Benny Intraday Intro Part1
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4/16/2008
How you can make money with only a computer EVERY DAY, ANYWHERE
The POWER of INTRA-DAY TRADING
POWER OF INTRADAY TRADING INTRODUCTION 1996 : • Got into the stock market frenzy while in college • Started attending some technical analysis seminar • Got first charting software, MetaStock 1997 : • Started trading the futures market in 1997. • Was against the trend, Lost heavily 1997 – 1999 : • Worked in a Recruitment Agency (Need to pay back debts!). • Started to study about trading. Discovered and learned mistakes • Developed trading strategies and traded lightly. • Learned about Automated Trading Strategies
Benny Lee
1999 • Started trading privately. Stocks and Futures, Malaysia and Singapore. • Started learning TradeStation and Omnitrader. • Training Consultant to a Software Company. (This was when my training experience started) Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
1
4/16/2008
POWER OF INTRADAY TRADING INTRODUCTION 2004 till present: • Still trading privately • Work with NextView Group as Chief Market Strategist • Trade and Work at home
Training/Coaching Experience (More than 8 years): Professionals and Retail Investors in Malaysia, Singapore, Thailand, Vietnam, Pakistan and Hong Kong Speaking Engagements (More than 6 years): Malaysia, Singapore, India, Indonesia and Thailand Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING INTRODUCTION
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
2
4/16/2008
POWER OF INTRADAY TRADING INTRODUCTION
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING INTRODUCTION TO INTRAINTRA-DAY TRADING Intra-day Trading Intra-day refers to “within a day”. Therefore, intra-day trading means buying and selling or short-selling and cover-short within the same day. So, there is an opportunity to make money every day.
Why trade intra-day and not position trade in derivatives? • High risk because of “leverage” when trading derivatives that includes futures, options or Forex markets. The trader has to make fast decisions to profit with minimizing the risk. • Volatile price movements within a day. • Lower commission rates • Uncertain price direction in the following day. Large gaps are common in the futures market. • Short term profits, suitable for those who wants to trade full-time. Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
3
4/16/2008
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES? Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and CFDs. They are 2 groups of derivatives contracts: Exchange Traded Derivatives – Contracts that are traded in an exchange. The Kuala Lumpur Composite Index Futures (FKLI) is an index futures instrument which the underlying instrument is the Kuala Lumpur Composite Index, traded in Bursa Derivatives Exchange. The Crude Palm Oil Futures is a commodity futures instrument which the underlying instrument is the physical crude palm oil price, traded in Bursa Derivatives Exchange The Nikkei 225 futures is an index futures instrument which the underlying instrument is Japan’s Nikkei 225 index is trades in a few exchanges , including Singapore. Call and put options can be traded in exchanges or over the counter…
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES? Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and CFDs. They are 2 groups of derivatives contracts: Over the counter derivatives- contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Forex trading (or currencies)– is done between banks. Retail traders can also trade forex with forex trading providers (or brokers). CFD (Contract for differences) – These CFD providers trade directly with their customers and offer many types of instruments including stocks, indices, futures, forex, options, etc and is normally done online.
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
4
4/16/2008
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives
i) Relatively Lower Commissions Commission for 1 Futures contract worth $60,000 (buy and sell) = $50 to $60
Commission for $60,000 worth of stocks (buy and sell with 1 to 1.4% commission) = $600 to $840 Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives
ii) Make money even when market is bearish Price Stocks – no opportunity
Time
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
5
4/16/2008
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives
ii) Make money even when market is bearish Price Futures – $$$$$$$$$$$$$ Short!
Time
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives iii) LEVERAGE
To trade 1 contract of Index Futures, I only need a capital margin of $9,000 to trade $65,000 based on current index points, say current index level = 1,300 points.
Therefore, in this contract 1 point is equivalent to $50.
That gives me a leverage of 7 times from my capital.
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
6
4/16/2008
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives
LEVERAGE – How does it help you? I can make more money with less capital ! Say I buy 1 futures contract (my initial capital is only $9,000), I have an equivalent value of stocks worth $65,000, with the current index level at 1,300. If I trade stocks, I have to come up with $65,000.
If the futures market moves up 5%, I can make $3,250. That’s almost a 30% gain from my capital.
If I have bought stocks with $65,000 capital, I would have only enjoyed a 5% gain. Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives Opportunities in derivatives market. The Daily Average Range for Crude Palm Oil price is between 50 to 100 points. That translates to RM1,250 to RM2,500 money making opportunity trading only 1 contract. The Daily Average Range for KL Composite Index futures price is between 20 to 40 points. That translates to RM1,000 to RM2,000 money making opportunity trading only 1 contract. The Daily Average Range for Nikkei 225 price is between 150 to 300 points. That translates to RM2,250 to RM4,500 money making opportunity trading only 1 contract. The Daily Average Range for USDJPY price is between 0.6000 to 1.000. That translates to USD600 to USD1,000 money making opportunity with USD1000 deposit and 10% margin.
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
7
4/16/2008
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives
Now, let’s be realistic! 1. You will never be able to buy at the lowest price and sell at the highest price Say you can only profit 50% from the daily range. You can make RM600 to RM1000 on CPOF or RM500 to 1000 on FKLI. 2. You do not make money everyday, even if there is an opportunity to make money everyday A trading plan with a winning edge will have more winning trades than loosing trades, with a profit to risk ratio of at least 2 to 1. Using FKLI as example. There is an opportunity to make RM500 to RM1,000. Let’s use the min profit of RM500 a day. Your risk is always ½ of the profit, therefore RM250. Say you have a plan with a 60% winning probability. Say you make 20 trades in one month. You win 12 trades and lose 8 trades. You make in total RM6,000 and loss RM2,000 and net a profit of RM4,000. This is only 1 contract. If you trade 5 contracts, you have an opportunity to make RM20,000. Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives
Who can trade intra-day?
YOU! Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
8
4/16/2008
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives
Who can trade intra-day? As long as you have the PASSION* and DESIRE* to beat the market everyday *from Napoleon Hill (in his famous motivational book “Think and Grow Rich”) Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives What you need to trade intra-day i) A trading plan – to identify opportunities to trade with low risk ii) A computer or a laptop with Internet access iii) Charts – A charting tool that is flexible enough to help you to implement your trading strategy iii) Trading Capital – To trade comfortably. A preferred capital is the contract margin x 2. iv) Discipline – Crucial when implementing a trading plan. The trade have to consistently follow the trading plan. v) A positive mind with clear goals that are achievable
TREAT IT LIKE RUNNING A BUSINESS ! Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
9
How you can make money with only a computer EVERY DAY, ANYWHERE
The POWER of INTRA-DAY TRADING
POWER OF INTRADAY TRADING INTRODUCTION 1996 : • Got into the stock market frenzy while in college • Started attending some technical analysis seminar • Got first charting software, MetaStock 1997 : • Started trading the futures market in 1997. • Was against the trend, Lost heavily 1997 – 1999 : • Worked in a Recruitment Agency (Need to pay back debts!). • Started to study about trading. Discovered and learned mistakes • Developed trading strategies and traded lightly. • Learned about Automated Trading Strategies
Benny Lee
1999 • Started trading privately. Stocks and Futures, Malaysia and Singapore. • Started learning TradeStation and Omnitrader. • Training Consultant to a Software Company. (This was when my training experience started) Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
1
4/16/2008
POWER OF INTRADAY TRADING INTRODUCTION 2004 till present: • Still trading privately • Work with NextView Group as Chief Market Strategist • Trade and Work at home
Training/Coaching Experience (More than 8 years): Professionals and Retail Investors in Malaysia, Singapore, Thailand, Vietnam, Pakistan and Hong Kong Speaking Engagements (More than 6 years): Malaysia, Singapore, India, Indonesia and Thailand Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING INTRODUCTION
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
2
4/16/2008
POWER OF INTRADAY TRADING INTRODUCTION
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING INTRODUCTION TO INTRAINTRA-DAY TRADING Intra-day Trading Intra-day refers to “within a day”. Therefore, intra-day trading means buying and selling or short-selling and cover-short within the same day. So, there is an opportunity to make money every day.
Why trade intra-day and not position trade in derivatives? • High risk because of “leverage” when trading derivatives that includes futures, options or Forex markets. The trader has to make fast decisions to profit with minimizing the risk. • Volatile price movements within a day. • Lower commission rates • Uncertain price direction in the following day. Large gaps are common in the futures market. • Short term profits, suitable for those who wants to trade full-time. Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
3
4/16/2008
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES? Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and CFDs. They are 2 groups of derivatives contracts: Exchange Traded Derivatives – Contracts that are traded in an exchange. The Kuala Lumpur Composite Index Futures (FKLI) is an index futures instrument which the underlying instrument is the Kuala Lumpur Composite Index, traded in Bursa Derivatives Exchange. The Crude Palm Oil Futures is a commodity futures instrument which the underlying instrument is the physical crude palm oil price, traded in Bursa Derivatives Exchange The Nikkei 225 futures is an index futures instrument which the underlying instrument is Japan’s Nikkei 225 index is trades in a few exchanges , including Singapore. Call and put options can be traded in exchanges or over the counter…
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES? Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and CFDs. They are 2 groups of derivatives contracts: Over the counter derivatives- contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Forex trading (or currencies)– is done between banks. Retail traders can also trade forex with forex trading providers (or brokers). CFD (Contract for differences) – These CFD providers trade directly with their customers and offer many types of instruments including stocks, indices, futures, forex, options, etc and is normally done online.
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
4
4/16/2008
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives
i) Relatively Lower Commissions Commission for 1 Futures contract worth $60,000 (buy and sell) = $50 to $60
Commission for $60,000 worth of stocks (buy and sell with 1 to 1.4% commission) = $600 to $840 Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives
ii) Make money even when market is bearish Price Stocks – no opportunity
Time
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
5
4/16/2008
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives
ii) Make money even when market is bearish Price Futures – $$$$$$$$$$$$$ Short!
Time
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives iii) LEVERAGE
To trade 1 contract of Index Futures, I only need a capital margin of $9,000 to trade $65,000 based on current index points, say current index level = 1,300 points.
Therefore, in this contract 1 point is equivalent to $50.
That gives me a leverage of 7 times from my capital.
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
6
4/16/2008
POWER OF INTRADAY TRADING WHAT IS A DERIVATIVE MARKET AND WHY TRADE DERIVATIVES?
Why trade derivatives
LEVERAGE – How does it help you? I can make more money with less capital ! Say I buy 1 futures contract (my initial capital is only $9,000), I have an equivalent value of stocks worth $65,000, with the current index level at 1,300. If I trade stocks, I have to come up with $65,000.
If the futures market moves up 5%, I can make $3,250. That’s almost a 30% gain from my capital.
If I have bought stocks with $65,000 capital, I would have only enjoyed a 5% gain. Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives Opportunities in derivatives market. The Daily Average Range for Crude Palm Oil price is between 50 to 100 points. That translates to RM1,250 to RM2,500 money making opportunity trading only 1 contract. The Daily Average Range for KL Composite Index futures price is between 20 to 40 points. That translates to RM1,000 to RM2,000 money making opportunity trading only 1 contract. The Daily Average Range for Nikkei 225 price is between 150 to 300 points. That translates to RM2,250 to RM4,500 money making opportunity trading only 1 contract. The Daily Average Range for USDJPY price is between 0.6000 to 1.000. That translates to USD600 to USD1,000 money making opportunity with USD1000 deposit and 10% margin.
Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
7
4/16/2008
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives
Now, let’s be realistic! 1. You will never be able to buy at the lowest price and sell at the highest price Say you can only profit 50% from the daily range. You can make RM600 to RM1000 on CPOF or RM500 to 1000 on FKLI. 2. You do not make money everyday, even if there is an opportunity to make money everyday A trading plan with a winning edge will have more winning trades than loosing trades, with a profit to risk ratio of at least 2 to 1. Using FKLI as example. There is an opportunity to make RM500 to RM1,000. Let’s use the min profit of RM500 a day. Your risk is always ½ of the profit, therefore RM250. Say you have a plan with a 60% winning probability. Say you make 20 trades in one month. You win 12 trades and lose 8 trades. You make in total RM6,000 and loss RM2,000 and net a profit of RM4,000. This is only 1 contract. If you trade 5 contracts, you have an opportunity to make RM20,000. Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives
Who can trade intra-day?
YOU! Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
8
4/16/2008
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives
Who can trade intra-day? As long as you have the PASSION* and DESIRE* to beat the market everyday *from Napoleon Hill (in his famous motivational book “Think and Grow Rich”) Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
POWER OF INTRADAY TRADING How you can make money trading intraday in derivatives What you need to trade intra-day i) A trading plan – to identify opportunities to trade with low risk ii) A computer or a laptop with Internet access iii) Charts – A charting tool that is flexible enough to help you to implement your trading strategy iii) Trading Capital – To trade comfortably. A preferred capital is the contract margin x 2. iv) Discipline – Crucial when implementing a trading plan. The trade have to consistently follow the trading plan. v) A positive mind with clear goals that are achievable
TREAT IT LIKE RUNNING A BUSINESS ! Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)
9
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