing.

To be in a better position, ask yourself what's the opening price for EUR/USD say at 5:00pm EST. Suppose the opening price is 1.2800. You roughly know that given a 200 pips average daily move on this pair, hitting a PT of 1.3059 is challenging as the estimated high will only be 1.3000.

You will also realize that different pairs/ crosses have different average daily move, which is something you need to know. As we are getting more experience as a forex trader, this is definitely a relevant question to ask. You will realize that not all set-ups can give us the best bang for the buck. This means that we have to think whether we should still take that trade.

See, this is something you may not find in free websites. However, you realize that you now know this relevant issue by reading my blog. It is easy, isn't it?

Why Does the Average Forex Trading Strategy Lose Money?

The following article (Part I) is a good wake-up call for folks who are looking for the Holy Grail.

http://www.dailyfx.com/story/topheadline/Why_Does_the_Average_Forex_1232461301568.html?print=1

Enjoy!

Which Forex course is worth to attend?

Quite recently, a few readers in my Discussion Board asked me the same question - which forex course is worth to attend?

"I ... would like to get your advice which forex course provide best system and which one worth to attend?"

This is an alarming question to me because you will realize that the subject matter in this question is to ask for the "best" system. As far as I am concerned, I do not believe there is the BEST system in the market. In fact, I will honestly tell my readers that there isn't any such system in the market. Imagine the system is telling you that it is the best. However, the system itself can never be the Holy Grail. The fact that there exists no Holy Grail in the market means that there is no one "best" system out there.

It may be a piece of disappointing news to many because they have been constantly looking for the best system. Well, you know as much as I do that success in trading business is not only to master one trading system, or learn from one instructor. I have been relaying the following example to many folks and I am happy to repeat:

Suppose A and B both pay $3,000 to learn from X to trade forex. X provides the entry guidelines and the so-called things to watch out. It is not surprising for either or in fact both to ask "can this work in other currency pair?" and "can this work if I do this or that?" People are all like that. They think they are looking for the best system. At the same time, they are also looking for ways to "outsmart" the system. Is this a self-fulfilling prophecy here - i.e. human beings are better than systems? Is there any conflicting issue you realize?

If you happen to shop for a course or a particular instructor, and if he tells you trading psychology is not important, you should run and not walk away. If he tells you that if you simply follow the rules, you will definitely make money. I think you should run and not walk away.

In my example, both A and B may have different trading personalities. Therefore, they may apply different money management rules to suit their own circumstances I believe. It's not about being right or wrong in trading business. It is all about how to manage risks. So, if both are able to adopt certain rules to manage their risks, they are doing a great job as risk managers.

So, here is my reply to my readers: there is no one best trading system or trading course that guarantees making money. We are the ones who control our destiny.

By the way, there is so much free information in the public domain. If we focus on looking for free information, we will notice that it is everywhere. Perhaps one of the most common places to go is babypips.com, followed by forexfactory.com. So, have you checked these websites already?

Never too late to Get Education

I was able to make some time to meet up with my fellow Optionetics colleagues over the weekend at Suntec City as we had our first 3-day Interactive Computer Training (ICT) Class in Singapore in 2009. I met up with some old friends who started with me around the same time in this trading business, and at the same time new friends who recently joined our Optionetics program.

This friend of mine started with Optionetics in 2005. We had a drink somewhere around Suntec City and shared with each other what we had been doing over the past few years. He shared with me that over the last couple of years, he did not do much with his portfolio and he used "complacency" as his reason. The market was bullish until the financial turmoil back in late 2007. His portfolio went up and he did not see the need to do anything. Put simply, he thought that he would just let the portfolio continue doing what it has been doing.

Of course you know as much as I do what happened over the last year. This friend of mine felt the pain too. Fortunately, he told me that he was not hurt as badly as his peers. During our talk, he shared with me that he went for education with Optionetics, and he should have had realized that there are ways to protect his portfolio. This serves as a wake-up call for him to change his strategies by being more alert to what's happening in the market, and get further education in order to improve his literacy in dealing with trading business.

A lot of things happened for a reason. When we feel the pain, it's probably the time for us to change our behavior. Does it happen on you too? What I am saying is that regardless of the entry into this trading business, there is always something to learn every single day. This is because the market condition keeps changing and what we saw is not what we see now.

Several people in this ICT Class were new to Optionetics. However, they all went for the class for a common reason - to take charge of their lives and make a difference regardless of the extent to which it will be. Some of them shared with us that they wanna have more time to pursue their passions - including hobbies, families and children etc. All I can say is that these folks have made their first step (i.e. by taking action).

You will realize recently that the poor folks who bought Hi-Note and Lehman Mini-bonds somehow were promised to be compensated in whole or in part. There are ethical and legal issues involved in this saga, and is beyond my role to comment. Suffice to say this serves as an alarm bell, in particular to the young ones, that they must do something to improve their financial literacy. If I were to describe that Mini-bonds is like (and I have simplified the picture for discussion sake here) buying 1 call and selling 2 puts. Optionetics students will be able to quickly tell me that:

1. Long 1 call and short 1 Put is synthetically long stock - an unacceptable position from Optionetics' perspective

2. 1 Short Put (or naked put) - which is also unacceptable position from Optionetics' perspective.

At the end, I have yet to hear any of my students from Optionetics who went to buy these kinds of instruments. Perhaps what they paid for getting the Optionetics education save them a lot. We knew some celebrities in HK who lost some HK$20m on mini-bonds. For our Optionetics students, they paid only a tiny fraction and they are able to stay away from this saga.

So, while I understand that S$5,000 for a 2-day life-time Optionetics program may be expensive. At the same time, if one thinks of these poor chaps, spending S$5,000 instead of losing the entire portfolio is worthy.

There were also stories about brokers and remisers in Singapore who lost a lot of money on stocks. One poor chap lost $1m because he failed to acknowledge his reading in the market and apply dollar cost averaging techniques.

What I can share with these people is that

"Will they buy insurance when they buy their houses?"
"Will they buy insurance when they buy their cars?"

So,

"Will they buy insurance for their stocks?"

It's amazing that many people did not know stock insurance, which is essentially put options. Had these guys been educated to apply this very simple techniques, they might be able to save millions of dollars.

It's amazing that there are many people who are prepared to enter into the financial markets without getting education, thinking that they are able to deal with all sorts of issues. When they lose money, they start to blame themselves, blame the markets, blame the Government. Is it what you do in your life - knowing how to blame and nothing else?

Here is your opportunities -

For newbies - we have Optionetics 2-hour Introductory Seminars in Singapore from 21 to 23 March (for details: check out http://www.optionetics.com.sg).

For repeating students - sign up for the upcoming 2-day Intermediate Seminar in Singapore on 5 and 6 April 2009.

For students who decide to step up and get further education - we have the following advanced courses in Singapore

- ITT Class - 14 to 16 April 2009
- Master ICT Class - 8 to 10 April 2009.

There is always something for someone. The question for you is "are you committed?"

Merry Christmas and Happy New Year!!

Time really flies in that we are approaching the final week of 2008. As most hedge fund managers have already gone for holidays, I do expect there isn't much to do with the forex market until next year. As a result, I have officially closed shop in my forex business for 2008.

Looking back what I have done during the first year of running this new (forex) business, I have learnt a couple of things:

1. Believe in yourself and you will find ways to achieve certain goals - my limiting belief of not being able to stomach the volatility in the forex market over the last decade, has been thrown away. Now that I am able to trade forex simply means that limiting belief is just limiting belief. If I give myself a complete stretch, I have progressed to the next step.

2. Successful trading is all but psychology - I could have the so-called "best and powerful" trading strategies and also the "best" forex guru in town to teach me, and yet the progress could not be achieved until I have got the trader's attutide right in this business. That's how the psychology comes about. Have an attitude that is deemed correct in my own circumstances. Follow the rules, and keep myself discplined. Further, remember the importance of continious improvement - Kaizan. I followed faithfully what I called "7 Essential Credentials of a Successful Trader" to work on this new business. I am glad to see significant progress in the first year and trust that I will be able to deal with the challenges in 2009.

3. Always have a back-up plan - this forex business was the result of my contingency plan in 2008. By anticipating the challenges in the equity and index markets, I started equipping myself with additional knowledge in another area of practice and I was glad that this anticipation resulted in a successful launch of my forex business. The fact that I could start the real operation within a couple of months means that I could make a difference from my old days as an options trader. So, what's my back-up plan for 2009? I am going to look at the next level of challenges - i.e. futures market. This means that I will be essentially one day able to trade anything under the sun. Having said that, I do anticipate a come-back to the index options market in 2009 as I expect that the trend will likely be a side-way for 2009 and perhaps 2010. I did quite well in 2005 in the sideways market by deploying sideways strategies - something which I am very good at. So, I am ready to play sideways strategies again in 2009 at least.

Finally, this will be my last post for 2008. I wish all of my readers a Merry Christmas and look forward to the upcoming challenges in 2009.

Believe in yourself and you will make a difference! This is our Patterns of Excellence!!