Secrets of Highly Profitable Traders: Lessons From Singapore's Trading Gurus

Secrets Of Highly Profitable Traders Lessons From Singapore’s Trading Gurus Written By

Chin Yong Sak

Published By

RANK BOOKS Singapore www.rankbooks.com Copyright Rank Books

Published by Rank Books Blk 1002 Toa Payoh Ind Pk #07-1423 Singapore 319074 Tel: 65-6250 8180 Fax: 65-6250 6191 Email: admin@rankbooks.com www.rankbooks.com Writer: Chin Yong Sak Photography: Chin Yong Sak Editor: Phua Wen Yi Copyright Š 2012 Rank Books Cover artwork and layout design by Rank Books and Rank Publishing ISBN: 978-981-07-0661-6 Printed In Singapore Acknowledgements: Photographs that appeared in this book were taken by Chin Yong Sak except for pictures that appeared in pages 1 and 26 and pictures of Binni Ong and Keane Lee which appeared in the Contents page.

Copyright Notes: The copyright to the charts, names, trademarks and steps relating to the specific trading strategies featured in this book belong to the contributors themselves and not Rank Books. For reproduction in any means relating to the trading strategies featured in this book, please seek written permission from the respective copyright owners.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the copyright owner.

Conditions of Sale: This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser.

Disclaimer: While every reasonable care is taken to ensure the accuracy of information printed, no responsibility can be accepted for any loss or inconvenience caused by any error or omission. The ideas, suggestions, general principles, examples and other information presented here are for reference and educational purposes only. This book is not in anyway intended to give investment advice or recommendations to trade.

The author, publisher or the individuals featured in this book shall have no liability for any loss or expense whatsoever relating to investment decisions made by the reader.

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Message From The Publisher Trading is an exciting way to make money. There are tremendous opportunities to profit in both bull and bear markets across different trading instruments from forex, commodities, options, futures, stocks, and CFD (contracts for difference). All you need to do to get started is open an account with a broker and deposit a sum ranging from a few hundred to a few thousand dollars. But do you know what it takes to be a successful trader?

This book reveals the true realities of trading by taking you up close and personal to five highly successful traders in Singapore. These five featured traders will share with you practical insights and knowledge accumulated during their trading career to let you better understand what trading really entails.

Here’s your chance to learn the secrets of their success and nuggets of wisdom that took these professional traders years to discover. Now, you can better understand how traders think, plan, and execute a trade for success.

Most of these traders have busted their accounts before, weathered the hard knocks of trading, yet they never gave up. Instead, they took the lessons learned and bounced back to discover a profitable trading system suited to their trading style and personality.

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Secrets of Highly Profitable Traders also offers proven strategies these five professional traders have used. Each trader reveals one of their favorite and proven trading strategies so readers can learn how to become a better trader. In addition, they also share their money management methods so you can minimize the risks of trading.

Trading has many pitfalls. It can be worse than gambling at the casino if you don’t know how to approach it correctly. If you are currently trading and have not achieved consistency in making profits, this book will enlighten you and take you nearer to your goal of becoming a successful trader.

Let these professional traders inspire you with their lessons, let the wisdom imparted in this book help you excel in your path towards becoming a profitable trader. In today’s volatile markets, this book will be the light that will illuminate your way to trading success.

Goh Kheng Chuan Publisher, Rank Books

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Contents The Confident Trader

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Binni Ong TerraSeeds Market Technician Pte Ltd

The Steward Of Money

41

Collin Seow Alpha Asia Holdings

The Disciplined Trader

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Nicholas Tan Nicholas Tan Trading Academy Pte Ltd

The Emotionless Trader

111

Keane Lee WP Global Group Pte Ltd (T3B System)

The Cultivated Trader

149

Jason Yee AchieverLife Pte Ltd

Education Resource Copyright Rank Books

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Binni Ong: The Confident Trader

The Confident Trader Binni Ong Chief Trainer and Co-founder of TerraSeeds Market Technician Pte Ltd

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Introduction Binni is the Chief Trainer and co-founder of TerraSeeds Market Technician Pte Ltd. Being an avid investor and trader, she generates income from investing and trading in stocks, options, futures, Forex, and commodities.

Binni is the winner of the Successful Entrepreneur award, 2010 and a nominee of the Spirit of Enterprise, 2007.

She has been featured regularly in many publications including The Straits Times and Shin Min Daily News, just to name a few.

As a trainer, her students enjoy her clear and systematic teaching style, which is one of the reasons why her community has grown rapidly. Binni being a seasoned educator, it is not surprising to find her in many investing and trading seminars and courses held by major banks, institutions, and brokerages. She has trained traders and participants from BNP Paribas, IG Markets, City Index Singapore, ShareInvestor, National University of Singapore Society, Singapore Armed Forces and many more. Binni has also been specially invited by Nanyang Girls High School to talk about financial literacy, Forex trading and the application of mathematical concepts in trading tools.

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Binni Ong: The Confident Trader

My First Involvement In The Market I grew up in a humble family living in Lim Chu Kang village. When I was young, my family was in the pig farming trade and I had to help in domestic chores after school. I was motivated in my studies and had good grades every year.

At the age of 17, my mother exposed me to the stock market. By 19 years old, I was trading on her behalf. I can still recall that 1995 was a good year. That year, the market was so bullish that any stocks you bought would definitely make money. That was what you would call a boom period, when the Singapore stock market, as well as the Malaysian market, was performing very well making new peaks.

My mother started trading the CLOB exchange which is no longer in existence now. It was an ‘Over-The-Counter’ market created in Singapore by local brokers to trade Malaysian stocks. Because the trades did not pass through the Malaysian exchange, it was akin to a parallel market.The CLOB market was very fast moving and you could easily make 10 to 15 percent daily. That was very lucrative compared to the Singapore market, which moved only about two to three percent back then.

My mother made entry and exit decisions while I monitored the position. We watched Teletex, observing the change in color and I found it interesting. As it was very bullish back then, money was made easily. I gave all my savings of about $10,000 to my mother to trade as I was too young to open my own trading account. During that period, I turned $10,000 into $40,000 with a $30,000 profit in just a one year!

When the Asia Financial crisis came in 1997, we were not aware of its implication to the stock market and kept buying the dips.

During that time, we did not know what cutting-loss was and we merely bought and held, waiting for profits. At the same time, the

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This loss made a huge impact in my heart but I understood it was my psychology affecting me. I was determined to relook and understand what I was doing. After much reflecting, I concluded that trading is about managing my risk and I understood that in trading there will be one point in time where the market would take money away from me. That made me rethink my life and my trading style, which eventually made me what I am now. My trading style now, unlike back then, does not require me to constantly stare at the screen. On top of that, I made an important realization: “We trade to free ourselves.”

Have I Ever Wiped Out My Trading Account?

Yes, I did experience wiping out my trading account. What I did was to divide my trading capital into three stages. The first and second stage had 30% each and the third stage had 40% of my trading capital. Every time you wipe out your account, you will gain experience, learn what you did and what went wrong that contributed to the failure. I wiped out my first and second stage/account and was only successful upon my third attempt. I guess this is a natural path for trading and I never believe you can learn trading and be successful in three days.

“It is important for traders to study

and understand why they make money. Repeat the best practices over and over again. ”

My previous failures have served as a good experience for me.

I realized that theories and rules you thought you knew and understood from books, were not really etched into your mind.

You will only start to realize their importance and remember them

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by heart when you lose or wipe out your trading account. Take for example a book that advocates against trading counter-trend.

Only with your previous losses and experiences will you be more likely to follow the rules and be patient to wait for your setup to appear. This over time will form a rule that belongs to you.

Despite wiping out my trading accounts twice, giving up never crossed my mind. After reflecting upon it, I found out the reasons why my accounts were wiped out, and with that, I started to formulate my own rules and strictly adhere to them.

One advice I like to give for traders who are yet to be successful is they need to also look inwards to understand themselves. Say for example when you are using a technique and it is not doing as well as you wish it could be, you have to figure out whether it is the technique that is not performing well or if there are other reasons. Normally they will keep finding different techniques, in an attempt to find a Holy Grail. But I have seen too many times that the key reason is actually themselves. Are they executing the trades as planned and are they willing to cut their losses when the technique clearly states so?

My Biggest Lesson Learned When winning, learn to take the money, and when losing, learn to walk away, cool down, and do something else besides trading. Do not keep on staring at the screen trying for revenge.

Take for example if you are losing money for three consecutive days, stop trading for a while and use this chance to take a rest.

You may also want to paper trade or try to analyze what has been contributing to the losses. You can also consider cutting down the number of trades per day while gaining your momentum back.

Most importantly, you ought to have a plan to make a comeback.

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My Favorite Strategy What I normally do is to look at the market from my mobile first thing in the morning. I will analyze the Forex market at around 10am to 11am (Singapore time) and will place a trade if there is a setup according to my strategy and rules. Basically I do not need much monitoring as I am using price-action strategy. I will have alerts when the price has hit my pre-determined entry point.

It is around 2 to 3pm when I will pay more attention to the chart movements, as this is the time when the European market opens.

Usually this is the time when I can get some hints on how the Forex and US market may be going for the day.

In TerraSeeds, we introduce the TFlow® strategy, which is suitable for most instruments like Forex, stocks, futures, commodities, options, etc. In TFlow®, the main idea is to trade the retracement of the main flow. When the initial price movement, which we call the flow, is established, we will trade when the price retraces to what we call the optimal zone, which is also the best place to buy or sell. TFlow® is not a breakout trade and we do not trade breakout.

We always assume that a support will remain as a support and vice versa for resistance.

The main decision maker of TFlow® is the price. Although indicators are a derivative of price, that does not mean we do not use indicators. We use them mainly to back up our decisions.

In TFlow® we are able to predict two things, namely the entry level and the target level using Fibonacci Retracement and Extension. For example, if the price movement is to go up, we can already predict what will be the different levels of profit targets. That allows me to key in the entry price, stop-loss, and profit targets in advance and wait for the trade to be triggered. The cut loss point will be just a few pips below the low of the retracement. One big advantage of this strategy is the ability to deliver a high Reward-Risk Ratio.

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The charts below give you a broad overview on what the TFlow® strategy is about.

Chart 1

(Copyright © TerraSeeds Market Technician Pte Ltd)

Chart 1: The River shows the flow of price clearly.

Chart 2

(Copyright © TerraSeeds Market Technician Pte Ltd)

Sell Signal of TFlow®

TFlow® Predicts Future Target Prices

Chart 2: The River is also an optimum zone for price retracement

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Nicholas Tan: The Disciplined Trader

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The Disciplined Pattern Trader

Nicholas Tan A Certified Financial Technician, full-time trader, trainer and best-selling author

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Secrets of Highly Profitable Traders

Introduction Nicholas Tan has more than 20 years of experience in the area of foreign exchange (“forex”) trading. He worked for 13 years as a forex trader with banks in Singapore. He rose from the ranks to vice president, making millions for the banks in those years. Besides a Bachelor Degree in Business Administration from the National University of Singapore, Nicholas is also a Certified Financial Technician (“CFTe”). This is a certification from the International Federation of Technical Analysts, given to a handful of qualified technical analysts across the world after passing their rigorous examinations.

Nicholas Tan has been running forex trading classes since 2007 in conjunction with Rank Seminar Pte Ltd. These classes are now Singapore’s longest running forex class and have exposed hundreds of participants to his simple yet highly effective forex trading techniques.

Nicholas Tan is the first Asian trader to write a book on forex, a subject that is dominated by American and European traders. His first book, “Handbook on Forex Trading”, was a National Bestseller, and his second bestseller, “Forex Trends and Profitable Patterns”, was launched in 2009. “Handbook on Forex Trading” was ranked among the 10 top bestsellers in the chain bookstore, Popular Book Co, in 2007.

Nicholas Tan has been featured in the Channel News Asia program, “Cents & Sensibilities EPISODE 6 - Money, Money, Money: Forex Trading”. He is a seasoned speaker on trading and has given many public talks on forex and charting at Smart Investor Expo and the Technical Analysis Society of Singapore.

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fails to keep me within a safe limit in my trading. Before I enter a trade, I will evaluate my risk and reward. I will evaluate where to place my stop loss, what risks are involved, as well as my potential profit. If my risk exceeds my rewards, I will not take the trade most of the time.

My Biggest Lesson Learned in Trading

It is very important for your trading style to be compatible with your own characteristics and style. If you do not have the belief that your rules work, you will not be able to follow them religiously.

For example, there are people who cannot sleep at night when they have overnight positions. In this case, it is evident that they are not suited to hold overnight positions. This type of personality would do well in day trading. You must fit your trading style to your personality.

Different people have different risk levels and different tolerances to risk. If you are a low risk taker, it is unwise for you to take a high risk trade, like holding an overnight position. You will need a bigger stop loss to accommodate the overnight swing, which you may be uncomfortable with. That will likely increase your emotional stress, which will lead to hesitation and apprehension. A low risk taker might also place a tight (close by) stop order, which could easily be taken out by the overnight market swing. It will result in more unprofitable trades.

Some traders can take big position but not every trader is comfortable with a big position. Some traders are conservative and prefer to trade small size. You need to know what your risk tolerance is. Stick with your comfortable level of risk tolerance.

What happens when you are holding a bigger position than your risk tolerance? You will have greater anxiety and this will tend to lead you to close your position sooner than you should instead of letting your profit run and meeting your profit objective. If you

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have a bigger position than your risk tolerance level position and it is losing money, you will be very eager to close the position in order Different people have different risk levels and different not to lose too much money ahead of the stop point necessary. tolerances to a low risk taker, is that unwise for Remember thatrisk. is a If traityou of are a conservative trader!itBut could youato take decision a high risk holding an to overnight be wrong andtrade, it will like be frustrating see thatposition. closed position higher stop without your stopthe lossovernight order if you You willrallying need a bigger losshitting to accommodate have to you yourmay original plan. You need give your position swing,kept which be uncomfortable with. to That will likely a chance to breathe and if you are not comfortable with the risk increase your emotional stress, which will lead to hesitation and level, your position will not get the appropriate chance to breathe. apprehension.

A low risk taker might alsomost placeofathe tight (close by) You will suffocate your positions to death time!

stop order, which could easily be taken out by the overnight market swing. It will result in more unprofitable trades.

My Trading Strategies

One of the strategy that I like to use is the pullback method. This method is used when the market is trending and it can be applied My both Trading Strategies for uptrend and down trend market conditions.

Chart 1

EUR/JPY Rising And Starts To Fall

Chart 1: EUR/JPY Chart.

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In Chart 1, Eur/Jpy has been rising for the past two days. However, after rising for two days, Eur/Jpy is looking toppish and is poised for a correction to a lower level. In fact, during the third day, on the 19th of May, Eur/Jpy has been falling since the start of early European hours. At around 7:30 pm (Singapore Time), Eur/Jpy seemed to have found a temporary low and is looking like it will head back towards the Moving Average line. At this stage, I am alerted to my favorite Pullback to Moving Average short-term swing trade opportunity.

In this technique, I am looking for a pullback after a strong trending move. During the pullback, the price should correct back to the 20-period exponential moving average. Pullback to the Moving average is just one possible guide. For a more accurate location as to where the pullback will end, I will apply the Fibonacci Retracement levels. Usually the point where the moving average and Fibonacci retracement meet is usually where the pullback will tend to end.

In this case, it looks likely that the Eur/Jpy pullback will terminate somewhere in-between the 38% to the 50% Fibonacci retracement level as can be seen in Chart 2 below.

Chart 2 MA

Wait to Sell at Pullback to the Moving Average (MA) Chart 2: The Pullback Method.

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After gauging the location of the possible pullback termination,

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to give better profit amount as opposed to a sideway range trading strategy. Scalping is best avoided for a beginner as experience and discipline is very important in scalping.

There is a tendency for many new traders to search for the best trading strategy. I can tell you there is no Holy Grail in this world. But everyone, including myself, will go through this stage, searching for the method that will make them rich overnight. As I had mentioned earlier, I wasted four years trying to find a Holy Grail, only to realize that such a thing does not exist.

Find out your own style of trading and finding a strategy to fit into your trading style that is comfortable to you is more important and appropriate.

My Keys to Success For me, I tend to stick to one method, which I call my bread and butter. My bread and butter method has already been discussed at length earlier in the interview. I use this method almost every day.

I do have other trading strategies that I can use. I think my success is sticking to what I know best and finding the market situation that would allow me to use my trading niche. After using this method for so long, I have managed to develop an intuition as to when it would come into play before the market actually play out my intuition.

When I find a new method or strategy, I will use it as a secondary method in addition to my main strategy. Knowing the method is not enough to make you a consistent profitable trader. Always follow your method and reduce trying to add new strategies. New strategies tend to result in losses in the intial stages of usage.

In my opinion trading discipline is more important than the method or strategy itself. There is no one method that will work all the

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Keane Lee: The Emotionless Trader

The Emotionless Trader Keane Lee Founder of the T3B System WP Global Group Pte Ltd

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My Key Trading Rules You have to cut loss if you are wrong and you need to be bold to admit that you are wrong. It is perfectly fine to take defeat for the time being. You must always take care of the downside and let the upside take care of itself. Never set targets for the market.

Trading is about following rules and not breaking them. When you break your rules, you will lose your mental capital, as I mentioned earlier.

My Lessons Learned Learn to accept the fact that many a time, when we feel like it is a sure-win trade, the outcome will likely disappoint us. Thus we must always stay emotionless and not lose rationality, as they deter you from making good decisions.

Trading has to be emotionless because:

Trading Results = Trading System – Emotions From the equation above, if the emotion factor is large, your results will be poor. As such, there is a need to reduce the emotion factor as it affects your psychology, which in turn prevents you from making sound decisions and following your rules. With emotions involved, you may even treat stock market like a casino without being aware of it. Thus you must stay emotionless and make your system as mechanical as possible. Like I always say, when you win, do not be happy, and do not be sad when you lose.

“There is no such thing as a sure-win trade, best or worst stocks.”

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I have a few good ways to reduce emotions, which I would like to share. Firstly, do not watch stock prices when the market opens.

This is also what I have been practicing. It does not mean you are trying to be lazy by doing this. When you see stock prices move, especially against your position, you will likely be emotional. You may lose the ability to make rational and sound decisions. You look at the prices and adjust your buy stops or sell stops after the market closes. This way, you can greatly minimize your emotions and prevent yourself from making hasty decisions.

Secondly, be as mechanical as possible. Put a stop-loss or trailing stop to always take care of the downside. If possible, set everything to auto mode once you enter a trade and let the market run without your emotional involvement. This can prevent your emotions from taking part in the decision making and you will get numb to it slowly. The point when you get numb is where you are getting started in being successful in trading.

“You

must not hold on to money too tightly.’’

A lot of people cannot take losses. I believe the secret to success is your willingness to give. This goes back to the “舍得” I mentioned earlier. When we take a taxi to work, why do we not feel painful when paying for this expense? But why are we so unwilling to pay the expenses when it comes to cutting loss on a bad trade?

Take a very profitable business like Old Chang Kee for example.

Their profit margin is about 15% and the rest of the 85% was spent on expenses in 2007. Trading is like a business. How can you only make money and not lose any as expenses? Many traders are not willing to give or cut-loss as an expense, and this eventually will make them lose more money. It is ultimately all about your mindset.

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