For those who have not read part 1 which talks about some of my investments in 2014,  you can find it here:

2014 Investing and Trading Review – Part 1

I will now go on to part 2 will talk about my experiences with futures and forex in 2014.

Futures

I currently trade only one type of futures contract – SIMSCI, which tracks the MSCI Singapore index.

SIMSCI

One SIMSCI futures contract gives a market exposure of $200 per point, which is about $76,000 based on the current value of 380.

I use SIMSCI when I want to take a short position on the market, as it is one of the most cost effective way of shorting the market. The charges are probably 10% or less compared to using CFDs. For more information on that, you can refer to one of my earlier article:

Trading the Singapore Market Using Futures

There is also no financing costs.

The only problem with SIMSCI futures is that the contract expire every month. So, if you want to express a long term view on the market using SIMSCI futures, you will need to manually roll-over the contract at the end of every month. This is a hassle and can sometimes lead to price slippages.

For 2014, I was using SIMSCI futures mainly as a partial hedge to my other long positions in the market.

Sometimes, I used the support and resistance lines to determine my entry and exits, but since this is meant as a hedge, most of the time I will just hold the position long-term.

I was short one contract of  SIMSCI in January 2014 (carried on from Aug 2013) , and all the way from April to end of December 2014.

January went well, with a profit of around $4000 due to a correction in the market. The rest of the year wasn’t so good, as the market recovered and finished the year higher than it started.

I managed to avoid the Feb – March rebound, but the April to Dec run-up wiped out my January profits.

Furthermore, as I was trying to take on additional short positions during the roll-overs (which did not work out most months), I ended up making some additional losses.

Overall, my loss due to SIMSCI in 2014 was around $2,000. I treat it as the cost of hedging, which is not so bad as I would have been protected if there was a major correction in the market.

I continue to hold a short position in SIMSCI going into 2015.

Forex

I had positions in two currency pairs in 2014 – the AUD/SGD and EUR/USD.

I consider myself as a position trader, as my positions are held for the long term. I find day trading too tiring – staring at a screen whole day long waiting for a technical signal is simply no fun at all.

In forex trading, the leverage is very high, and you definitely do not want to hold a position that is beyond your comfort level. One thing I found out is that if a position is big enough to bother you, you tend to make all kinds of silly decisions like taking profits or cutting losses too early/late.

This often leads to disastrous outcomes.

Therefore, I tend to trade positions of 50,000. This is a position that I’m comfortable with to have long term positions without becoming irrational.

I don’t even login to the trading platform much to see the running profits or losses, perhaps just once every one to two months. However, I do monitor the market prices regularly on my phone.

Each position I trade will also be backed by at least $10,000 of equity, so as to avoid excessive leverage.

Now, a bit more on my two currency pairs.

AUD/SGD

This is one of my frequently traded currency pair for various reasons.

AUD/SGD tends to trade in a range, although once in a while, it does break into a long trend which can be very brutal if you are caught on the wrong side of it.

I hold some other investments denominated in Aussie dollars, so sometimes I use this pair to hedge the Australian currency if I find it to be trading quite high in its trading range.

However, as you need to pay interest costs if you short the AUD, it can be costly to hedge the currency for an extended period of time.

Last year, I had only two trades in it, both on the long side.

I initiated a long position in Jan 2014 at 1.12. The strategy was to simply hold it long term and earn the interest. This is also known as the carry trade.

The price actually went up all the way to 1.18 (profit of S$3k). I did not sell as this was meant to be a long term carry trade strategy.

However, the price subsequently clashed below my entry point and I temporarily closed my position in early November at 1.1275 off a rebound . The interest earned meant that my purchase price went down to 1.103 with a profit of around S$1200.

I re-entered the position again in late November at 1.11 with the intention of resuming the carry trade. On hindsight, the re-entry was a bit too early as the downtrend was still very much intact.

The position was down around S$1500 at year end, resulting in an overall loss of S$300 for AUD/SGD for 2014 after I factor in the earlier profit.

As I’m still holding on to this position (still holding on to my carry trade thesis), the losses on the open position has widened to S$3000 based on the current price of 1.052.

Not exactly a happy outcome coming from a very profitable position in the middle of 2014 but oh well, you can’t win everything.

EUR/USD

This currency pair was my big winner for 2014.

I had actually shorted this pair at 1.34 since September 2013. I have held on to it for the whole of 2014 and I’m still holding it currently. The price in 2014 for EUR/USD dropped from 1.37 at the start of the year to 1.21 at the end, which meant a massive move of US$8,000 in my favor. And the price has since dropped further to around 1.13.

This is a kind of no-brainer fundamental trade. With the US ending quantitative easing and on the verge of hiking interest rates but the Euro going into monetary easing, the Euro is bound to depreciate against the US dollar.

The problem with fundamental trades is that you can get the theory correct but the timing wrong. There are also counter-trend movements along the way which might cause you to be closed out from the trade and lose money.

So if you try to trade this short term or with too high a leverage, it might not work out. There is also a risk of being played out by the central banks.

I was actually too early in my trade but because I committed only a small initial position, I was able to hold it despite the early rally and then ride the downtrend all the way till today.

Also, if you miss the initial move in this kind of trade, it can be difficult to overcome your emotions to enter the trade.

Take one example – the USD/JPY, another seemingly no brainer trade with a similar investment thesis as the EUR/USD.

Having targeted to long the USD/JPY  but missed doing so a couple of years back, I find it psychologically impossible to enter the trade with the price having moved from 75 to 120 in the space of two years.

One thing you quickly learn about the market is that there are endless number of opportunities popping up from time to time. It’s fine to miss one; you just need to find and make a few good trades.

What’s yours?

To leave your comments, please go to : 2014 Investing and Trading Review – Part 2

Global Brokers NZ is shutting down, FXCM said clients owe US$225 million on their accounts while IG Group estimated an impact of 30 million pounds.

There could be more.

Remember MF Global?

If you have some unused cash lying around with brokers that provide leveraged forex trading, it might be prudent to withdraw some of your money.

You never know whether any of them will go under.

To leave your comments, please go to : Safeguarding Your Money From Forex Casualties

Besides abandoning the floor, the SNF also cut interest rates from -0.25% to -0.75%.

SNF apparently decided to do 2 out of the 3 things they could have done as highlighted in this article from Saxo.

SNB faces classic ‘trilemma’ as EURCHF floor nears

That article was written in 3Q2014 so please ignore the trading calls at the end.

Kathy Lien wrote an article on how the move by SNB might affect the various currency pairs and asset classes.

For those who trade forex, you will know that a 30,000+ (typo) 3000+ pips movement in a matter of minutes is no laughing matter. This is the type of seismic movement that will either blow your trading account or make you a fortune. The Swiss Market Index was also down  8.7% at the end of the day, dropping by as much as 14% intraday.

Following the announcement by SNF, I received a couple of emails from trading platform providers with this message:

Due to today’s exceptional market movement in CHF crosses, we have been filling client orders and positions in an extremely illiquid market.

Once we are better able to establish true market liquidity, all executed fills will be revisited, and will be revised and amended to more accurate levels. This may result in a worse execution rate than the originally filled level.

What this means is that those who had a CHF trade executed during the period of volatility might have their price adjusted.

This is one big thing that I don’t like about trading Over The Counter (OTC) products. Your counter-party is essentially your platform provider and he is at liberty to do things as adjusting your prices without warning.

Imagine having the first leg of a trade done at a particular price but then being told afterwards that the price will be adjusted and made known to you at a later date. How are you going to manage the position?

Furthermore, your losses are the platform provider’s gains and vice versa. Trading with stop-losses in place is like playing poker with an opponent who can see your cards and knows when you will fold. That makes it more difficult to win.

A solution to this would be to use exchange traded products. For forex, this would be forex futures.

Another thing about yesterday’s movement is that stop losses would not have protected you fully due to the gap down in prices. This would have been the case whether you were trading using an OTC product or forex futures.

However, in the case of forex futures, at least you know that whatever price your trade was executed would be the price that you get. For OTC, what you see might not be what you get.

Trade with care.

To leave your comments, please go to : EURCHF Carnage as SNF Abandons Euro Floor

Mario Singh, one of Asia’s favourite Forex coach and also an ex-classmate of mine, will be holding an event for the launch of his second book, Unlocking the World’s Largest Financial Secret.

“Unlocking the World’s Largest Financial Secret” is the the guide to getting a quickstart on how to build a solid foundation in the Forex market and a must read for every Forex trader who wants to succeed in the Forex market.

Mario Singh has trained thousands of students worldwide on Forex trading, including private bankers from ICBC and Julius Baer. He has also appeared more than 40 times on CNBC and Bloomberg, and has contributed to top investment magazines like Smart Investor and Your Trading Edge.

What will you get at this book launch event for $25?

• Personalised signed copy of Mario’s new book “Unlocking the World’s Largest Financial Secret”
• Market outlook from Jimmy Zhu, Senior Economist at FXPRIMUS
• Buffet dinner
• Networking with Singapore’s smartest traders
• Additional book purchases at a 32% discount

You may register for this event here:

Unlocking the World’s Largest Financial Secret Book Launch

For those of you who are going, please come and say hi to me!

To leave your comments, please go to : Unlocking the World’s Largest Financial Secret Book Launch

The proposed FX futures suite will include deliverable and non-deliverable Asian currencies cleared in currencies such as the US dollar, Japanese yen and Singapore dollar. SGX will initially offer four currency pairs: the Australian dollar/US dollar, Australian dollar/Japanese yen, Indian rupee/US dollar and US dollar/Singapore dollar.

SGX is consulting the public on its first four proposed foreign exchange (FX) futures contracts.

These cash-settled FX futures contracts will be traded on and cleared by SGX.

SGX seeks the views of the public and market participants on the following proposals:

• Position Limits – The position limit for each FX futures contract will be 10,000 contracts net on the same side of the market and in all contract months combined.
• Price Limits – In line with the underlying over-the-counter FX markets and the practices of other exchanges, these contracts will have no price limits unless SGX prescribes them. This allows free price movements in response to market developments and information.
• Termination of trading – The last trading day for the FX futures contracts will be two business days prior to the third Wednesday of the contract expiry month, except for the Indian rupee/US dollar futures. For Indian rupee/US dollar futures, the last trading day will be two business days prior to the last business day of the contract expiry month.
• Final Settlement Price – The suite of FX futures contracts will be settled in cash based on proven and widely-accepted methodology.

SGX targets to introduce the new suite of FX futures contracts in the third quarter of 2013.

The consultation paper is available on SGX’s website at www.sgx.com from today. Market participants and members of the public can submit their comments and suggestions from today until 16 April 2013 via email to [email protected].

To leave your comments, please go to : SGX Public Consultation on New FX Futures Contracts