The End of 2009

Hello everyone


It is almost the end of 2009 and in the next few days we will welcome 2010. Merry xmas and happy new year to everyone. hope everyone enjoy their holidays and spent some good time with loves ones and family. Since i started to trade, i had neglected all my friends, family, become super anti social and seldom meet anyone for a long time.

some of my friends starting to know that i am doing some sort of investment. but its very hard for me to explain or even teach them. becoz they are not looking at things from my perpective and they dunno wat i really mean when i say something. and i can sense some ego and they are not ready.

some questions my purpose of a blog, it is just personal and private journal of my thoughts and feelings and notes. pls understand that i am not doing this for profit, publicity, sales, networking, setting of a fund, etc. close friends that know me know that i am very low profile and i just wish to live my live everyday slacking around and doing nothing. i everyday just like to wear t shirt, shorts and crocs. and i never comb my hair.


I had recently attended my buddy wedding. it was really tiring to be brother, wake up so early and run so many places and got to eat disgusting stuffs. but SRG are all steady boys and we had great fun and my brothers all can drink so well. i cant drink so i can only be the AV boy. at the end seeing my friend so happy married, it was all worthwhile.

Project Lobo is almost 1 year old. This 1 year i feel past by so quickly, lots had happened to me. shift office, retrenched, started new job, etc.

All these events doesnt really means anything to me as i had already expected to be retrenched and employee day job doesnt mean anything to me now. I dun say such things to hao lian or brag or sound cool or act zai. everyone got different goals and dreams. This is just my plan and my goal to archive. pls understand all this is all just a means to an end for me.

Since letting Project Lobo running last year Dec, i had seldom touch it. i am just letting it run. during this 1 year i had read a lot but i dun chiong to read now, i just slowly take my time to read. i had gain more knowledge and more confidence as a result of further researches and studies. i enjoy myself everyday, playing tennis, swimming, cycling, reading. finally i am free to catch up with all my friends. to watch movies, to go Jurong bird park, night safari, Zoo, KL watch tennis. i almost feel like semi retired!

This year i noticed a considerable change in me as compare to my first year of trading. when i am a newibie i like to brag and hao lian and angry when ppl look down on me, now I dun feel the need to prove or brag to anyone abt wat i know or do. it feels like a normal job i do everyday. i think i had finally break out of stage 2 of trading, and i am going on to stage 3 now. i cant progress fast now, at this later stage, it is very slow and i will need at least another 2-4 years more to get to next stage. but i am very happy now, things are looking good and i can finally see the light at the end of the tunnel.



As promised i will now show a statement from the account of vyu which i had managed for her for the past 1 year. She is the only person that had always believed in me. She listened to all my testing, theories, nonsense, bullshit, scolding, etc. LOL so funny she always trusted me all these time even when i am constantly losing for the first year. without her i might not be trading now or even dare to have such a crazy dream. She had changed my dream, goals, life. and now i given her 26% net profit gained for her account after 1 year. here is the link to her statement.

http://257fx.blogspot.com/2009/01/trade-journel.html

Lastly i wish everyone a merry Christmas and a happy new year. Good health to everyone. Happy 2010!

Risk Management

hello everyone

today Mr Lobo is going talk about Risk Management. as i had said in a eariler post, risk management is the most important in trading. It is not about the trading system, the various indicators or trading methods, the news, market condidtion, timing, insider tips, etc. It is risk management. remember what i said becoz this is really really important. this is the main difference btw a novice and a old bird, the difference btw losing and winning consistently.

ok now you know how important risk management is in trading. dun say i never share some advice. today now i am going to show you how i manage my trading risk. listen carefully coz this is surely going to help you. dun forget to treat me kopi when u
win some money.



Diversification (finance)
From Wikipedia, the free encyclopedia
It is the spreading out investments to reduce risks. Because the fluctuations of a single security have less impact on a diverse portfolio, diversification minimizes the risk from any one investment.

There is no secret in reducing risk, the only way to reduce risk is thru Diversification. when i talk abt Diversification i dun mean to invest in 101 all different stuffs. overly Diversification you wont lose much, but you also wont win much too. all you need is 2-3 different investments that is preferbely not linked in any way. i myself only diversify with 2 instruments max. because we are unable to predict or foresee any up or down movement, we need to diversify into 2 or more so
that any single excessive negative movement will only affect us with minimal impact.



ok below here is all the various risk in which i will lose money.
There are

1. Broker Default Risk
2. Account based currency risk
3. Currency Swap Risk
4. Trading System Risk



Broker Default Risk
Probability: Low
Impact:Huge
Plan: To open accounts with 2 different broker. even if in the event that 1 broker fails, i will only be losing 50% of my capital.
Target to complete: 3-4 years

let me first talk abt Broker Default Risk. This is the risk in which the broker that you put all your money is Defaulted. All the money that you had put in the broker is gone too. even though the chances of this happening is quite low, but broker defaults still do happen, eg Swiss Crown Forex recently. we can try to prevent this by doing research and read up before we decide to put our money in a overseas broker. the broker must be regulated, segregated account, dun have too much complains and not too many dirty tricks. if we ever notice that our broker is behaving strangely, withdrawal late, price shading, etc then we should close our account immediatly.



Account based currency risk
Probability: Low
Impact: High
Plan: To have my second broker account in a different currency.
Target to complete: 3-4 years

This is the risk in which the currency you put in the broker depreciate. for example my account is USD, if USD deprecicate then i will lose money when i convert them back to SGD during withdrawal. even though the USDSGD rate is pretty stable. even during US sub prime crisis the exchange rate for USDSGD is still at least 1.3++. the recent lowest was during 2008 was 1.34++. what we can do to prevent being affected badly by USDSGD rate is to build my 2nd broker account in another currecny, most likely EUR as EUR is the second largest currecny in the world. EUr is offen said to be anti USD, this is becoz when USD go down EUR go up. by having both currency account, we can minimise our negative explosure to unpreditable currecny rate movement.



Currency Swap Risk
Probability: High
Impact:Low
Plan: For older trades that has a large negative swap, i will need to change the take profit manually to make sure that the take profit will completely compensate for the swap. Target to complete: Done, TP changed for older trades. Currency Swap Risk is the risk in which the negative swap is more then the profits when the trade is closed, this results in a overall negative losing trade. Currency Swap Risk is calculate from the difference of the national interests rates. it can be positive or negative. it is very hard to have a strategy based on swaps as the interests rates can change very often. some of the trades in which i hold for a long time, more then a year will be expose to this risk. but all we need to do is to increase the target profit from 50 pips to 70pips or even 100 pips, so that the trade will be closed at a profit.



Trading System Risk
Probability: Medium
Impact:High
Target to complete: entire range in 1-2 years, entire range plus another 50% buffer in 3-4 years.

Plan: as of now my DD is never above 50% on my current balance, so there is no need to increase. i know that is still not enough. when i am build my account to the size in which i will withdraw monthly, i will need to have at least a balance to cover the entire range. I will most likely implement this when i had switch to a classic account next year. and of coz in future the best is have another 50% more balance to buffer if i had the extra cash. it is always good to have more to buffer the DD.



ok everyone. this is my risk mangement in a nutshell. for every biz all you need is to take care of all the down size, and you will be left only with the upside. as you can see i got pretty much everything covered up nicely. so now i am only left with the profits in my accounts. hehe how do i know? becoz my accounts and the account i manage for my friend have zero losses for the whole year 2009. hehehe

Famous Traders

Hello everyone

I was at the library over the long weekends, i borrowed this book "Reminiscences of a Stock Operator". This book is like the classic must read for all traders. This book was written in early 1900s about jesse livermore, one of the best trader during that time. Some of the stuffs written in the book still holds even till today.maybe some will say that the market had not change as it is build on men fear and hope and greed. but i would think that it is the way to cheat the everyday joe's money is still the same. Brokers earns from customers losses. in the book the bucket shops calls the customers "Suckers"

a quote from jesse livermore
True suckers thought they can actually beat the game by winning consistently, the reality was that they lost everything in a short time and never came back to a market that they never understood in the first place" A sad truth, many ppl are blind by their ego and tink they "know" what they are doing. It is very hard to get out of the grey area unless you are able to accept the truth and with a open mind.




ok lets talk more abt jesse livermore, ok since he is such a great trader that had won millions. he should be living in luxury and leading a good life rite? WRONG! Livermore gained and lost several multi-million dollar fortunes. It was never disclosed to anyone what happened to the great fortune he had made in the crash of 1929, but he had lost it all. On November 28, 1940, Livermore shot and killed himself.



now lets talk about other famous speculators. the most famous currency speculator is of coz George Soros, "the man who broke the Bank of England".George Soros will always be remembered for his almost $2 billion profits made when he shorted the British Pound. But not too many seem to recall George Sosros's horrific 60%+ losses in his funds when he was caught in the 1987 crash! In fact, Soros even admits that he is rarely more than half right!



ok now guys you heard of the "turtle traders"?. In 1983, Richard Dennis and Bill Eckhardt pondered the idea of whether being a great trader was a nature skills or whether it could be taught. Dennis believed that one could be trained while Eckhardt thought it was an innate skill. In order to settle this bet. Richard Dennis and Bill Eckhardt recruited 21 men and 2 women with little trading experience and taught them a trading system that made Dennis and Eckhardt famous in the industry. When his experiment ended five years later, his Turtles reportedly had earned an aggregate profit of $175 million.

now everyone must think that Richard Dennis must be a great trader ? WRONG again. Dennis managed pools of capital for others in the markets for a while, but withdrew from such management in the spring of 1988 after his clients suffered heavy losses. In the Black Monday stock market crash of 1987, he reportedly lost $10 million, with a total of $50 million reportedly lost in 1987-88. He also managed funds for some time in the mid and late 1990s, closing these operations after losses in the summer of 2000.



another trader call Nicolas Darvas wrote the book "How I Made 2,000,000 in the Stock Market". In the book he describe a Box system based on support/resistent. even though he is trained as a economist in school, he is a professional dancer. New York Attorney General had 'thrown the book' at Darvas charging that his story was 'unqualifiedly false' and that it could find 'ascertainable' profits of only $216,000. Did he continue to trade? No. Later, He went on to explore other fields, the fashion industry,theatrical producing, real estate are just a few. His method is now known as "classic" and wont work in current times. you can try it out yourself if you dont believe hehe.



Here are some more quotes from famous traders/investors

In this business if you're good, you're right six times out of ten. You're never going to be right nine times out of ten.
Peter Lynch

Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed.
Benjamin Graham

The financial markets generally are unpredictable. So that one has to have different scenarios.. The idea that you can actually predict what's going to happen contradicts my way of looking at the market.
George Soros

Before this century is over, the Dow Jones Industrial Average will probably be over one million versus around 10,000 now. So for the long-term, the outlook is tremendously bullish if you buy stocks blindly to keep for a century.
John Templeton

Even famous investor guru warren buffet does have huge losses. Both Alan Greenspan and ben bernanke belives that nobody can profits from the markets constantly. Referring to Alan Greenspan's famous remark about the "irrational exuberance" of the market, "Traders think, ‘No one can beat the market — but I can,'" Will i suffer the same fate as the "famous traders"? I hope not! wish me luck guys !!!!