Trading Without Traditional Indicators with Robin Ho
You might be thinking, “Is that even possible?” According to Robin Ho, one of PhillipCapital’s top tier remisiers and one of Phillip CFD top traders, the answer was a resounding “Yes!” and he shared his trading techniques with clients during a joint seminar with Phillip CFD on the 5th March 2011.
Ho started the seminar by presenting on the background and outlook of various markets like the USA, Europe, China and finally on South East Asia. As 2011 will be a very volatile and unpredictable year, the advice is to be cautious and to learn how to preserve one’s capital while trading. Statistics have shown that 95% of traders lose money but what gives the 5% the edge is psychology.
As described by Ho, the ideal trader needs to be a “chameleon” who “changes” according to the market. This is where Ho uses CFD as a trading strategy as CFD is adaptable – allowing one to both long and short the market. Ho shared that through monitoring the charts and using CFD to short, he was able to turn $300,000 to $2 million within seven months during the 1998 financial crisis. And he did this without traditional indicators such as the MACD, Bollinger Bands or RSI. Ho’s belief is that trading should be simple and instead of relying on lagging indicators, the best ‘indicators’ are:
• Price
• Volume
• Price spread
In order to stress his point that traditional indicators do not work all the time, Ho showed charts where three indicators signaled a sell action but the chart was shown to be on an uptrend and vice versa.
Showing charts with 20-year trend lines, short term support and resistance lines, Ho explained that these are the ‘roadmaps’ that he used in his trades to see the big trends and sub-trends respectively. A good ‘roadmap’ to start with is any index’s chart as indices paint the broad picture of the markets. Ho trades indices via CFD very regularly and three indices that he looks closely at are: the Dow Jones Industrial Average (DJIA), the Straits Times Index (STI) and the Hang Seng Index (HSI). The rationale for focusing on these indices is that the DJIA tends to show the global picture while the STI is close to our (Singaporean) hearts and with China’s growing influence in the global arena, the HSI is an important index to keep an eye on.
Ho emphasized that technical analysis or fundamentals alone were not enough and it had to be a combination of both fundamentals and technicals that would enable an investor to make good trades. He cited an example that his dentist friend who wanted to invest in crude oil simply because of all the news regarding the Middle East. This might be a macro-economic factor but without the charts, his friend might be entering the market too late and might end up losing money instead. This is fundamental where the ‘roadmap’ comes in and helps an investor make smart decisions, Ho added. Furthermore, trend lines can be used for future price projections. Nevertheless, Ho did admit that it is a skill that needs to be honed over the years.
Ho also shared that some investors tend to trade through rumours, hearsay or simply through reading analyst reports.
However, this is merely trading through “blind faith” as there are many differing views that may contradict each other. The best method is to read analyst reports as background information on the stock but use the chart patterns at the same time to see a holistic picture. After all, trading is not only about knowing when to enter but also when to close off your position, he remarked. Being a trader or an investor does not mean observing the market every minute. It is also about having the patience to wait for the right volume and price signals to indicate the best entry and exit points, he shared.
The seminar ended with Ho quoting Jesse Livermore, the world’s greatest speculator, who advised that investor should keep the number of stocks he or she owned to a controllable number; to take losses quickly instead of brooding on them; and most importantly, not to try to play the market all the time – as investors tend to be governed by emotions.
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