| People's
Summary
Prologue
A number of factors have been responsible
for the growth in futures trading:
-
Sophisticated investors have long sought
more effective methods of diversification. With practically a zero correlation
with stocks, futures trading can be an ideal asset class to profoundly
diversify an overall securities portfolio.
-
The tremendous expansion of futures
to encompass stock indexes, debt instruments, currencies, and options as
well as conventional commodities has created new categories of profit opportunities.
The global nature of today's futures markets also has expanded the scope
of investment possibilities.
-
Studies have shown a portfolio of stocks
and bonds performs less and is actually more volatile without, than with,
futures. Simply put, the addition of futures can increase performance and
reduce volatility when added to a portfolio of stocks and bonds!
The Mechanism of Futures Trading
1) Futures are financial
instruments whose value is derived from an underlying physical commodity
or financial instrument. In such, their prices is based on the price of
the instrument on which they are based - crude palm oil futures are based
on the price of palm oil traded in the commodities market.
2) The main reason for the
evolution and existence of futures is the fact that prices of commodities
and financial instruments fluctuate, often rapidly and over wide ranges.
Produces and uses of commodities and financial instruments, wish to avoid
the uncertainty that this price fluctuation brings. The futures market
brings buyers and sellers together in one place, where, through their brokers,
they agree on a price at which those commodities and financial intruments
will change hands at given future dates, thereby limiting their exposure
to price change. Thus, the primary purpose of futures is to manage risk.
The Advantages of Futures
Trading
3) The primary attraction,
of course, is the potential for large profits in a short period of time.
The reason that futures trading can be so profitable is leverage. Leverage
means that the return in investment exceeds the return on the underlying
instrument. In the futures market, leverage is made possible because of
the system of margins. For a small initial outlay ( the margin), a trader
has exposure to a much larger sum and can make huge profits/losses from
small variation in price.
4) Another advantage of futures
trading is much lower relative commissions.
5) Futures trading is not
particularly complicated. Unlike the stock market where there are over
ten thousand potential stocks and mutual funds, there are only about forty
viable futures markets to trade.
6) In futures trading, it
is as easy to sell (also referred to as going short) as it is to buy (also
referred to as going long). In other words - it's a two-way market.
7) It is economic-proof. |
Making (or Losing) Money in Futures
Trading
8) When you BUY a futures
contract, you essentially make a binding promise to acquire the commodity
at a certain time in the future. This time occurs at or around the expiration
of the contract and may be several months down the road.
9) When you SELL a futures
contract, You essentially make a binding promise to deliver the commodity
at a certain time in the future. Again, you’d be expected to deliver the
commodity at or around the expiration of the futures contract which may
be several months down the road.
10) Profits are derived when
buying positions are off-setted by selling positions at higher prices and
when selling positions are off-setted by buying positions at lower prices.
Trading System
11) Most successful traders
use a mechanical trading system. This is no coincidence.
12) A Complete System covers
each of the decisions required for successful trading: (1) Markets - What
to buy or sell (2) Position Sizing - How much to buy or sell (3) Entries
- When to buy or sell (4) Stops - When to gget out of a losing position
(5) Exits - When to get out of a winning position (6) Tactics - How to
buy or sell. |
Resam Padi Trading System
13) Our trading system is
Resam Padi Trading System (RPTS).
14) RPTS is designed based
on historical data that market adjustments sometimes form trends. The models
have revealed that there is an inherent return in participating in price
movements that reflect those trends.
15) RPTS does not predict
trends nor predicts any future market movements.
16) Prices is the foundation
of the analysis.
17) RPTS is more focus into
sound money management and risk control rather market analysis.
18) RPTS is designed to be
harmony with both the user of the system and the markets.
19) With RPTS, low analysis
accuracy is expected. RPTS is into trading strategies rather analysis accuracy.
20) RPTS is designed to be
harmony with the market. Expect to go long when the market is going up,
and short (or out of) the market when it is going down.
21) RPTS is a long-term trading
strategy - trading with the objective of making money in the long run (6
- 12 months) and consistently that the straategy will make money given enough
time.
Money Management
22) The number one cause
of financial death among beginning traders is trading too much with too
little. In other words, using a lot of leverage - much more than they should.
23) Risk capital is the amount
of money you decided to invest in futures trading where, if you should
loose it all, it won't affect your lifestyle. |
Trading Disciplines
24) Confidence and Consistency
is two most important disciplines in applying any trading system.
25) Cut losses short and let
profits run are key ingredient in successful trading.
Technical Analysis
26) RPTS uses technical tools
for trading decisions.
27) These technical tools
measure market behaviors which are divided as :
(1) Trending (2) Congesting (3)
Ranging (4) Retracing (5) Sideways
28) RPTS trade markets according
to market behaviors through trading sub-system :(1) Trend-Following Trading
(2) Swing Trading (3) Counter-Trend Trading and (4) Range Trading. |
Trading Plans, Trading Logs and
Trading Performance Report
29) RPTS shall not resume
trading without a trading plan.
30) Trading plans are used
as pre-decision to trade before markets open to identify where and when
to take positions, cut losses and take profits.
31) All trading activities
are recorded in Trading Log.
32) Through trading logs,
Trading Performance Reports are produced, usually semi-annually.
Our Recommendations
33) It
is our goal to offer our clients alternative investment in futures trading,
that are appropriate to their risk tolerance, investment goals, and investment
experience. Not all of the products we offer are appropriate for all prospective
investors: various futures trading are available only to persons who meet
specific financial requirements.
34) Our first recommendation
is of course to ask you to understand that futures trading is risky and
only meant for speculative investments.
35) Our second recommendation
is to decide on the three alternatives suggested below as it is impossible
for us to access anyone's personal profile:
a) Never even think of trading futures.
b) If you should trade, better have
the knowledge and the skills (the right disciplines, mentalities and
analysis abilities)
in trading.
c) If you should trade but you don't
have the knowledge and the skills, better ask us to trade on your
behalf and you
continue doing whatever you do best.
36) Our third recommendation
is to calculate how much money you should initiate your trading account
through calculating your risk capital where:
Risk Capital
1) Calculate your net worth where:
Net Worth = Total
Assets - Total Liabilities
2) Calculate 10% of your Net Worth.
3) Decide how much of the amount
in (2) is your risk capital [money you can
afford to lose
that won't change your lifestyle].
Hence, amount in (3) is the amount
you should initiate your trading account.
If the amount calculated in (3) does
not exceed RM 5,000.00 then, SORRY, you are not qualified for trading futures
through Okachi (M) Sdn. Bhd. We still recommend you to refer to other brokerage
firms for your investment goals. You can refer through SC or MDEX or MDCH
for a start.
37) Our fourth recommendation
(if you should trade on your own) is for you to have your own trading system
be it through fundamental analysis or technical analysis or the combination
of both. Your trading system should suit your trading style, your financial
goals and your personal profile.
38) Our fifth recommendation
is we trade on your behalf using our trading system - Resam Padi Trading
System which emphasizes on (1) Money Management (2) Trading Discipline
(3) Technical Analysis.
39) Our sixth recommendation
is choosing which markets to trade. Which market to trade has a lot to
do with your trading size or your trading equity and market volatility.
40) Our seventh recommendation
is to quit trading totally once the account equity reduced 50% from the
original initiate amount.
41) Our last recommendation
is to open a trading account.
You will be asked to fill and complete
some forms. These are:
1. New Account Information.
2. A Customer Agreement Form.
3. A Risk Disclosure Document.
4. A Letter of Authority Form -
Only if you need someone else (non-broker) to
trade on your
behalf.
You will want to sign the relevant
documents only after you have thoroughly read through them. To be eligible
to trade, you will need to place a 'margin' or cash or bank guarantee.
42) We are looking forward
to serving you in your investment. |
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