Traders September 2015

8/17/2019 Traders September 2015

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Interview: J. C. Parets – How I Trade False Signals P. 74

Your Personal Trading Coach

September 2015 | www.traders-mag.co.uk

H o w t o G e t

a J o b i n

P r o p T r a d i n g

P. 1 4

The Best ofBoth WorldsTrading for Short Term &

Longer Term Gains P. 46

Narrow RangeBreakoutThe Silence Prior

to the Big Move P. 50

The Stop-Loss Controversy P. 24Do You Need Life Insurance in the Markets?

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EDITORIAL

4

www.traders-mag.co.uk 09.2015

» It is true, trading is par ticularly about making money. Nevertheless I am convinced

that t here is more to it than that. Sometimes, it can even turn out to be a hindrance

seeing your trading account in terms of real money. The reason for that are our

emotions, which can keep us from taking the right actions . But what else is trading

about?

In the long run, it is hard to endure the tough lessons of trading only being motivated

by money, because there will always be difficult times. In order to invest necessar y

time and energy to keep going, it takes something else.

I am talking about the fascination of trading. The sophisticated challenge of

surviving and profiting in the markets. The curiosity of finding out how to be

successful in the stock market and of course, enjoying adapting to the constantly

changing conditions that the market presents.

It is just like in any other job. Is your work only about earning money, or do you really

enjoy it and see a purpose in what you do? Over the years one will feel apathetic if

the only moti vation is earning money. A nd this is not a t rivial problem, since we will

be spending a decent amount of our lifetime doing this work .

But there is even more that trading is about: personal development. With every

win or loss on your trading journey, you will make progress. The stock market is

an instrument that will make you humble over time. It is an instrument that helps us

to appreciate the things we have other than our career. Above all, life is precious,and because in the end, it is not the money that makes us happy. It is the people,

experiences and memories. Whereas money is a means to an end, we should not

let it control us.

“The stock market is man’s invention that has humbled him the most.” (Alan Shaw) «

Good Trading,

What Trading is About (Apart From Money)

Marko GraenitzDeputy Editor-in-chief

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TABLE OF CONTENTS

6


24

TABLE OF CONTENTS

September 2015

14

NewsFind the latest notes and

announcements from around the world

of trading in our “News“ section.

INSIGHTS

COVER STORY

34 New Products The Latest Trading Technology

36 Web Review www.optionslam.com

40 Book Review Frontier

42 App Review CBOE Mobile

TOOLS

12 TRADERS´ Talk We talked to Chris Weaver, CEO of My Trading Zone, about

his idea of teaching others how to coach traders, and about

coaching traders in general.

14 How to Get a Job in Proprietary Trading Trader Rayner Teo discusses the traits you need to get a foot

in the door at a prop trading firm.

18 Portfolio MetricsDirk Vandycke explains why looking at returns is a very bad

idea when it comes to estimating one’s long term potential in

financial markets.

22 Trading Seasonalities Thomas Bopp trades coffee shares and the DAX.

24 The Stop-loss Controversy

A stop is an order that is triggered automatically when theprice reaches a preset adverse level. However, it is not a

perfect risk control tool. Azeez Mustapha discusses the

controversy surrounding this enigmatic instrument.

60

8

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TABLE OF CONTENTS

7

74

Publisher

Lothar Albert

Subscription Service

www.tradersonline-mag.com/subscribe;

[email protected];

Tel: +49 (0) 931 45226-15

Address of Editorial

and Advertising Department

TRADERS´ media GmbH

Barbarastrasse 31a

97074 Wuerzburg, Germany

Contact:

E-mail: [email protected]

Phone: +49 (0) 931 45226-17

Editor-in-ChiefLothar Albert

Editors

Katharina Boetsch, Leanne Chesterman,

Prof. Dr. Guenther Dahlmann-Resing,

Marko Graenitz, Carmen Hellmann,

Sandra Kahle, Simone Kirksey, Inessa Liss,

Rodman Moore, Najia Rasuli, Stefan Rauch,

Katja Reinhardt, Markus Schneider, Karin Seidl,

Tina Wagemann, Christine Weissenberger

Articles

Thomas Bopp, Richard Chignell, Alvaro Echeverri,

Alan Ellman, Azeez Mustapha, Dave Landry,

David Pieper, Rayner Teo, Dan Valcu, Dirk Vandycke,Stu Whisson

Pictures© Africa Studio, Svyatoslav Lypynsky y, md3d, psdesign1, Brian

Jackson, Matej Kastelic, Andrew Ostrovsky, Andrew Bayda,

IMaster, Massimo Cavallo, lassedesignen, Bjoern Wylezich, lev

dolgachov, Wrangler, DenisNata, Stefan Yang/ www.fotolia.com,

Sandra Binder

Price data

www.captimizer.de; www.esignal.com;

www.metaquotes.net; www.tradesignalonline.com;

www.tradestation.com

ISSN

1612-9423

Distributor / Retail:

DPV GmbH, www.dpv.de , [email protected]

Disclosure

The information in TRADERS´ is intended for

educational purposes only. It is not meant to

recommend, promote or in any way imply the

effectiveness of any trading system, strategy or

approach. Traders are advised to do their own

research and testing to determine the validity

of a trading idea. Trading and investing carry

a high level of risk. Past performance does notguarantee future results.

© 2015 TRADERS´ media GmbH,Barbarastrasse 31a, 97074 Wuerzburg, Germany

BASICS

STRATEGIES

60 Performance Analytics Regarding the ever more complex financial data analysis, Dan

Valcu takes a look at Open-source R-packages.

64 The Physical Game Stu Whisson explains how to develop your trading with the

help of physical fitness.

66 Why Choose the Short Term? Alvaro Echeverri shows why the short term time frame offers

the most trading opportunities.

46 The Best of Both WorldsDave Landry wants to capture both short term and

longer term gains.

50 Narrow Range Breakout David Pieper teaches you what is important and how to

develop a trading strategy based on below-average prices.

54 Generate Monthly Cash Flow by Selling Stock Options In this article Alan Ellman discusses cash-secured puts..

70 The Pro‘s Process – Larry Tentarelli

74 J. C. Parets – How I Trade False Signals J. C. Parets is the founder and president of Eagle Bay

Capital, LLC. He earned the Chartered Market Technician

designation (CMT) and is the New York City Chapter

Chair of the Market Technicians Association (MTA). Heis a regular guest on CNBC, Bloomberg, Business News

Network and in the Wall Street Journal.

PEOPLE

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8/82

INSIGHTS – NEWS

8


INTERNATIONAL TECHNICAL ANALYSIS CONFERENCE IN TOKYO

The International Federation of Technical Analysts (IFTA)

will hold its 28th annual conference from 2nd to 4th

October 2015 in Tokyo, Japan, hosted by the Nippon

Technical Analysts Association (NTAA). The IFTA annual

conference is an event for technical analysts, traders, fund

managers, asset allocators, and investors. Presentations,

debates, and panel discussions for this year’s conference

will include many different lectures and a panel discussion

on how technical analysis is being used at leading

investment management organisations around the world.

More events and schedule details can be found at the

website.

Source: www.ifta.org

FIBONACCI EXTENSION S&P 500

The high of the S&P 500 almost exactly hit

the 161.8 per cent Fibonacci extension. The

initial range for the extension was from

the low of 2009 to the old high of 2007.

Source: www.tradesignalonline.com

OIL PRICES AT NEW 6.5 YEAR LOWS

Oil prices have fallen to a fresh 6.5 year low in

August, amid continued worries of high global oil

supply while investors expect the demand fromChina to remain weak due to its growth slowdown.

Brent crude has declined below $45 per barrel, while

WTI crude has come down below $40.

Source: www.ibtimes.co.uk

http://www.traders-mag.co.uk/http://www.ifta.org/http://www.tradesignalonline.com/http://www.ibtimes.co.uk/http://www.ibtimes.co.uk/http://www.tradesignalonline.com/http://www.ifta.org/http://www.traders-mag.co.uk/


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INSIGHTS – NEWS

9

STOCK-PICKING CHALLENGE

VectorVest’s StockPickingChallenge.com is a new site for market enthusiasts with weekly and monthly cash prizes

from $100 to $5,000. No purchase or subscription is required. StockPickingChallenge.com offers beginners and

experts the opportunity to compete for weekly and monthly cash prizes by simply entering five stock picks. The top

five entrants in the weekly competition receive Visa Reward Cards from $100 to $500, based on the performance of

their five stock picks. Weekly entrants are entered into the monthly contest for a chance at $5,000. There is no limit to

how many times entrants can win. Included are a streaming market newsfeed, 15-minute delayed quotes on indexesand stocks, the Stock Picking Blog, Lightning Video Lessons, and free Stock Analysis Reports.

Source: www.StockPickingChallenge.com

CFD SPOOFERS FINED OVER £7 MILLION BY UK COURT

A UK court ruled that the Financial Conduct Authority

(FCA) is entitled to permanent injunctions and penalties

totalling £7,570,000 against three Hungarian traders and a

Swiss investment firm for unfair trading practices.

The technique consisted of entering and trading of

orders in relation to shares traded on the London Stock

Exchange in such a way as to create a false or misleading

impression as to the supply and demand for those shares,

enabling them to trade those shares at an artificial price.

The traders typically used a mixture of large and small

orders entered on one side of the LSE’s order book to

create a false impression of supply or demand in a

particular stock. These orders were not intended to be

traded. The large orders were carefully placed at prices

close enough to the best bid or offer prevailing on the

LSE at the time to give a false impression of supply and

demand, but far away enough to minimize the risk that

they would be traded.

The small share orders (typically around 100 shares) were

used to improve the best bid or offer price. As the price

improved, further large orders were strategically placed at

prices close to the new best bid or offer in order to support

the improved price. In this way the traders systematicallysought to manipulate the share price up and down. These

orders had the effect of moving the share price as the

market adjusted to the apparent shift in the balance of

supply and demand. Once the price had been moved to

an advantageous level, they initiated a trade on the other

side of the order book in order to profit from the price

movement that they had created. These trades took place

either on the LSE or on a competing venue in order to take

advantage of available liquidity.

The large “layered” orders, which were never intended

to trade and which were used to stimulate the price

movement of the relevant shares, were then cancelled

and the process would start over again, typically aimed at

moving the share price in the opposite direction. In this

way the actions consistently resulted in buying shares at

lower prices and selling shares at higher prices than would

have been the case had the strategy not been employed.

The traders accessed the relevant trading platforms via

Direct Market Access (DMA) brokers. DMA allows clients

direct access to exchanges and other trading platforms.

They did not trade directly in shares but used a derivative

instrument called a Contract for Difference (CFD), the price

of which precisely matches the price of the underlying share.

Source: www.financemagnates.com, written by Avi Mizrahi

http://www.stockpickingchallenge.com/http://www.financemagnates.com/http://www.financemagnates.com/http://www.stockpickingchallenge.com/


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INSIGHTS – NEWS

10


HIGH FREQUENCY TRADING AND MARKET SPIKES

HFT is typically 50 per cent of overall volume, but they have

to walk away in a heightened volume event such as on

24th August. This dramatically reduces liquidity. Hightened

volatility was mainly unwinding of hedges, not panic.

Anyone who actually trades knows that this precisely what

happens every time there is a spike in market volatility:

HFTs simply walk away leading to the dreaded “HFT

STOP” moment, creating a feedback loop of even less

liquidity, and even more volatility, until circuit breakers

are finally hit or asset prices hit limits. On 24th August,

for the first time in history, not only the S&P 500, but the

Nasdaq and the Dow Jones all hit their particular “limit

down” triggers. HFT’s had an amazingly profitable day because as a result of the total chaos, they were able to frontrun

block orders from a mile away and as a result of soarking bid/ask spreads, raking in millions by simply capitalising on the

chaos it and its peers have created.

Source: www.zerohedge.com

NOTHING BUT HOT AIR?

As the chart on the left shows, it seems as if almost all

the gains of the stock market took place after some sort

of Quantitative Easing was announced. That said, we

may see tough times soon in case the era of QE finally

comes to an end, and monetary policy begins to tighten.Source: Charlie Bitello, Stockcharts

DOW JONES IN TIGHTEST RANGE

EVER JUST BEFORE CRASH

A few days short of the crash, on 18th August Ryan Detrick

posted a fascinating statistic. Until that point in time (morethan half into the year) the Dow traded in just a 6.44 per cent

range since January. Then, in the crash on 24th August, it

fell 1089 points at the lows, largest 1-day decline ever.

Source: Ryan Detrick, FactSet. Stockcharts

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BROKERS‘ CORNER

11

Saxo Bank announced the appointment of Søren Kyhl as Chief

Operating Officer (COO) and member of the Management Board

effective from 1st January 2016. His appointment will further

strengthen the organisation and streamline the bank’s digital and

operational value chain. In this newly created role, Søren Kyhl will

assume responsibility for daily operations and execution including

overseeing the bank’s digital experience, marketing, data science

and Saxo Privatbank. He joins Saxo Bank with significant senior

experience most recently as Head of Transaction Banking and COO

in C&I (Corporates and Institutions) at Danske Bank. During his

13-year career at Danske Bank Kyhl also served as co-head

and global head of sales of Danske Markets and global head of

research, quant and business development. Søren Kyhl, who holds

a PhD in economics from University of Copenhagen, brings to the

role significant expertise and a strong track record of performance,

which together with his unique financial sector experience will

further strengthen Saxo Bank’s focus on its core business.

Source: www.saxobank.com

In the first half of 2015, Swissquote increased net revenues by 5.2

per cent year-on-year to CHF 74 million. Despite this growth, pre-

tax profit decreased by 11.1 per cent to CHF 11.7 million, due largely

to higher marketing costs. Showing a loss of CHF 10.6 million,

Swqissquote’s current half-year report is the first not to present a

net profit. This loss is attributable to the extraordinary provision of

CHF 25 million (announced in January) created to cover the negative

balances incurred by clients as a result of the Swiss National Bank

decision to remove the floor against the Euro. Net new monies

increased by 27.1 per cent year-on-year to CHF 580.2 million.

Source: www.swissquote.ch

IG Group has officially launched its Dubai office. This marks

the second regulatory license received by the company in a

new jurisdiction within a year after the broker obtained a Swiss

banking license last September. Commenting on the opening

of IG’s Group’s Dubai office at the Al Fatan Currency House, the

Interim CEO of IG Group, Peter Hetherington, said, “Dubai is a

thriving hub for commerce and trade and given its geographic

location, investors are in the perfect position to access a varietyof markets in real time using our tried and tested online platform.”.

Source: www.financemagnates.com

GAIN Capital limits omnibus accounts for institutional clients.

The company will scrap the Dealbook 360 platform, while

supporting institutional white labels via City Index’s Advantage

Trader. After completing a string of acquisitions in the retail

space over the past few years, GAIN Capital is poised to

consolidate its institutional foreign exchange business and to

calibrate its partnerships to claim greater visibility and exposure.

The NYSE-listed brokerage envisions a limited role for the

omnibus accounts it is operating on its platform, where trades

are facilitated for other brokers’ clients, such as Ameritrade and

the German headquartered FXFlat.


Interactive Brokers has revealed its volumes for the month

ending August 2015, showing a higher performance in a few

notable metrics compared with July but overall mixed results.

For the month ending August 2015, the number of Daily

Average Revenue Trades (DARTs) were reported at 652,000,

corresponding to a jump of 13 per cent from July 2015 and 49

per cent higher from August 2014. These gains were partly pared

by the equity balance in customers accounts totaled just $62.9

billion in August 2015, which represents a decline of four per

cent from $65.8 billion in July 2015. As is the case with most

of its business however, 2015 has been a more fruitful year for

Interactive Brokers, with equity balance rising 13 per cent from

August 2014.


Shares of Plus500 will be delisted from the London Stock

Exchange’s Alternative Investments Market (AIM) after the

conclusion of the merger deal with Playtech. Both companies

have recently reported their earnings for the second quarter of

2015. The brokerage reported revenues higher by 20 per cent

as profit declined 25 per cent. Playtech expects to conclude

the merger with Plus500 not earlier than September according

to its earnings report. After the conclusion of the deal the

owner of the company will be a subsidiary established by the

gaming company under the name Brighttech. The merger is still

pending the formal approval from the U.K. Financial ConductAuthority (FCA).


http://www.saxobank.com/http://www.swissquote.ch/http://www.financemagnates.com/http://www.financemagnates.com/http://www.financemagnates.com/http://www.financemagnates.com/http://www.financemagnates.com/http://www.financemagnates.com/http://www.financemagnates.com/http://www.financemagnates.com/http://www.swissquote.ch/http://www.saxobank.com/


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INSIGHTS – TRADERS´ TALK

12


Chris Weaver

CEO of My Trading Zone

TRADERS´ Talk

We talked to Chris Weaver, CEO of My Trading Zone, about his idea of

teaching others how to coach traders and about coaching traders in general.

Coaching Is about Listening

» TRADERS´: Your idea of teaching someone how to coach

other traders is new – what is your motivation behind

My Trading Zone?

Weaver: Coaching is about listening. A lot of trading

coaches are very keen to demonstrate their expertise in

an attempt to impress the coaching candidate enough

that they will want to buy more coaching. On the surface

this makes sense, but in reality it does not work. Clients

normally have a very strong idea of what they actuallywant to learn or get out of a coaching session. It is critical

that the coach identifies what the candidate would like

to learn and address it during the session. The candidate

finds value in the session and is more likely to buy more

coaching.

TRADERS´: What is the most important thing

when you want to be a coach in the financial market?

Weaver: Online infrastructure and product strategy. We

are very big on the sales funnel which is the process of

taking a client who is unknown to your product or brand

and moving them all the way up to a premium customer.How your trading and coaching products are displayed

and accessed are directly related to the success of your

business.



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INSIGHTS – TRADERS´ TALK

13

TRADERS´: Are there common mistakes

a coach should avoid?

Weaver: Do not talk too much and do not assume that you

know what the candidate wants to learn. I am stressing

this point as I feel it is such a common error that trading

coaches make. We suggest having a very thorough fact

finding document filled in by the client before the series

of coaching sessions begin. This is a great way to get to

know your customer and portrays a very professional

image.

TRADERS´: What do you think about the coaching market?

Is there a backlog of demand? What is a trader looking for

when he/she is interested in coaching courses?

Weaver: I believe there is a strong demand for quality

coaching with well thought out and professionally

presented products. More and more retail traders are

coming to the market every day and they are interested

in learning. There are plenty of amateurs out there but I

believe they will be forced to either increase the overall

quality of their offering or exit the market.

TRADERS´: So, what can My Trading Zone offer?

Are there special products?

Weaver: My Trading Zone is an online resource centre for

both private trading coaches and larger trading education

providers. We provide websites for individuals and

organisations who would like to run their own trading

education businesses. We also offer custom and/or white

labelled courses and presentations for trading education

companies, as well as free initial consultations and product

demonstrations to anyone interested in our services.

TRADERS´: Webinars are now a common thing. What do you

prefer – an online coaching or a personal coaching?

Weaver: I prefer convenience and comfort. Whichever is

best for the client and the coach to be productive makes

sense to me. They can both work extremely well.

TRADERS´: What can we expect from the coaching market

in the future?

Weaver: I believe that the “cream will rise to the top”.

As I stated earlier, the amateur coaches and trading

organisations who are not properly structuring their

marketing, product offering and presentation will be

forced out by those who are. I think there will be some real

quality coaching companies that seize the opportunity

over the next few years and generate heavy profits. «

I believe there is a strong demand for quality coaching

with well thought out and professionally presented products.

http://www.tradersonline-mag.com/index.php/forum


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INSIGHTS

14


Critical Traits to Possess in Order to Make it

How to Get a Job

in Proprietary Trading

Trader Rayner Teo discusses the traits you need in order to land a job at a prop firm. In addition to a

passion for trading, there are things like having grit and being good at numbers. And the list goes on.

» Proprietary trading is when a bank, firm or other any

financial institution trades on its own account rather than

on behalf of a customer. The instruments traded can be

anything from options, futures, currencies, derivatives

etc. Proprietary trading involves risking the firm’s capital,thus any profits or losses are borne entirely by the firm.

It is a highly sought after job as traders do not need to

cough up with initial capital, receive professional training

from seasoned traders, and still get a share of profits if

they make money. Thus it is no surprise to see many fresh

graduates applying for such a role.

But the interesting aspect about trading is that your

IQ has little to do with successful trading. We have seentraders who made millions with a zero level education,

and traders who failed even with a master’s degree.

Because of this fact, proprietary trading firms are not



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INSIGHTS

15

about trading and are not just walking the talk. This will

make you stand out from the thousands of applicants you

are competing with.

Even if you are a losing trader, it does not matter.

Because it tells them you are accepting your current

status (a losing trader) and want to improve your trading

by joining a proprietary trading firm.

If you want to take it further, bring along your trading

journal and charts during the interview to explain your

thought processes behind your trades. Which interviewer

would dislike a candidate like this?

Grit

Grit means firmness of character, indomitable spirit

(dictionary.com). Passion alone is not enough to succeed,

studies have shown that Grit plays an important factor as

well. So what is grit?

Grit is the ability to keep moving forward even when

crap hits the fence. Most traders will quit and stay away

from trading after blowing up a few trading accounts. But

those with grit will constantly reflect upon their actions

and seek to better themselves, which separates the

winners from the losers.

The author spent close to four years learning how

to trade but still was not profitable. It was depressing

as he knew so much about trading and yet he could notturn his knowledge into profits. Many times he felt that

profitable trading was an illusion but never once did he

consider giving up. There was always something in him

that pushed him forward, and today he realizes it is none

other than grit.

looking to hire candidates with the best educational

background or the highest IQ. So what does it take to get

a job in proprietary trading?

Passion for Trading

Just like anything else in life, if you have no passion in

whatever you are doing you will not be able to give your

100 per cent. And the same goes for trading, you must

have passion for it to have a chance of succeeding at it.

So what is passion?

It is not reading a few books on trading and thinking

you can make money by clicking your mouse. Neither is

it going to forums looking for the best trading strategy.

These are hobbies and hobbies cost money.

Rather, passion for trading is devoting countless

hours each day, week, month and even years to improve

yourself. To get better and better each day yet staying

humble all the way.

You will be reading hundreds of books, spending

infinite hours on Youtube watching trading videos, and

keeping a trading journal to record your progress as a

trader. Sounds like hard work? That is passion for trading.

Prove it

When you are interviewing for a proprietary trading job,

you want to convince the interviewer about your passionfor trading and your ability to persevere. What is the best

way?

We feel the best way to go about it is to start trading

on your own retail account. By showing the interviewer

your own trading records, it tells them you are passionate

mailto:[email protected]


16/82

INSIGHTS

16


If you do not believe, check out this book, “Pit Bull:

Lessons from Wall Street’s Champion Day Trader” about

a trader called Martin Schwartz who lost money for nine

years before making millions every year.

Minimal Liabilities

It would be ideal to come into proprietary trading with as

little liabilities and commitment as possible. It is best you

are not married with kids, have no outstanding loans or

any form of financial liabilities. Why is that so?

Because most proprietary trading firms operate on

the basis of giving their traders a basic allowance and a

profit sharing scheme. Not forgetting that trading has a

steep learning curve which can take a trader anywhere

from six to 18 months to be consistently profitable.

This means you will be living on a shoestring budget

for a period of time till you are consistently profitable.

Thus it makes perfect sense to reduce or have no liabilitiesat all.

Most proprietary trading firms will look out for this

factor, and this explains why they tend to hire fresh

graduates who are below 30 years old.

Quick with Numbers

The trading approach of most proprietary trading firms

is scalping, arbitraging or day trading. Because you are

trading on such low time frames, you need to think fast

and act fast. So how do they test you?

During the interviews they would ask you

mathematical questions (48 x 67) or solve some

statistical puzzle (Monty Hall). Some proprietary trading

firms take it one step further by requiring you to pass

Rayner Teo

Rayner Teo is a trader, blogger and founderof TradingWithRayner.com. He has threadsfeatured in Forexfactory and Hardw arezone.Traders around the world have benefited from his

sharing, and he is widely followed on YouTubeand ForexFactory. When he is not trading, he hitsthe gym or reads a book.

www.tradingwithrayner.com

a mathematical test before granting you an interview.

You may even be asked to play a game of poker with the

other candidates.

You can consider doing mathematical speed test a

few weeks prior to your interview to improve your mental

calculation.

Commonly Asked Questions

The author has been through a number of interviews at

different proprietary trading firms, and here are some

commonly asked questions:

• Why do you want to be a trader?

• Can you survive without a fixed pay?

• How long are you willing to give yourself?

• What trading books have you read?

• What is your trading approach to the markets?

• How much money do you want to make? • Where did you learn how to trade?

• Solve the Monty Hall problem

• What is 32 x 32?

Tell a Story

For every interview the author will highlight his passion

for trading, show evidence to prove it and explain his

determination to succeed. He does it by sharing his story

with the interviewer from childhood till present. He loves

to share his story because it engages the interviewers and

gives them an idea of personal traits and characteristics.

Conclusion

In Singapore, proprietary trading jobs are usually

advertised four to six times a year on jobs portal like

Jobstreet, Jobsdb and Efinancialcareers. If you want a

career in proprietary trading, always keep a look out for

such openings.

When granted an interview, you must convince the

interviewers you are passionate about trading and have

the grit to see through the tough days ahead. You canconsider telling a story like the author does to illustrate

the key characteristics proprietary trading firms are

looking for. «

You must convince the interviewers

you are passionate about trading and have

the grit to see through the tough days ahead.

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INSIGHTS

18


Portfolio MetricsAn Abnormal Fixation on Return

Trading and investing are done with one major purpose in

mind: making profits. Even though preventing losses are part

of the package as well, one’s returns seem to be the ultimate

(dis)proof of one’s ability. In this article we are going to take a

shot at convincing you of why looking at returns is a very badidea when it comes to estimating one’s long term potential in

financial markets. And of course, we will end up suggesting

what better indicators there might be.

Dirk Vandycke

Dirk Vandycke has been actively and independentlystudying the markets since 1995 with a focus ontechnical analysis, market dynamics and behaviouralfinance. He writes articles on a regular basis and

develops software partly available at his co-ownedwebsite www.chartmill.com. He teaches softwaredevelopment and statistics at a Belgian University.

[email protected]

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INSIGHTS

19

decision (process)

good bad

outcome

good deserved

success

dumb

luck

bad bad

luck

poetic

justice

This table shows how outcomes might relate to decisions made.

Source: www.chartmill.com

F1) On Decisions and Outcomes

probability

possibility

» Making it alive running through a dynamite factory with

a burning match in your hand does not mean you are not

an idiot. More accurately, it does not mean deciding to do

so was a good idea to begin with. Welcome to our biased

world.

The Third Monkey

As evolutionary biologists well know by now, we are a

species (not the only one) of overactive pattern seekers.

During our evolution, this started out with physical

patterns but quickly turned into looking for causal

relationships as well. All of this is good, because it has putus where we are today. The sons and daughters of a very

impressive chain of survivors harnessing those powers

along the way. However, falsely recognising something

that is not there, does not diminish our survival chances.

Not seeing what actually is there, almost guarantees not

handing over genetic material to the next generation. So

up until today, we see way too many patterns and causal

relationships.

Biases in Abundance

The relationship relevant in the search for where our

obsession with returns comes from, is the one between

the decisions we make (process) and the outcomes we

eventually get. To most it is crystal clear that with good

decisions must come good results. And while affirming

the antecedent we wrongly turn this upside down into

good results having to be proof of good decisions made.

Unfortunately there is a lot wrong with this default view.

Figure 1 shows that with good and bad decisions on

one side and good and bad outcomes on another, there

are four, not two, possible combinations. So on anyindividual occasion, good decisions may unfortunately

turn into bad outcomes while good outcomes may spring

from even bad decisions. That is what we call bad luck

We see way too many

patterns and causal relationships.

in the former case and dumb luck in the latter. For an

individual occasion we are talking (four) possibilities, but

in a repetitive frame, sticking to good decisions will on

average have good results as output. That is probability

taking over. Having four possibilities does not mean they

will share equal likelihood (25 per cent).

Judging decisions on their outcome, although not all

that is known now was known at the time the decision

had to be made, is what is called outcome bias. Its close

friend, hindsight bias, states that we are prone to estimate

what we knew or how we felt making the decision. The

”I knew effect”. Well, you probably did not know it then!While similar to the outcome bias, the two phenomena

are markedly different. The hindsight bias focuses on

memory distortion to favour the actor, while the outcome

bias focuses exclusively on weighting the past outcome

heavier than other pieces of information in deciding, if a

past decision was a good one.

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INSIGHTS

20


Profit (De)bunk(ing)

There is no shortage of fisherman’s

yarn in the financial industry.

One way to defuse the excessive

importance we put on returns (after

all the good outcome we are looking

for), is to put them in perspective

on a larger time scale. We present

you Table 1, a table of long term

compound returns. In blue, we have

the average risk free return over

the past 53 years. In red Warren

Buffett’s net worth is shown, while

in green and yellow we have the

GDP of Belgium (a small country)

and the USA (a very large country).

Now that should put it into

perspective, a few of the examples

of great returns. For instance on the lowest row we have

the winner of a one-month guru competition. Simple math

indicates that these examples are highly probably just

plain luck (or fraud) and very likely impossible to be even

an average sustainable return. Another one is a service

stating it is easy to achieve a 200 bucks earning a day on a

10,000 portfolio. Of course you cannot compound or this

would make too much money, we were told criticising thisscam with the same numbers of Table 1.

Repetitiveness and scalability are key in turning your

traders’ mind around such examples. If something sounds

Being profitable in the long r un with trading, and every investing enterprise for that matter, is about cutting

losses and letting profits run. Although this is a hearsay thing of ages, statistical exp ectancy actually proofs

the saying mathematical. It is not about being right or wrong but handling both profits and losses well.


F2) Expectancy Depicted as Scales

So this is what to expect when cumulating profits (given both on a p er month as well as a per year base) over ten and up to 60 years. As Einstein put it: “Compound interest

is the eighth wonder of the world. He who understands it, earns it ... he who does not, p ays it”.


Return Per Month Return Per Year Return Over 10 Years 100 Over 10 Years 100 Over 60 Years

0.21% 2.50% 28% 128 440

0.47% 5.84% 76% 176 3009

1.00% 12.68% 230% 330 129238

2.00% 26.82% 977% 1077 155640877

2.84% 39.99% 2789% 2889 58200000000

3.00% 42.58% 3371% 3471 174904823971

3.13% 44.83% 3960% 4060 447599831447

3.65% 53.70% 7260% 7360 15889960045023

4.00% 60.10% 10966% 11066 183655650658859

5.00% 79.59% 34791% 34891 180424425186733000

10.00% 213.84% 9270807% 9270907 63494091560654900000000000000000

15.00% 435.03% 1921944400% 1921944500 5040168486422420000000000000000000000000000000

T1) Cumulative Effect of Returns

A colleague once tried to convince me of the fact that

it seemed obviously a good idea, at least to him, having

bought shares of a tumbling bank in 2008 a week before

breaking news. Having made a whopping 200 per cent out

of it, he was all confused and surprised by my question, if

it had seemed a good idea at the moment when he made

the decision. Mind the fact that good decisions are not

restricted to knowing what stock to buy. There is far moreimportant decisions a good trader can make, in the absence

of knowing what the outcome will be. Selling losers before

a mistake turns into a problem is just one of them.

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INSIGHTS

21

too beautiful to be true, it probably is. If they promise you

quick wealth, quick is how you need to get out.

New Quality Metrics

If returns are not the way to measure achievement, then

what is? Well, in true science we have to keep track of the

misses, not just the hits! Likewise a good trader is to be

spot by looking at his losses.

Take Figure 2. A picture we frequently (re)use

to explain that profits come from balancing the

average size of profits and losses over their relative

frequency. Since we have far more control over the

average size of our profits and losses than we have

over their frequency, we should focus on minimising

losses and maximising gains. From this it follows

that a good portfolio or trader must be recognisable

from an overall historical picture showing (lots of)

small losses and (probably fewer) big winners. In

contrast though, with each momentarily look at such

a portfolio, chances are that you will find just the

opposite. For there will be few small losses and almost

only (big) winners. Because losses need to be weeded

out quickly. So metrics might include the average size

of losers against the average size of winners but also

the average holding period of losers against that of

winners. Also having a rising equity curve with small

drawdowns and more losers than winners is a strong

indication of a good trader.

One remarkable psychological study even showed

how long term performance of traders was, to a certain

extent, inversely correlated with how frequently

performance was measured (by return). So the more

traders look at their returns, the less they seem to have

them. But we cannot deduce any causality from this

without further study. It could just as well be that bad

traders look at their returns more. But even then it is a

correlative indicator, nevertheless.

In Conclusion

Returns, in the end, will be the result of being a consistent

trader focusing on self reflection while keeping a

constant eye on risk management and position sizing.

So as bad as metric returns are on short time scales,

as inevitable they will be in the long run as the ultimate

proof of being able to do the right things instead of

doing things right. «

http://goo.gl/4Z2C8


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INSIGHTS

22


In September and October there is a

good chance that many stocks and

indices will end their correction. In this

issue we show you the ideal entry date

for an American stock and the German

DAX.

Trading Seasonalities

Seasonal Low for a Coffee Stock and the German DAX

Keurig Green Mountain has lost heavily during the past months. The seasonal analysis recommends a buyon 30th September with a holding period until 7th February of the following year. In the past, you could have

achieved a profit of 32 per cent on average with an average loss of 17 per cent.

Source: www.lp-software.de

F1) Trading Idea Keurig Green Mountain

» Trading Idea Keurig Green Mountain

The US-stock Keurig Green Moun-

tain (GMCR), formerly known as

Green Mountain Coffee Roaster,

is the first seasonal trading idea.

The stock may be a long candidate

on 30th September, with a hold-

ing period until 4th February 2016.Based on the data of the past 16

years you could have achieved an

average profit of 32 per cent during

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INSIGHTS

23

traded indices. It lost about 15 per cent and even closed

well below the 10,000 level. Figure 2 shows that buyers

used the opportunity of the low prices to buy. Another

pullback to the lower downtrend line on 10th Octoberwould be an ideal entry date to trade the seasonal strat-

egy. The DAX may quote at about 9,070 points at that

time. Then you would achieve a risk-reward-ratio of

3.65, which is very good. Both trading ideas could also

be implemented with leveraged instruments (options,

futures and CFDs). «

these 127 days. One year there was

even a profit of over 200 per cent.

The stop-loss should be placed 17

per cent below the entry price. The

stock has dropped considerably

during the past months and as the

quarterly earnings at the beginning

of August did not fulfil the expecta-

tions, the stock lost another 30 per

cent overnight. Figure 1 shows the

price development of the stock with

several seasonal lines as well as

the entry and exit dates displayed

with vertical lines in green and red.

The chart shows, that a lower down

trend line was touched and a small

reversal started. The stock shows

a bottom formation starting at the

entry date and therefore we should

look for an entry. The maximum po-

tential is the uptrend line, where you can find the 200-

day line as well. Another interesting entry would be the

support from the years 2011 and 2012 at the level of $34.

In August of the previous year, Coca-Cola closed a longterm deal with the company and bought ten per cent of

the shares. The low prices could challenge Coca-Cola to

buy further stocks and to eventually take over the com-

pany. That could possibly lead to increasing prices.

Trading Idea German DAX

The second trading idea is one of the darlings of Eu-

rope’s traders – the German DAX. Based on seasonali-

ties the ideal entry date for a long position would be

10th October with a holding period until 4th January

2016. Based on the data of the past 27 years you would

have achieved a profit of ten per cent with a hit ratio

of 86 per cent. The risk of loss was 2.64 per cent. The

maximum profit was over 22 per cent. The stop-loss

should be placed about 22 per cent below the entry.

The DAX started a correction like most of the active

We will publish an update on 1st and on 13th October

2015 on our TRADERS´ website and on facebook, with an

analysis based on the current chart. The profit targets and

stop-losses will be calculated as well.

Update

The DAX has been in a strong correction during the past months. We suggest to use the touch of the triple

support at the area of 9,070 on the entr y date 10th October to buy until 4th January of the following year.

Source: www.lp-software.de

F2) Trading Idea German DAX

Table 1 shows the entry- and exit-dates of the introduced trading ideas.

Source: www.captimizer.com

T1) Seasonal Trades of the Month

Instrument Keurig Green Mountain German DAX

Direction Bullish Bullish

Entry 30.09.2015 10.10.2015

Exit 04.02.2016 04.01.2016

%-Win 94.00% 86.00%

History in years 16 27

Average profit 32.00% 9.32%

Maximum profit 219.00% 22.91%

Average loss 17.00% 2.64%

Maximum loss 58.00% 4.92%

Holding period 127 days 86 days

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COVER STORY

24


A stop-loss is an order that is triggered automatically when the price reaches a preset adverse level.

However, it is not a perfect risk control tool (there is no perfect risk control tool). And that is the reason

why certain professionals are preaching against it. On the other hand, some veterans, each with decades

of experience, vehemently advocate the use of stops. Who should you believe? Should you use stop-loss

in your trading? This article discusses the controversy surrounding this enigmatic risk control tool.

Do You Need Life Insurance in the Markets?

The Stop-Loss Controversy

» Arguments Against Stops

Those who preach against stop-loss believe that it has

negative effects on the performance of their trading

systems. They believe the only smart thing they can do is

to avoid the use of stops, for it increases negative ordersin the account history, including trades that could have

won, but which were stopped out at losses, for volatility

invariably affects the initial stop and price target. They

feel one can become profitable without the use of stops,

since there are profitable traders who do not use stops.

They make people realise that every stop stands for either

a loss of capital or a loss of profits.

Problems with Trading Methodologies that Do Not Use Stops

When the author was a neophyte, he once came across

an institutional trader who advised him against the use



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http://www.fxpro.co.uk/


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COVER STORY

26


of stops. He thought she was giving him good advice,

without knowing that he would suffer for believing her.The majority of those professionals once thought that

they could survive without stops; whereas you would

hardly come across sane forex traders who do not use

stops. Many professionals have learned bitter lessons as

a result of their past failure to use stops to safeguard all

their trades. You might even need to find out the truth

yourself. Open a demo account with a broker that does

not allow their demos to expire, as long as a few trades

per month are placed. Trade with such a demo account

without using stop-loss in all your trades. Do that for two

years and then report to us, showing us your account

history.

Believe us, when you receive margin calls, you will

not experience the gains enjoyed by stop-loss users. Any

trading methodology that does not use stops, or that

recommends the use of mental stops should be monitored

more closely, simply for the benefit of the doubt. With such

a methodology, traders may transiently appear cute when

some drawdowns are recovered and when losing positions

eventually break even or become positive positions, but it is

inevitable that an event will happen, like natural disasters,high frequency trading disasters, unprecedented volatility

in some pairs, et cetera. which will make your mental stops

useless or make you freeze in terror. You will be unable

to act until the inevitable happens

to your account. Why would you

lose a colossal amount of money

in a trade when it could simply be a

negligible loss? Do you want to be like

those gamblers who call themselves

pros? Those who treat trading like a

business use stops, gamblers do not!

Why would someone lose tens

of thousands of dollars or hundreds

of thousands of dollars or millions

of dollars before they learn a simple

lesson? Why can they not limit

their loss with stops in order to

avoid the harrowing consequences

of stupidity? If you are already a

speculator and right now you do not

use stops, then the best favour you

can do for yourself is to stop the no

stop-loss mentality and set stops

with your positions.

The only life insurance that can

guarantee your permanent success

in the markets is stop-loss. Please check what happened

to JPY pairs in October and November 2014. Good profitswould have been made if you were in the right direction,

but if you got caught in the wrong direction, what would

you have done? We pity those large institutions that do

not currently believe in stops. Obviously, they fail to learn

lessons from large institutions that crashed and burned

in the past.

When your portfolio experiences severe roll-downs,

we know you are not going to be happy. Your main

preoccupation is how to recover the roll-downs, which

is more difficult than preventing it in the first case. There

is a probability that your portfolio will never recover

when another roll-down drives it further into more

negative territory, while you are trying to recover from

the first roll-down. A margin call can follow. So why did

you not prevent this in the first place by using objective

stops? You can only enjoy higher probability of survival

with stop-loss. Stop-loss is mandatory as you give

your winning trades some leeway. One professional

even declares, without mincing words that anyone who

would argue against risk control by discouraging the

use of stops is a fool indeed. In effect, they are sayingyou should put your capital at unlimited risk. It should

become clear to yourself which one is sensible for you –

limited risk or unlimited risk.

In 2013 and 2014, Silver fell in an established downtrend. The bull should have cut his loss at a negligible

amount and looked for another trading opportunity. But what might have happened to a so-called professional

who refused to use a stop?.


F1) Sustained Bearish Movement on Silver

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COVER STORY

27

Some Recent Examples

Remember the 6th May 2010 Flash Crash, in which the

Dow Jones Industrial Average plunged about 1,000 points

(about nine per cent), only to recover those losses within

minutes. Because of that, some people argued against

the use of stops, while some argued in favour of stops.

Some experts thought that they would not suffer losses

because the market bounced back quickly. What if the

market had not bounced back quickly? In fact, the hope

that the market will – at some point in the future – bounce

back quickly is the only seemingly rational explanation

behind sermons against stops. “Stop deniers” preach

against stops because it is not a perfect risk control tool.

Although there are disadvantages in using risk control

tools, you need to know that the disadvantages pale in

insignificance when compared with the advantages.

Please see Figure 1, from 14th July 2014 to

5th November 2014, silver fell by 6,200 points. While a

position trader, who likes to go with the flow of the market

would have made some heartwarming gains, a bull that

got caught in a wrong direction would have suffered a

significant loss. The bearish trend on silver as a worse-

case scenario at that period is one of the worst-case

scenarios experienced by the bull. The bull should have

cut his loss at a negligible amount and looked for anothertrading opportunity. But what could have happened to a

so-called professional who refused

to use a stop? That professional

would have tried to cut his loss with

the hope that the market would

reverse that week, or the following

one, or the following month; but

the hope would be dashed as the

person got to his office every day,

sorrowing over his own stupidity. A

small position size could amount to

a gargantuan loss if the loss was not

contained.

Nobody can predict the future.

A Harvard PhD and a high school

dropout have equal skills at

prophecy. The GBP/USD suffered a

massive plunge in the year 2008 and

since then, the pair is far from seeing

the distribution level at 2.0000 again.

What would have happened to thosewho failed to cut their losses on

GBP/USD as a result of their long

trades? They would eventually be

forced to cut those losses at much larger losses. In a bull

or a bear market, some accumulation and distribution

territories can be respected. The occasional respect,

however, is not always dependable, and only stops can

rescue our portfolios when a strong trend continues

against us. If you are over the age of 60, then the cable may

not see the supply level at 2.0000 again in your generation.

The author is tired of seeing the self-professed “gurus”

suffering from a quick and speedy financial ruin, not only

because of high lot sizes in proportion to their account

sizes, but also because of their failure to use stops. Those

who encourage you not to use stops have other sources of

income that can sustain them in case of receiving margin

calls; and their portfolios are probably not risk capital. Do

you want to imitate them? They preach against the use of

stops, but they will not tell you what happened to them

when their preferred methodologies go through a baptism

of fire. Your stop may not be hit but a margin call will

force you out of the market. If this advice has given you

cause to think, then you have taken a huge step in your

evolution as a super trader, knowing the inherent dangers

and problems that come with illogical trading methods

that do not use stops. A great trader who has made tens

of millions of dollars from the stocks and commodities

markets told me the one individual universal reason forfailure is the inability to take a loss.

The chart shows the Flash Crash in a one hour time frame. In that scenario, stops were run but the losses wererecovered quickly. This is often used as an argument against the use of stops. What, however, if prices had

not rebounded and the decline continued as it did the days after?


F2) Flash Crash 6th May 2010

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Further Arguments for Stops

The author has experienced the wonders of stops allthrough his career as a trader. At some point, you will

suffer limited losses if you use stops and unlimited

losses if you do not use stops. Your stop may stop

you out of a trade that could have ended up being a

winner, but you are safer with the stop in place (you

are vulnerable without one). We are not talking about

mental stops, but physical stops. Even a veteran may

not respect mental stops because

of the heat of emotion. The markets

have a knack for moving faster

against us than we think.

It is much more satisfying to

control our urge to ignore stops.

In the end, is it worth losing your

entire portfolio because you want

to satisfy momentarily irrational

thoughts? Is the use of stop-loss

unduly restrictive? Not at all!

To disregard its use is to invite

problems and unhappiness in your

trading experience. Heeding the

advice to use stops and other risk

limiting tools adds peace of mind to

your career. Furthermore, you have

the prospect of enjoying lasting

survival in the markets, whereas

those who cultivate emotional and

irrational trading styles lose out

on both happiness and money.

Perhaps you might go scot-free in

other types of financial markets without s tops, but you

cannot emerge unscathed out of forex if you do not usestops.

The Greatest Achievement in Trading

The greatest skill in trading is your ability to cut losses.

This has nothing to do with what or who you are. The

greatest achievement in trading is controlling the

treacherous statistics called drawdowns, not making

profits, for profits are easy to make but difficult to

control. For example, if you made a profit of ten per cent

in this month, you could start experiencing losses in the

first or the second week of the next month (as is true of

any trading approach you might adopt). Proof of your

proficiency then lies in your ability to lose as lit tle money

as possible, going down by, say, three per cent to six per

cent maximum. This way it is easier for you to bounce

back when the strategy enters another encouraging

winning streak. However, a bad trader would lose from

ten to 40 per cent or even more, during such a transitory

losing streak. What is the benefit of gaining 20 per cent

this month and losing 40 per cent the next?

Your ability to cut your losses when they are stillinsignificant is the most important aspect of your trading

career. It is the greatest determinant to your everlasting

success, your ability to survive losing streaks (which all

Anybody not using a stop when tr ading short against the trend in USD/JPY could easily have been killed if the

position size had been sufficiently large. When breaking out above 110, price did not bounce back as is often

assumed will happen.


F3) USD/JPY Bull Run in 2014

A stop-loss order is an order placed with a broker to sell

a security when it reaches a certain price. A stop-loss

order is designed to limit an investor’s loss on a position in

a security. Although most investors associate a stop-loss

order only with a long position, it should also be used for

a short position, in which case the security will be bought,

if it trades above a defined price. A stop-loss order takes

the emotion out of trading decisions and can especially

be handy when one is on holiday or cannot watch his/her

position. However, execution is not guaranteed, particularly

in situations where trading in the stock is interrupted or

gaps down (or up) in price.Source: Investopedia.com

Stop-Loss Order

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COVER STORY

29

The ability to use and respect stop-loss is the foundation

of your progress in trading. If you fail to do this, other

things are completely useless.

Like in real life, doing the right things does not always

make you appear smart. In fact, you may sometimes look

stupid by doing the right things. A trader that uses a stop

may appear stupid when they are stopped out on a trade

that eventually reverses and turns positive. A trader may

appear stupid when a position they are trying to ride fails

to meet its target, turning from positivity to negativity.

But in the end, we will reap the benefits by doing the right

things. «

proficient traders must inevitably face occasionally), and

the possibility of ending up being profitable.

Final Thoughts

Many pragmatic traders advise that stop-loss is

extremely crucial (not mental stops). Please enter a stop

before or after you enter a trade. You cannot afford to

be married to your screen because every movement in

price – whether significant or moderate – will cause you

anguish if your position is negative. Every movement

can run you mad.

On the battlefield of the financial markets, the most

common factor that will demoralise you or kill your

portfolio is your inability to respect your stops. Every

trader must decide to use stops when trading, for this is

part of the rock solid discipline required for successful

trading. Some people think that they can set stop-loss

some hours or days later (too wide stops), and at last, the

plan to use stops is abandoned. There are also traders,

who widen their stops more and more because they want

to give losing positions more leeway. When the use of

stops becomes a part of you, you are already triumphant.

Azeez Mustapha

Azeez Mustapha is an official analyst at Instaforex

Companies Group, a blogger at Advfn.com, anda freelance author for trading magazines. He isworking as a tr ading signals provider at somewebsites. He is a senior analyst at Paxforex.com.His articles are also available on other websites likewww.ituglobalforex.blogspot.com.

[email protected]

http://www.ituglobalforex.blogspot.com/mailto:[email protected]://www.tradersonline-mag.com/index.php/forummailto:[email protected]://www.ituglobalforex.blogspot.com/


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COVER STORY

30

www.traders-mag.co.uk 09.2015COVER STORY

30


Ad vice from Our Pro fes

sionals

When you hear the word trading the first thought that may spring to mind

is profit. In Forex trading a popular function is a take profit order, which is

an automated order to close a profiting trade.

The words take profit may make your eyes shine when you hear them, but

what if the market goes against you and you start losing, and you wish

you had closed your position earlier…

Well, thank the man who invented the take profit order, as he also

invented the stop-loss order which is designed to limit an investor’s loss

on an open position when trading a security.

You may ask yourself: what can the benefit of a loss be? I will answer

your question with a question: why would you ignore the word “stop”?

When you use a stop-loss order you avoid liquidation, minimise your

loss, close positions if the market goes against you, and remove the

need to monitor your position on a daily basis .

A popular theory says if you open ten positions, seven become losing

positions and three become winning ones, your total will be positive if

you place a stop-loss for each.

A final note to all traders is: do not open any order without protecting

your positions!

Wissam Al Sallakh, Business Development Manager at ICM Capital

When placing an order I limit a single trade to one or two per cent of my

account balance and use the entry to stop distance to calculate the contract

size. By using this approach the underlying volatility of the market is taken

into consideration, so higher volatility in the market results in a wider stop

but smaller contract size, whilst a lower volatility market results in a tighter

stop and higher contract value.

When choosing my stop placement I try to find less obvious places

because too many stops in the same place (like, say, a swing high or low)

attracts price like a magnet and usually ends with you being stopped

out before the price reverses. Instead I will go for a wider stop behind

a cluster of technical levels, allowing so called “breathing room” for

market noise.

Additionally I limit myself to two new positions of uncorrelated markets,

and only seek to add positions if my original orders have been moved

to break-even.

By using smaller positon size and limiting my market exposure to

uncorrelated markets I have significantly reduced my chances of a

margin call should an unexpected and extreme move force me out of

my positions.Matt Simpson, Senior Market Analyst at ThinkForex

What is Your Life Insurance in the Markets?

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ADVERTORIAL

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TOOLS www.traders-mag.co.uk 09.2015

» Seoul-based financial technology firm SYSTRA has

launched a product that allows common traders to

implement their own algorithmic trading strategies. With

the technology, traders can build a complex algorithm,

without writing a single line of code. FXTraBox is a modular-

based FX algorithm builder that allows independent,

interchangeable, reusable modules such as Conditions and

Actions. As there are some solutions on the market which

already address this segment of the market, FXTraBox aims

to deliver a multi-asset solution. The product is offered on

a monthly subscription basis, with a free version dubbed

“Lite” offering a number of the features for usage. SYSTRA

is initially positioning the product towards the OTC Forex

trading market with back testing of the strategies available

for MT4. For more information visit www.fxtrabox.com.

» iStockAlerts has relaunched its stock trading app forApple or Android tablets, phones, and desktop computers.

The application constantly monitors financial data and

issues buy, sell, and hold recommendations for equities on

the NYSE and NASDAQ. iStockAlerts uses a proprietary

algorithm based off a set of technical indicators and sends

real-time alerts based on a customised watch list. New

34

News from the World of Technology

NEW PRODUCTS WEBREVIEW SOFTWAREREVIEW BOOKREVIEW APPREVIEW

New Products

iStockAlerts

features and added functionality incorporate earnings

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and Wall Street Journal. It also displays indices and offers

basic charting. The relaunched app, which was originally

developed by Eli Engelman in 2013 when he was still a high

school student, now includes brokerage account integration

with E*Trade, TD Ameritrade, Fidelity, Scottrade, and

Schwab, so the user can trade stocks while staying in the

iStockAlerts platform to complete the transaction. The new

version also offers access to market newsfeeds, analyst

ratings, and more. The mobile and desktop versions are

free. More advanced and customisable versions have

an annual subscription rate of $89.99. You can get more

information at www.istockalerts.com .

» MetaQuotes has made an important product

announcement. The company’s flagship MetaTrader 4platform is getting web trading support in the latest

build of the beta version of the platform. With the

new solution in beta, we are still months away from

seeing an officially available product, but the news that

MetaQuotes is working on a web-based solution should

please a number of brokers. All of the features of the

platform will be available for traders from a web browser

of their choice within a secure environment. The trading

account number and passwords will be encrypted and

stored locally

Traders September 2015

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