Day Trading

7 Feb 2008

Day trading is a process of multiple buyings and sellings which are conducted within a day. These are done with the intention of maximizing the profits. Normally, the profits taken for each transaction are small but with multiple number of buyings and sellings, the profits gathered are bigger. In CPO, day trading can only be practised if the range of votality in a day is big and so is the volume. Usually if the range is above 25 points a day then day trading is said to be viable to be considered. If ,on average, the range is less than 25 points, it is advisable to bring forward the trading to the next day before any close position is to be undertaken.

In my case, at the present situation where the price of CPO is among the highest ( The highest was on 5 Feb 2008 where it touched RM3458 ) in history, I would prefer to do day trading rather than bringing forward to the next day because it is less risky especially for a small investor like myself. Anyway if the votality is too high and voilent ( the price per tick is very vast between 5 to 10 points ), then I would prefer to stay away from the market.

In general, there are a few strategies that I use when it comes to day trading of CPO futures ;

1) I would figure out the short term trend of the market. The long term trend is not to be determined.

2) After determining the trend, then I would forecast the direction of the market. e.g. If the trend today is bearish ( after the

market closes ), then I would set the entry for tomorrow either to sell or buy based on opening of the day by using

my own devised strategy.

3) The opening is very important. As I have indicated in previous postings, the price of CPO has a close relation to the price of

soybean oil in US and also to the world's price of crude oil. So if the opening today is higher than the close of yesterday,

normally it has already indicated those factors.

4) During the trading of the day , I would only use 4 types of trendlines to execute my positions such as ; Head and Shoulder

Top or Bottom, Rounded Top or Bottom, Double/Triple Top or Bottom and Middle Cut Top or Bottom.

5) If the opening of the day is not within the forecasting range, then I would simply close the computer and take a day off

Since today ( 7 Feb ) and tomorrow is a bank holidays in Malaysia, the market will only open on this coming Monday ( 11 Feb ). After the closing of that day, I would make a price forecast for the next Tuesday! As I pin-pointed earlier, my forecasting is not always right, it tends to be wrong at times!

Trading Methodology

1 Feb 2008

Having done your mock trading, the next step is to do the actual trading. There are many futures trading tools which are available in the market. Some of these trading tools can be learnt from books or by attending short courses conducted by investment companies or organisations.There are also some on-self softwares or applications which can be purchased and be installed in computer.Any way, from my experience, these apllications are no gurantee that you will be making "huge profits in a day of trading" as promised by some of the software producers. Some are good to be true. The use of human brain's capacity in analysing the strategies of entering and existing of the market is more prominent.The dependence solely on the softwares and follow it religiously may end you in the depleting of the deposits in your account.

The use of technical analysis is common among the futures traders. Unlike the stocks, there are two schools of thought when it comes to stocks trading ; fundamental analysis and technical analysis. In futures, fundamental analysis is almost non-existing. Technical analysis is a methodology to study and forecast the price movement of the commodities through the use of charts. The technical analyst make decision either to enter or exit the market by looking at the charts.This is done by appraising the trends of the past and present.Besides, there are also other methodologies in determining the future prices of the commodities such as; Moving Average, Japanese Candle Stick, Fibonacci Retracement Ratios, Oscilltors and Elliot Waves.

My experience in futures market especially the CPO futures, indicates that there is no specific technical analysis that can be used to ensure maximum profits. The combination of one or more technical analysis is more promising. As for me, I am using Japanese Candle Sticks ( with improvisation), trendlines and my own devised strategy. In normal circumtances, you can only devise your own trading plan after fully understood and after being in the market for quite sometime.

My forecasting of the CPO prices will be elaborated further in the coming issues. One point to ponder, whatever trading plan that you use, it will not gurantee that you will be making profits on every entrance of the market. There are times when your entrance is not profitable. In a month if you have 10 positions entered and at least 6 of them generate profits, then your are on the right to success!

Further readings ;

http://www.tssupport.com/
http://www.barchart.com/
http://www.chartpatterns.com/
http://www.candlesticksforum.com/
http://www.fxwords.com/
http://www.candlesticker.com/

Mock Trading

29 Jan 2008

Investing in CPO futures or CPO investment is one of the best way to make money. To certain people, it is a mechanism to create wealth provided if you are on the track. It is also a business opportunity whereby you could operate the business right from your home.

What is mock trading ? After you have had your account open, it is time for you to start trading but what happens if you fail ? So before proceeding to actual trading, it is better for you to practice a trial trading. This is an offline trading which the risk of investing is completely nil. It is good for beginners to test their trading skills and also to try any new trading techniques, if any. You could also open an account in the website for an online mock trading practices and you are allowed to do the trading for free of charge.

As mentioned earlier, after you have open your account at a brokerage firm and a website where you can view the real time price of the futures, you could practise doing either "buy" or "sell" position. When you are ready , then you could do the real trading with a high level of confidence. Should you pose with any problems you could always consult your broker for further information.

Further readings ;

http://www.mocktrading.com/
http://www.hedgestreet.com/
http://www.learninvesting.com/

Getting Started

Saturday - 26 Jan 2008

Once you have decided to invest your own hard-earned money into a futures market, your next course of action is to open up an account. In Malaysia, opening an account is relatively easy and not that troublesome. In fact the profits which you acquire from futures or stock tradings are tax-free and not subjected to any government tax. This is done primarily as to encourage foreign investment in Malaysia.

There are a number of futures brokerage firms in Malaysia and majority of them operate in Kuala Lumpur, the capital city of Malaysia. All you have to do is to pay a visit to a brokage firm of your choice and deposit a sum of money. The amount of deposit depends on the requiremet by the firm and it varies from each other. Basically, the minimum amount deposited is around RM5000 and you are allowed to trade immediately. If you happen to make a loss, then you are allowed to trade until your money decreases to a minimum of RM2000. That would mean you are only allowed to trade for RM3000.Before choosing the right brokerage firm, it is suggested that you choose the brokerage firm which entitles you to access to its website whereby viewing of the real time price fluctuation of the contracts are available. Currently, there are two brokerage firms which provide this facility and the service is free for the account holder. Besides that, you could also subscribe to an investment company which provides a real time quote prices for a small fee.
Once an account is open, you could start immediately right from your home. All you have to do is to view the prices of the contracts, say CPO April contract, on your computer and when you decide to open a position either to buy or sell, you could simply give a call to your broker and place your position. If you decide to close your position, again you could call your broker and state your position. If you make profits and you intend to withdraw them or a portion of it, you can instruct your broker to do so and your money would be deposited in the bank of your choice on the next very day. Currently there are a number of foreign banks which have their operation in Malaysia such as Bank of America, Citi Bank, Standard Chartered and Hong Kong Shanghai Bank. This is a good business/investment opportunity for almost everybody and if you have a lap top or note book, you can trade almost anywhere in the world!

This form of business opportunity does not require you to have a proper office, save money on your petrol, no need to go through conggested traffic jam and etc....Most importantly, you do not have to have any physical products to sell and there are always ready buyers and sellers out there.


FCPO Brokerage firms :

http://www.rhbinvestmentbank.com/
http://www.ambg.com.my/
http://www.bursamalaysia.com/
http://www.kenanga.com.my/

Real time quotes :

http://www.thenextview.com/


AmFutures Sdn Bhd -

Bursa Malaysia

In Malaysia, the trading of futures contracts are conducted in Bursa Malaysia, just like CBOT ( Chicago Board Of Trade ) in US. With the advancement of internet services, one can view the fluctuation of the market price ( real-time price ) throgh his own computer at home without having to presence himslf in Bursa Malaysia or any brokerage firm. The products which are traded in Bursa Malaysia include;

* FCPO - Crude Palm Oil Futures
* FPKO - Crude Palm Kernel Futures
* FKLI - Kuala Lumpur Index Futures
* FKB3 Futures
* USD CPO Futures
* FMG3 - Malaysian Government Secutities Futures

From the above, the CPO and FKLI are the most popular futures among the investors and are traded heavily on daily basis.
CPO's contract size is 25 metric tons with a minimum price fluctuation of RM1 per metric ton. The trading hours are from 10.30 a.m. to 12.30 a.m and 3.00 p.m. to 6.00 p.m. in the evening.The contracts expire on 15th day delivary month.

Why CPO?

Malaysia is the largest supplier of palm oil in the world and eventhough Indonesia is catching up to be the next world's producer of palm oil, the palm oil produced by Malaysia is said to be off the highest quality.The nearest competitor to palm oil is the soybean oil which are produced largely by the US. Any movement of the price of the soybean oil would have an impact on the price of the palm oil and vise versa. They are said to be inter-related.

The advantage of futures trading especially the CPO is the potentiality of making huge profits ( losses as well) in a short time. At the present situation, the market price of CPO is relatively high that is around RM3000 and the fluctuation of the price is between 30 points to 100 points per day ( between RM30 to RM100 .e.g. If you make a profit of 50 points, your profits would be RM1200 per lot after deducting the brokerage cost ). With proper strategies , anybody who would like to involve himself in this form of investment would take advantage of this current market situation immediately. In fact this is the right time to invest as you can do day-trade which means you can buy and sell the futures ( or vise versa ) with out having to bring forward to the next day. Unlike stock market where short selling ( sell now and buy later to make profits ) is not allowed, the futures market practise two ways of trading ; Buy now and Sell later and also; Sell now and Buy later.

Further readings ;

http://www.bursamalaysia.com/
http://www.commodities.sgcib.com/

Futures Investment

If you are thinking seriously of venturing into a business of your own, then investing in commodities or futures is a great idea.Commodities or futures investment is a form of business opportunity for unemployed, home maker, retiree, student and those who want to have a second income.Many people have become very rich when it comes to investing in futures. It is one of a few investment vehicles where an individual with a limited capital can acquire profits in a relatively short time.Due to the fact that many investors lose their money, probably about 80% of them,the reputation for commodity trading investment has a bad reputation.Futures trading is only risky if you want it to be risky. If you treat your investment as a business,instead of a casino, the risk can be kept to a minimum level and the returns are excellent.

What are commodities?

The history of commodity trading originated back to Japan in the 18th Century. The commodities involved were rice and silk. In US, the trading of commodity started in 1850s with the introduction of cotton, corn and wheat.Commodities are the actual physical products such as corn, palm oil and oil. Futures , as in stocks and equities in stock market, are the contract of the commodities.The process of trading of commodities is known as futures trading.When you trade futures you do not own the commodities, instead you own the contract for a limited period of time. You are actually speculating or forecasting on the future price of the commodity. Contract is an agreement by two parties who agree to transact physical commodities for delivary at a particulr price at a later date.

In Malysia, if you are to trade futures, say CPO ( Crude Palm Oil), you would have to trade it in Bursa Malaysia, just like CBOT in US. Firstly, you have to have an account open with a sufficient cash deposit with a brokerage firm. Secondly, you can place an order either to buy or sell through a broker in the brokerage firm. Any transaction which incurs profits or loses will have to borne by you.Before involving yourself in a futures investment, you have to educate yourself with a good understanding of the market and the strategies adopted. You can place a position at what level that may interest you but if you fail, you may have to take delivary of truckload of crude palm oil to your house.

Further reading;

http://www.oxfordfutures.com/
http://www.insidefutures.com/
http://www.patterntrapper.com/
futurestradingcharts.com