Mastering Effective Trading Strategies
Originally published on www.GulfNews.com, February 20, 2009.
Technical analysis, as their instructor El-Hassan A.
Baker explained to them, is a mathematical way of following market trend by using past prices and volumes. "It is more art than science," Baker said.
Dubai: Last Tuesday, at about 9.35pm, Omar Al Shaya, a full-time trader on the local stock exchange, was tracking the
Euro/Dollar movements live onscreen at a financial trading academy in Knowledge Village. To decide on his strategy, he was taking
a close look at a couple of technical charts.
The charts indicated a weak trend of the Euro. If he were trading with real money, he said, he would have opted for a short, a
position which is a sale of borrowed currency on the expectation that the asset will fall in value.
"Given the bearish trend of the Euro against the greenback, I would hold on to the short position and cover my position
[during correction] to make some quick money," said twenty-nine-year old Al Shaya. He has been trading local stocks online for
four years now and wants to get into currency transactions and also, the Nasdaq during the summer lull here.
At a time when the markets are witnessing tumultuous changes and a lot of technicals and fundamentals have moved to one
extreme on many occasions, students at the Online Trading Academy in Dubai look at the training as a good opportunity to grasp
the reality and experience the real business of trading.
Some students are daily stock market traders, who are picking up a new trading skill, some are beginners, while others have
been trading for just about a year or less and have lost money.
Technical analysis, as their instructor El-Hassan A. Baker explained to them, is a mathematical way of following market trend
by using past prices and volumes. But he also reminded that no single indicator is the right one and too many signals can give
"It is more art than science," Baker said.
It is an opportune time to learn forex trading, when local stocks are still struggling, according to Al Shaya.
"The local markets are having problems with transparency and liquidity, which is going to grow more as summer comes upon us,"
Al Shaya said. "So forex for me is like, I don't want to say a safe haven, but it is much better than local markets in the
meantime, until everything settles down here," Al Shaya said.
He is one among the 18 students currently taking the 10-day, 40-hour foreign exchange trading course at the Dubai-based Middle
East franchise of Online Trading Academy, a US-based company, which offers courses also in trading stocks, futures, options and
commodities. The Forex course costs $3,500 (Dh12,845).
As they pick up skills, the students are given $800 (Dh2,936) on their accounts and they trade in small blocks of 10 shares
for every transaction with a stop loss rule of 5 cents away from the entry point to minimise losses.
Richard Parker, 39, who has been working in the steel construction sector in Dubai for the past two years, came to the training
as a total novice. After both the stocks and forex courses, he feels confident to trade online.
"Absolutely yes," when asked if he intends to start trading right away after completing the forex course. "I will be trading
in most markets in both stocks and forex, using different systems."
In fact, alongside his classes, Parker has already started trading in forex with his own $1,000 (Dh3,670).
"But all I am doing now is playing with the smallest amount possible, understanding the software and understanding the
discipline. You can play with a demo account, but you are not really learning the psychology of what it actually is like," Parker
said. "What it is all about is managing your risk, managing your account. Discipline is key."
Parker considers himself more of a short-term trader, trading on the basis of a few hours to a couple of days. He is not
nervous at all looking at the dismal global markets marked by extreme volatility.
"It doesn't matter whether the markets are up or whether they are down. It is a matter of having the discipline. You are going
with the trends - if the trend is down, you are going down, if the trend is going up, you are also going up.
"And if you are a day trader, there is a risk obviously, but it is here where management comes in, where discipline comes in,"
Jeff Todd, director of One Financial DMCC, which provides technical assistance for the course and supply demo accounts seconds
Parker's views. He looks at the current conditions as a "fantastic opportunity" to enter the market, whether it goes up or
"Now that you can short sell everything on our platform, that gives you the opportunity to just trade when there is movement in
price," Todd said.
"Now there is volatility that's extreme but that's nothing to be feared. People are always taught on this course that they
should have a stop loss. They are taught about entry points and exit points - how to minimise their risks, how to basically
decide on how much risk they want to take. Everyone has different risk levels."
One of the students, Natasha Arif, 23, who works in the financial services sector in Dubai, traded online, "unsupervised", in
forex in 2007.
"I had initiated with a demo and then opened a live account," said Arif. "I started with $2,000 and made a $1,300 profit over
it. That was pretty okay, I guess."
Arif is fully aware that the forex market is unpredictable and currently it is definitely "very volatile." But she feels that
if one is able to do an analysis well, handling the forex market shouldn't be a problem. However, as of now, she would prefer to
continue on a part-time basis, but she doesn't rule out a future career as a forex trading specialist.
There are traders on the course who have lost money and have come to sharpen their trading skills.
Obisike Nwabiriba, 33, from Nigeria, is a dental technologist and a forex trader. "In the past one year since I started
trading, I have lost much money," Nwabiriba said. "I had taken a few seminars offered online in Nigeria but they were not very
good. I came to improve my trading skills and become a better trader." Undeterred by his earlier losses or the current market
conditions, he wants to get back into forex trading, utilizing his training here, as soon as he returns to Nigeria.
Managing risk is an important ingredient of the learning process, says Tareq Abu Hantash, one of the academy's executives.
"We teach different elements of technical and fundamental analysis, but what we emphasise is to master the psychology of trading
- to overcome both fear and greed," said Abu Hantash, business development executive and centre manager, Online Trading Academy.
"Live trading allows them to test their psychology."
The students trade live on the US markets and not the local markets for two reasons. One, because here there are no
brokers/dealers yet who are willing to provide assistance with real money. And, two, volume for the Nasdaq market being very high,
the trader can enter the trade and liquidate her position in a few minutes.
"In the local market, it happens, but only from time to time," Abu Hantash said.
Al Shaya trades daily on the local markets managing the portfolio of his family. He said he benefited much from the stock
trading course he had taken two years ago.
The course, he said, made him more disciplined. "Listening to the instructors who are experienced traders talking about their
trading style and their mistakes, has helped me immensely," Al Shaya said. You should know when to hold and when to execute
He stopped trading in August last year and re-entered the market in mid-January.
Citing the example of Arabtec, which plummeted more than 40 per cent in just a few days from January 28 onward, Al Shaya said
the technical indicators, namely the oscillator, was showing zero.
"It had to change. I went in at Dh0.78 on February 4, it went down to Dh0.71 the next day and I bought more and my indicator
showed it will go up. And then in just seven straight sessions, I made more than 100 per cent profit selling it at Dh1.51," he
said. There was, however, a talk of short-shelling which could have pushed up the price of Arabtec, he added.
"If you have determined a stop loss, do not change that. Do not say 'I am going to move from short-term trade swing to long
trade.' Just finish and take the loss and exit."
About last week's ongoing technical analysis course, which is maze of numbers, points, lines and graphs and involves quick
thinking, Parker didn't find it intimidating at all.
"It's simple. You can come to the classes and take the course, but you need to do homework for yourself to get the edge. I have
been reading books and also watching DVDs," he said.