2014

Yapi Kredi Yatirim Trading Simulations Results

21st – 22nd February 2014

TWO DAY PROGRAMME

2 www.dcgtraining.com

The Training Day DC Gardner conducted trading simulations for various participants at Yapi Kredi Yatirim during the day, each of 1.5 hours in duration. During each simulation participants experienced: • Increasing speed of news events and price ticks from Simulation 1 to 4 • Trading stress caused by:

− The requirement to trade 1. by quoting prices to external clients calling in (generated by the simulation

software) 2. by trading with other participants in the room by calling out 3. by trading with the electronic market (prices and sizes are generated by

the simulation software) − Trading room noise and telephone ring tones − Active electronic trading markets with indicated size and bid offer − An active news ticker containing both irrelevant and relevant price sensitive news

items − A tick by tick price chart, allowing the trader to consider technical price support and

resistance levels (no volume data is displayed) − Increasing the numbers of securities, which the participant was called upon to trade

simultaneously − The requirement to participate in spot tests of awareness to verify, amongst others:

1. Position long /short 2. P&L 3. Last trade and size 4. Average price of position 5. News items 6. Number of trades 7. Last client call received 8. Last price and size quoted on the market

Securities Traded The simulations traded the following securities: • Simulation 1: Trading a single equity security: Nestle, with the objectives of achieving of

maximising the Trader P&L • Simulation 2: Trading a long only portfolio of up to 9 securities as a proprietary trader, with

the objective of beating a benchmark index • Simulation 3: Trading two currency pairs simultaneously : EUR/USD and GBP/USD with

the objective to maximise their combined P&L • Simulation 4: Trading two securities and 1 commodity simultaneously with the objective to

maximise their combined P&L − WTI − Chevron equity − US 10 yr Treasury

This simulation permitted long and short positions and it was suggested that the three instruments might be correlated, since Chevron profitability is heavily influenced by refining margins and crude oil input costs. Additionally, given the influence of the oil price on economic growth and inflation, delegates were free to assume that the price of crude WTI oil would also impact US Treasury yields. The trader has to consider: • Whether the evidence provided by price movements is strong enough to support trading

strategies based on perceived correlations between the securities (pair trades) or between a security and news flow

• If the price movement disproves correlation, how should the trader modify his position and trading style

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Annoted Graphs A set of annotated output graphs is shown below. This illustrates the key attributes which should be displayed by an experienced and profitable trader: Graph 1: Nestle : Position Value vs. Share price • Red lines = maximum limit long or short: Breaking a limit requires the trader to bring his

position back to compliance levels as soon as possible. Whilst a temporary breach of limit may be acceptable in order to facilitate a client trade, remaining out of limit or repeated breaches of limits indicate a failed trading strategy and a lack of awareness

• Traders can display conviction by utilising the limits when major market trends are establishing

• Profitable traders are able to remain “flat” in sideways trending markets by capturing flow through market making activity to generate profits

Graph 2: Nestle Total P&L vs. Share Price • The total P&L takes into account both realised and unrealised profits from trading activity

and the underlying position of the trader. Ideally the graph should show a steadily upward sloping trend even during periods of indeterminate side-ways trending markets. Making money during sideways trending markets, shows that the trader is actively trading the spread and capturing flow

Graph 3: Nestle Price with Buy and Sell ticks • The blue buy and red sell ticks show where and how often the trader has dealt either on

the open electronic market or concluded a bargain with a client by quoting a price. − Good traders

Buy low and sell high Make the market actively which is shown by closely paired alternating red

and blue ticks − Position traders are clearly directional in their dealings with clusters of red or blue

ticks sited at perceived turning points in the price trends. The frequency and number of tick marks is lower than an experienced trader

position marketvalue

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

position

-4.50

-4.25

-4.00

-3.75

-3.50

-3.25

-3.00

-2.75

-2.50

-2.25

-2.00

-1.75

-1.50

-1.25

-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

market values

Position for Instrument Nestle

Nestle

2 | (c) Oxyor 2013

1. Trader was initially struggelingto find his routine and startedwith a long bias while marketwas trending lower.

2. Breach of limit (probably due to a clienttrade), but quickly went back below the limitso this is acceptable.

3. Short bias while marketwas trading up.

TPL marketvalue

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

-30,000

-27,500

-25,000

-22,500

-20,000

-17,500

-15,000

-12,500

-10,000

-7,500

-5,000

-2,500

0

2,500

TPL

-4.50

-4.25

-4.00

-3.75

-3.50

-3.25

-3.00

-2.75

-2.50

-2.25

-2.00

-1.75

-1.50

-1.25

-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

market values

TPL for Instrument Nestle

Nestle

| 3(c) Oxyor 2013

1. Clearly shows the problem of the longbias at the start of the session.

marketvalues buy sell

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

48.75

49.00

49.25

49.50

49.75

50.00

50.25

50.50

50.75

51.00

Trades

Trades for Instrument Nestle

Nestle

4 | (c) Oxyor 2013

1. A lot 2-way trades so seems trader has been marketmaking which is good.

position marketvalue

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

-50,000

-40,000

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

position

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

market values

Position for Instrument 1 EURUSD

EURUSD

2 | (c) Oxyor 2013

1. Overall position moved nicely with the priceaction. Positions where quite small though, couldhave used limits better.

2. It's a shame thetrader partlymissed the largestmoves in thesession.

position marketvalue

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

-50,000

-40,000

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

position

-1.0

-0.9

-0.8

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

market values

Position for Instrument 2 GBPUSD

GBPUSD

| 3(c) Oxyor 2013

1. As seen with a lot of participants, conviction on direction of GBP/USD as low and hence erratic positions in small size.

TPL

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

-50,0000

50,000100,000150,000200,000250,000300,000350,000400,000450,000500,000550,000600,000650,000700,000750,000800,000850,000900,000950,000

TPL

Sum of total profit and loss

Sum of total profit and loss

4 | (c) Oxyor 2013

1. Very stable PNL profile with few draw downs. This is how a PNLprofile should look like.

TPL marketvalue

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

025,00050,00075,000

100,000125,000150,000175,000200,000225,000250,000275,000300,000325,000350,000375,000400,000425,000450,000475,000500,000

TPL

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

market values

TPL for Instrument 1 EURUSD

EURUSD

| 5(c) Oxyor 2013

TPL marketvalue

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

-25,000

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

250,000

275,000

300,000

325,000

350,000

375,000

400,000

425,000

450,000

TPL

-1.0

-0.9

-0.8

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

market values

TPL for Instrument 2 GBPUSD

GBPUSD

6 | (c) Oxyor 2013

marketvalues buy sell

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

1.321

1.322

1.323

1.324

1.325

1.326

1.327

1.328

1.329

1.330

1.331

1.332

1.333

1.334

1.335

1.336

Trades

Trades for Instrument 1 EURUSD

EURUSD

| 7(c) Oxyor 2013

1. Buy low, sell high shown in practice!

marketvalues buy sell

09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00Time

1.5950

1.5975

1.6000

1.6025

1.6050

1.6075

1.6100

1.6125

1.6150

Trades

Trades for Instrument 2 GBPUSD

GBPUSD

8 | (c) Oxyor 2013

1. Buy low, sell high shown in practice!

position marketvalue

10:00 11:00 12:00 13:00 14:00 15:00Time

-35,000

-30,000

-25,000

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

position

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

market values

Position for Instrument 1 Chevron

Chevron

2 | (c) Oxyor 2013

1. Good timing to close longposition as market peaked.

2. Instead of going from along to flat position, tradershould have gone shorthere.

3. Trader had a short bias and held onto this shortway too long. Should have stopped out earlier.

position marketvalue

10:00 11:00 12:00 13:00 14:00 15:00Time

-50,000

-40,000

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

position

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

market values

Position for Instrument 2 CrudeOil

CrudeOil

| 3(c) Oxyor 2013

1. Seemed to had little conviction,and hence kept positions smallwhich makes sense.

2. Turned long at theright moment, butshould have utilisedthe limits better.

3. Closed long a bit too earlygiven the sharp rally that wastaking place. But at leastprotected profits nicely.

4. Nice catch ofthe small dip andsubsequent rally,but could haveused limits better.

position marketvalue

10:00 11:00 12:00 13:00 14:00 15:00Time

-100,000

-75,000

-50,000

-25,000

0

25,000

50,000

75,000

100,000

position

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

market values

Position for Instrument 3 UST10yr

UST10yr

4 | (c) Oxyor 2013

1. Position moves nicely in line with theprice action until 13:00. Could have usedlimits better to increase PNL.

2. Seems trader lost convicition in2nd part of the session, focussed onother instruments in the session andwent to flat. When no convicition itmakes sense to be flat rather thanhave a position that's not beingmonitored.

TPL

10:00 11:00 12:00 13:00 14:00 15:00Time

-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

TPL

Sum of total profit and loss

Sum of total profit and loss

| 5(c) Oxyor 2013

Very nice upwards trending PNL profile. And mostimportantly, a very stable profile.

TPL marketvalue

10:00 11:00 12:00 13:00 14:00 15:00Time

-30,000

-25,000

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

TPL

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

market values

TPL for Instrument 1 Chevron

Chevron

6 | (c) Oxyor 2013

TPL marketvalue

10:00 11:00 12:00 13:00 14:00 15:00Time

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

TPL

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

market values

TPL for Instrument 2 CrudeOil

CrudeOil

| 7(c) Oxyor 2013

TPL marketvalue

10:00 11:00 12:00 13:00 14:00 15:00Time

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

75,000

TPL

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

market values

TPL for Instrument 3 UST10yr

UST10yr

8 | (c) Oxyor 2013

marketvalues buy sell

10:00 11:00 12:00 13:00 14:00 15:00Time

99.50

99.75

100.00

100.25

100.50

100.75

101.00

101.25

101.50

101.75

102.00

102.25

102.50

102.75

103.00

103.25

Trades

Trades for Instrument 1 Chevron

Chevron

| 9(c) Oxyor 2013

1. Traded mainly directional in the first half of thesession. Could have done more on market making tocreate more 2-way flow.

marketvalues buy sell

10:00 11:00 12:00 13:00 14:00 15:00Time

95.0

95.5

96.0

96.5

97.0

97.5

98.0

98.5

99.0

99.5

100.0

100.5

101.0

101.5

Trades

Trades for Instrument 2 CrudeOil

CrudeOil

10 | (c) Oxyor 2013

1. Mainly sold into this rally,should ideally have added tothe long when the marketmoving headline came out.

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Thank you for your participation in the trading simulations. For any questions or future queries, please do not hesitate to contact:

Aurelia Mason Client Relationship Manager DC Gardner, a division of Euromoney Institutional Investor TRAINERS IN FINANCE FOR 30 YEARS Nestor House | Playhouse Yard | London | EC4V 5EX Tel. +44 (0)20 7779 8902 Mob. +44 7408 843 730 amason@dcgtraining.com www.dcgtraining.com