FKLI December 2005 – Oops! Trade 43 – Closed with a net loss of RM150

Trade Planning and Management

December 21, 2005

FKLI Spot Chart as at December 20, 2005

Entry Strategy for Oops! Buy stop order
a. Option 1: If the price opens gaps down from prior day’s low, put a buy stop order 1 tick above prior-day low after FKLI opens.
b. Option 2: If the price opens flat or higher than prior day’s low, do nothing.

Entry Strategy for Oops! Sell stop order
a. Option 1: If the price opens gaps up from prior day’s low, put a buy stop order 1 tick below prior-day low after FKLI opens.
b. Option 2: If the price opens flat or lower than prior day’s low, do nothing.

Entry Strategy for Oops! Buy stop order during Rollover period (starting 22nd of the month):
a. Option 1: If the price of both Spot and Next month contract opens gapped down from prior day’s low, put a buy stop order 1 tick above prior-day low after FKLI opens.
b. Option 2: If either the price of Spot and Next month contract opens gapped down, do nothing.
c. Option 3: If the price opens flat or higher than prior day’s low, do nothing.

Entry Strategy for Oops! Sell stop order during Rollover period (starting 22nd of the month):
a. Option 1: If the price opens gaps up from prior day’s low, put a buy stop order 1 tick below prior-day low after FKLI opens.
b. Option 2: If either the price of Spot and Next month contract opens gapped up, do nothing.
c. Option 3: If the price opens flat or lower than prior day’s low, do nothing.

Adding More Contracts and Re-entry Strategy
a. No adding more contracts and Re-entry Strategy

Trade Management
a. If the stop order is triggered, put a stop order:
i. 1 tick below the intra-day’s low for Buy stop order.
ii. 1 tick above the intra-day’s high for Sell stop order.
b. Exit Strategy
i. MOC – if the price hits extreme in your favor. The extreme is when a long outside-day is formed with Close near Low or High. Close at 5:14pm.
ii. Next day‘s Open – if the trade is profitable but the price is not extreme, leave it over-night. Exit next day’s Open if the price gaps in your favor.
iii. Next day’s Close – if the price hits extreme in your favor. The extreme is when a long candle is formed with Close near Low or High. Close at 5:14pm
iv. 10 to 16-point profit. – Exit immediately
v. If there is no ascending or descending triangle target, use Fibonacci 161.8% as a possible target for trend-following Oops!.

c. Trailing Stop for Exit on Next day Close or subsequent days
i. The protective stop cannot increase your risk (loss) and reduce your profit unless No 6 and 7 below.
ii. The protective stop cannot give back more than 6 points of unrealized profit.
iii. When the trade is profitable, move your protective stop to the breakeven point. Trail your stop.
iv. When the trade is profitable, move your protective stop. Short Position: Move your stop to 1 tick above the open or high, whichever is lower, for sell stop but must be lower than your previous stop. Long Position: Move your stop to 1 tick below the open or low, whichever is higher, for buy stop but must be higher than your previous stop.
v. If the price moves in your favor, the trade is profitable and the prior day bar is a long bar (more than 8 points), move your stop 1 tick above or below the middle of the bar.
vi. Short Position: If prior-day’s bar is a long bar (8 points or more) and the today’s open is higher than prior day’s close but below the middle range of prior-day’s range, put your stop at 1 tick above the middle of prior-day’s range. Long Position: If prior-day’s bar is a long bar (8 points or more) and the today’s open is lower than prior day’s close but above the middle of prior-day’s range, put your stop 1 tick below the middle of prior day’s range.
vii. Short Position: If prior day bar is a long bar (8 points or more) and the today’s open is lower than prior day’s low, put your stop at 1 tick above the prior day’s low. Long Position: If prior day bar is a long bar (8 points or more) and the today’s open is higher than prior day’s high, put your stop 1 tick below the prior day’s high.
viii. Short Position: If prior-day’s bar is a long bar (8 points or more) and the today’s open is higher than both prior day’s close and middle range of prior-day’s range, put your stop at 1 tick above the prior-day’s high. Long Position: If prior-day’s bar is a long bar (8 points or more) and the today’s open is lower than both prior day’s close and middle of prior-day’s range, put your stop 1 tick below the prior day’s low.
ix. The maximum loss is 10 points or high/low of the next bar if the price gaps

Today’s Entry strategy:
a. Call Apex at 8:45am to check the opening price. Ask Apex for the following before entering a trade:
i. Open
ii. High and Low
iii. Last Done
iv. Prior day high / low (if not remembered or need confirmation)
b. If the price opens gaps up or down, put a stop order
c. Ask them to inform you when any trade is done. If the stop order is triggered, put a protective stop order based on intra-day High or Low.
d. Exit on MOC, next day‘s Open, next day’s Close or 10-point profit.
e. Let the trailing buy stop follow the price until it is taken out.

My actual Entry strategy
a. I called Apex to check the Open. The price opened gapped up at 892.5 for December contract even DJIA lost 30 points. Why? The January contract opened gapped-up as well at 885.5.
b. I hesitated for a white before taking the trade. Then, I called gained to check the price.
c. Finally, I called at 8:53am again to put in my sell stop order at 891.5, 1 tick below the previous day’s high.
d. I do not feel good about this trade. But there is a signal, I took it anyway.
e. I expected that my sell stop would be triggered between 9:01am and 10:00am.
f. I received a call from Apex at 10:30am to inform me that my sell stop was triggered at 891.5. I immediately put in my protective buy stop at 895.5, 1 tick above intra-day’s high.
g. I was busy with my 2006 planning that I did not monitor the trade.
h. At noon, the price was at 892. I still have a bit doubt of the trade. I told myself that if the price at MOC is greater than 891.5, will close my short position.
i. At 4:30pm, I checked the price. The price is at 892 and 894 range.
j. I felt like the pre-holiday trading may not be good.
k. I monitored the price at 5:05pm.
l. At 5:12pm, I closed my position at 893.5 at market order. The price closed at 893.5.
m. It is my 2nd FKLI loss in a row with net loss of RM150 (2xRM50 + RM50 commission).
n. But I did not felt as bad as my previous loss as I am following my trade management. If I do so in long run, I will be net winner.


Trade executed according to plan? Yes

What I have done best:
a. I follow Oops! entry, trade management and exit.
b. I closed my position even with a small loss. It is my Oops! rule.

What I need to improve:
a. I need to back-test Oops! method with trend-following and “close position on MOC if there is a loss” again for my 2006 planning.

What I have learned:
a. The premium or discount of FKLI and CI narrows during this pre-holiday season this year and last year.