For the start of 2010....meaning come 4th Jan Monday, the stock would start higher then it will start to drift from there on becoz for the last couple of weeks before the end of the decade the market actually made up quite a bit of ground. So it wouldn't be a surprise for the market to pullback and rest if not then when the pullback happens it would be deeper and full painful for everyone. That is for SGX.
As for HK market....it would be a different tack with the market shooting higher at the start and it shall head higher for at least a few day longer before profit taking take holds. Then...it will drift lower till maybe end of the Jan before it starts the second round of moving higher esp towards the Chinese New Year period. Why this? That's becoz the HK market has gone thru a small correction prior to the X'mas and New Year period when most of the "ang mo" traders closed the books for the year and go for their year-end holidays. And since some of the counters in HK market...has fallen to attractive level...they would be buying opportunities for them. I shall be paying greater attention to this market and at the same time....clearing some of my SGX counters to do a house spring-cleaning and to raise fund for a better fight later.
For the moment....I shall keep my fund at present gearing, meaning that I shall not add any new fund to my trading thus I shall be controlled in a sense until I can show a profit for my present trading fund at MF Global. At moment....I have closed my book for the month with a 25% nett loss. Yes! I have traded actually for a full month.
For a review of what has happened that caused the 25% loss....was that I tried to do day trading with those pullback stocks with my view that this will be rebounding soon. yes....some do, but some don't. With faster drop that caused me bigger losses.
Thus....my trades can be summed up as winning small amount while losing bigger amount becoz of stocks "stopped out". During this 1 month period....I kena "9 to 10" stopped out situation which caused most of the damaged to the funding, while I make more winning trades but due to smaller wins which after minusing commission and interest charges as I am suing the DMA - CFD system, my fund is still showing negative balance at the end of 1 mth trading. That is also the main reason why...I didn't want to increase my funding anytime soon. Really cannot to afford to lose money at the same time I hate the idea of ever losing money.
Thursday, December 31, 2009
2010 - a new year and a new beginning for me and my loved ones
Yes....I will make this a great start for new beginning for me as a "babywhale" trader at this moment to be a "killerwhale" trader by the end of the learning curve. No other choice if I want to make it as a trader. A trader that can make a comfortable living just from the trades and not just from doing a regular 9 to 5 type of job.
A trader who can provide the same standard of living or better for my family and loved ones. Plus the fact that I can have a oversea holiday at the end of every year the same for those professional traders and dealers. Maybe instead of the super high-class type, I am fine with just 3 stars standard ones to near-by Bali or Thailand.
I shall do whatever it takes to make this happened....to follow the rules! hehehe
A trader who can provide the same standard of living or better for my family and loved ones. Plus the fact that I can have a oversea holiday at the end of every year the same for those professional traders and dealers. Maybe instead of the super high-class type, I am fine with just 3 stars standard ones to near-by Bali or Thailand.
I shall do whatever it takes to make this happened....to follow the rules! hehehe
Let's have winning trades from now on!!! HUAT AH!!
Yes....HUAT AH!!!! Let's hope that this is a good start for the coming year and decade esp for stock trading!
Whatever it takes to make the above happened....I must pay attention to learn and master the methods and to follow the rules to success!
Will go back to the basic of T3B trader's rule and method....plus to improve by fine-tuning the system to suit the situation for that moment as no one rule suit all trading conditions.
Went to Tuesday's mentor session and learned something from that too....esp for the fundamental view point that stated that we must follow the stock that can break peak or new high. At the same time....to set the stop-loss order as soon as the trade is confirmed done. The stop-loss sell off price should be strictly capped at max 8% of share price or lower. And to put a trailing stop loss whenever the stock price goes higher in order to protect the profit. Never to worry of selling off a bad stock even at a loss then holding onto a falling knife.
This week....I have better winning trade ratio. Win 4, loss 1....the trouble is that I didn't keep long enough to ride the trend or else I would have make back all my previous 2 week's losses. From this....I can sensed the possibility of making trading a full-time job if can keep strictly to the rule of the game. Same for forex trading too. What I learn so far, can be used for forex trading too. It is universal set of trading rules.....eg candle stick system, money management system, stop-loss in order to cap losses while to ride out the trend ( which I didn't follow - yes! I was trying to find a system that suit me ).
Whatever it takes to make the above happened....I must pay attention to learn and master the methods and to follow the rules to success!
Will go back to the basic of T3B trader's rule and method....plus to improve by fine-tuning the system to suit the situation for that moment as no one rule suit all trading conditions.
Went to Tuesday's mentor session and learned something from that too....esp for the fundamental view point that stated that we must follow the stock that can break peak or new high. At the same time....to set the stop-loss order as soon as the trade is confirmed done. The stop-loss sell off price should be strictly capped at max 8% of share price or lower. And to put a trailing stop loss whenever the stock price goes higher in order to protect the profit. Never to worry of selling off a bad stock even at a loss then holding onto a falling knife.
This week....I have better winning trade ratio. Win 4, loss 1....the trouble is that I didn't keep long enough to ride the trend or else I would have make back all my previous 2 week's losses. From this....I can sensed the possibility of making trading a full-time job if can keep strictly to the rule of the game. Same for forex trading too. What I learn so far, can be used for forex trading too. It is universal set of trading rules.....eg candle stick system, money management system, stop-loss in order to cap losses while to ride out the trend ( which I didn't follow - yes! I was trying to find a system that suit me ).
Reflections and resolutions at the start of 2010
For reflections....well, guessed I have to accept whatever happened from 2000 till yesterday 31/12/2009. Both my parents passed away after years of sickness....and yes!
it is sad to be an orphan but to see them suffer, I felt a greater pain in my heart as guessed I should consider that it is better for them this way.
Resolutions for the new year and new start of the decade - Yes, I want to be a good full-time stock trader and also equally good for forex trading too. What I meant by good? Good is the sense that I should do whatever it takes to be successful as a trader and make a comfortable living from it plus have time to do other activities....eg charity, go to gym, swimming, have a comfortable small home again....a car plus a healthy bank account for my retirement. I am not even asking to win back what I have lost in my past trading experience. Or...at least it can give me a passive income if I have other full-time job.
Please God....hear my prayers and granted me this wish, to be able to trade right and to be able to make a living out of it from now on.
it is sad to be an orphan but to see them suffer, I felt a greater pain in my heart as guessed I should consider that it is better for them this way.
Resolutions for the new year and new start of the decade - Yes, I want to be a good full-time stock trader and also equally good for forex trading too. What I meant by good? Good is the sense that I should do whatever it takes to be successful as a trader and make a comfortable living from it plus have time to do other activities....eg charity, go to gym, swimming, have a comfortable small home again....a car plus a healthy bank account for my retirement. I am not even asking to win back what I have lost in my past trading experience. Or...at least it can give me a passive income if I have other full-time job.
Please God....hear my prayers and granted me this wish, to be able to trade right and to be able to make a living out of it from now on.
Monday, December 28, 2009
Trading with my new set-up
Yes....tried out my latest set-up of trading during the first 15 mins of opening esp to buy or sell. Why this?
Yes....read about this esp to get the best price out of the trade. Buy...if the previous closing of US market is "down" and to sell...if the US market closed up with big gain. Usually the market here will gap "up or down" becoz of the US market closing and I can take advantage of the situation if I want to trade. If not....then just forget about trading and do other activities eg swimming, go to gym or just wake-up late hehehe.
For this morning trading...managed to get out of both trades at the next highest price and after which the stocks drop back.
Tomorrow...will go to the final mentor's session for 2009 and to see what's up and the latest news. Yes...also to see and share ideas with the "kakis".
Yes....read about this esp to get the best price out of the trade. Buy...if the previous closing of US market is "down" and to sell...if the US market closed up with big gain. Usually the market here will gap "up or down" becoz of the US market closing and I can take advantage of the situation if I want to trade. If not....then just forget about trading and do other activities eg swimming, go to gym or just wake-up late hehehe.
For this morning trading...managed to get out of both trades at the next highest price and after which the stocks drop back.
Tomorrow...will go to the final mentor's session for 2009 and to see what's up and the latest news. Yes...also to see and share ideas with the "kakis".
Saturday, December 26, 2009
The master plan - swing trader
The master plan
"Why does swing trading work? Simply because fast moving stocks tend to pause for a few days before they explode again. Just look at any candlestick chart! Stocks keep on cycling every 3, 5 to 7 days. In other words for, every three-day gain there will probably be a down day. For every five-day gain there may be three down days. A seven-day rally may produce up to five down days.
And the great thing about swingtrading is that there is never a shortage of new opportunities. We just need to wait patiently for the right stock to cycle..." - MrSwing
* Step1: WHAT - Finding swing opportunities
There is no shortage of new opportunities, and MrSwing.com helps you find them. To start, you can sign-up for MrSwing Lite, which sends you a list of swing opportunities before the stock market opens on Monday.
I also strongly suggest signing up for my charting software specifically designed for swingtraders, SwingTracker. There is no substitute for seeing the charts, and all of my technical indicators are included. In addition, SwingTracker has an excellent scanning engine so that you can find the stocks you want to swingtrade. (A full explanation of the scan feature is located in the SwingLab section of this website.)
* Step2: WHEN - Entry techniques
Buying AFTER the open is BETTER
wait a few moments to allow the market to breath normally.
Technique 1: Long Swing Entry Technique 1: Short Swing Entry
Buy the stock from the moment it trades 0.06$ (=1/16) above its previous day's high. As soon as you buy, place a stop-loss order 0.06$ below the low of the previous day or the entry-price - 4%, whichever is higher. Sell the stock short from the moment it trades 0.06$ (=1/16) below its previous day's low. Once you sell short, place a stop-loss order 0.06$ above the high of the previous day or the entry-price +4%, whichever is lower.
Technique 2: Long GAP Entry Technique 2: Short GAP Entry
Used on stocks that gap up or down at the open by 0.5$ (=1/2) or more. Once the stock has gapped, we wait for 5 minutes on a DOWN gap and we wait for 30 minutes on a UP gap. After 5 or 30 mins, we put a buy-stop order 0.06$ above the high of the new day. And we place a stop-loss order 0.06$ below the entry day's low.
In summary, we use the 30-min buy rule when trading in the same direction as the gap and we use the 5-min buy rule when trading in the opposite direction of the gap... Used on stocks that gap up or down at the open by 0.5$ (=1/2) or more. Once the stock has gapped, we wait for 5 minutes on a UP gap and we wait for 30 minutes on a DOWN gap. After 5 or 30 mins, we put a sell-stop order 0.06$ below the low of the new day. And we place a stop-loss order 0.06$ above the entry day's high.
In summary, we use the 30-min sell rule when trading in the same direction as the gap and we use the 5-min sell rule when trading in the opposite direction of the gap...
Step3: HOW - Exit techniques & riding the waves
Our money management principles can be summarized in easy rules:
1. Stop-Loss Order - place your stop the moment you enter a trade. We exit our trade from the moment we have a 4% loss. We are not second guessing the trade... no problem... move on to the next swing trade...there is never a shortage of opportunities! To do this, we ride our trade using a trailing stop. After each day, we simply move our stop-order to 0.06$ under the low of that day for longswings. And we move our stop-order to 0.06$ above the high of that day for shortswings. However.. we never set the stop loss at a lower/higher price than the day before.
2. The 50 percent rule - from the moment we have more than a 7% gain on the long swing trade we sell 50% of our shares...and we cover 50% of our shares on a short swing...
3. Riding the wave - we ride the rest of our trade using a trailing stop. After each day, we simple move our stop-order to 0.06$ under the low of that day for longswings. And we move our stop-order to 0.06$ above the high of that day for shortswings.
4. Gaps - be prepared to sell your positions if the stock gaps UP for longswings and to cover your short positions if the stock gaps DOWN for shortswing. We use the Long-Gap-Entry-rule as our exit-long-rule & our Short-Gap-Entry-rule as our exit-short-rule
GAP Modes!
"LONG Swing GAP: be prepared to sell your long positions if the stock gaps UP and to buy your positions if the stock gaps DOWN...
SHORT Swing GAP: be prepared to short your positions if the stock gaps UP and to cover your short positions if the stock gaps DOWN..."
- MrSwing
We will show you how the 4% loss & 50% & the riding the wave-rules can be executed with ease, discipline and no stress with ThinkorSwim everyday. We will only use stop & limit orders with our preferred brokers. See "ThinkorSwim."
"Why does swing trading work? Simply because fast moving stocks tend to pause for a few days before they explode again. Just look at any candlestick chart! Stocks keep on cycling every 3, 5 to 7 days. In other words for, every three-day gain there will probably be a down day. For every five-day gain there may be three down days. A seven-day rally may produce up to five down days.
And the great thing about swingtrading is that there is never a shortage of new opportunities. We just need to wait patiently for the right stock to cycle..." - MrSwing
* Step1: WHAT - Finding swing opportunities
There is no shortage of new opportunities, and MrSwing.com helps you find them. To start, you can sign-up for MrSwing Lite, which sends you a list of swing opportunities before the stock market opens on Monday.
I also strongly suggest signing up for my charting software specifically designed for swingtraders, SwingTracker. There is no substitute for seeing the charts, and all of my technical indicators are included. In addition, SwingTracker has an excellent scanning engine so that you can find the stocks you want to swingtrade. (A full explanation of the scan feature is located in the SwingLab section of this website.)
* Step2: WHEN - Entry techniques
Buying AFTER the open is BETTER
wait a few moments to allow the market to breath normally.
Technique 1: Long Swing Entry Technique 1: Short Swing Entry
Buy the stock from the moment it trades 0.06$ (=1/16) above its previous day's high. As soon as you buy, place a stop-loss order 0.06$ below the low of the previous day or the entry-price - 4%, whichever is higher. Sell the stock short from the moment it trades 0.06$ (=1/16) below its previous day's low. Once you sell short, place a stop-loss order 0.06$ above the high of the previous day or the entry-price +4%, whichever is lower.
Technique 2: Long GAP Entry Technique 2: Short GAP Entry
Used on stocks that gap up or down at the open by 0.5$ (=1/2) or more. Once the stock has gapped, we wait for 5 minutes on a DOWN gap and we wait for 30 minutes on a UP gap. After 5 or 30 mins, we put a buy-stop order 0.06$ above the high of the new day. And we place a stop-loss order 0.06$ below the entry day's low.
In summary, we use the 30-min buy rule when trading in the same direction as the gap and we use the 5-min buy rule when trading in the opposite direction of the gap... Used on stocks that gap up or down at the open by 0.5$ (=1/2) or more. Once the stock has gapped, we wait for 5 minutes on a UP gap and we wait for 30 minutes on a DOWN gap. After 5 or 30 mins, we put a sell-stop order 0.06$ below the low of the new day. And we place a stop-loss order 0.06$ above the entry day's high.
In summary, we use the 30-min sell rule when trading in the same direction as the gap and we use the 5-min sell rule when trading in the opposite direction of the gap...
Step3: HOW - Exit techniques & riding the waves
Our money management principles can be summarized in easy rules:
1. Stop-Loss Order - place your stop the moment you enter a trade. We exit our trade from the moment we have a 4% loss. We are not second guessing the trade... no problem... move on to the next swing trade...there is never a shortage of opportunities! To do this, we ride our trade using a trailing stop. After each day, we simply move our stop-order to 0.06$ under the low of that day for longswings. And we move our stop-order to 0.06$ above the high of that day for shortswings. However.. we never set the stop loss at a lower/higher price than the day before.
2. The 50 percent rule - from the moment we have more than a 7% gain on the long swing trade we sell 50% of our shares...and we cover 50% of our shares on a short swing...
3. Riding the wave - we ride the rest of our trade using a trailing stop. After each day, we simple move our stop-order to 0.06$ under the low of that day for longswings. And we move our stop-order to 0.06$ above the high of that day for shortswings.
4. Gaps - be prepared to sell your positions if the stock gaps UP for longswings and to cover your short positions if the stock gaps DOWN for shortswing. We use the Long-Gap-Entry-rule as our exit-long-rule & our Short-Gap-Entry-rule as our exit-short-rule
GAP Modes!
"LONG Swing GAP: be prepared to sell your long positions if the stock gaps UP and to buy your positions if the stock gaps DOWN...
SHORT Swing GAP: be prepared to short your positions if the stock gaps UP and to cover your short positions if the stock gaps DOWN..."
- MrSwing
We will show you how the 4% loss & 50% & the riding the wave-rules can be executed with ease, discipline and no stress with ThinkorSwim everyday. We will only use stop & limit orders with our preferred brokers. See "ThinkorSwim."
What is Swing trading?
* Keeping things as simple as possible
"Things should be made as simple as possible, but not any simpler;" - Albert Einstein
It is our firm belief that there is only one easy way to trade with discipline and that is when you keep things simple: BEAUTY THROUGH SIMPLICITY. This should be a general rule for everything you do in life: REDUCE TO BASICS
To fully understand what swingtrading really is, we are going to first define what up/down trends are ...
* Trends
UpTrend - A price movement consisting of a series of higher highs and higher lows. In other words, an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines which terminate above the low point of the preceding sell-off. See MYGN
DownTrend - A price movement consisting of a series of lower lows and lower highs. In other words, a downtrend is a series of successive declines that extend though previous low points, interrupted by increases which terminate below the high point of the preceding rally. See VRSN
* SwingTrade
Long Swing - Looking more closely at the definition of an uptrend: "an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines/pullbacks that end above the low point of the preceding sell-off".
The Long Swing identifies buying opportunities in stocks that are in clear uptrends on the daily chart. In addition, the stock must be experiencing a minor decline/pullback within the context of this uptrend, allowing the purchase of the stock at a discount to its recent prices.
These declines identify the start of a long swing trade. We will use a technique for entering the market called trailing buy-stop. When the trend is up and the daily trend declines, it activates a trailing buy-stop technique: place a buy order 1/16 above the high of the previous day. If prices break out, you will be stopped out when the rally takes out the previous high. If prices decline, your buy-stop will not be touched.
Short Swing -Looking more closely at the definition of an downtrend: "a downtrend is a series of successive declines that extend though previous low points, interrupted by increases/rallies that end below the high point of the preceding rally".
The Short Swing identifies shorting opportunities in stocks that are in clear downtrends on the daily chart. In addition, the stock must be experiencing a minor rally as part of this downtrend.
These increases identify the start of a short swing trade. We will use a technique for entering the market called trailing sell-stop. When the trend is down and the daily trend rallies, it activates a trailing sell-stop technique: place an order to sell short 1/16 below the low of the previous day. As soon as the market turns down below the previous low, you will be stopped out on the short side. If prices rally, your sell-stop will not be touched.
"Things should be made as simple as possible, but not any simpler;" - Albert Einstein
It is our firm belief that there is only one easy way to trade with discipline and that is when you keep things simple: BEAUTY THROUGH SIMPLICITY. This should be a general rule for everything you do in life: REDUCE TO BASICS
To fully understand what swingtrading really is, we are going to first define what up/down trends are ...
* Trends
UpTrend - A price movement consisting of a series of higher highs and higher lows. In other words, an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines which terminate above the low point of the preceding sell-off. See MYGN
DownTrend - A price movement consisting of a series of lower lows and lower highs. In other words, a downtrend is a series of successive declines that extend though previous low points, interrupted by increases which terminate below the high point of the preceding rally. See VRSN
* SwingTrade
Long Swing - Looking more closely at the definition of an uptrend: "an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines/pullbacks that end above the low point of the preceding sell-off".
The Long Swing identifies buying opportunities in stocks that are in clear uptrends on the daily chart. In addition, the stock must be experiencing a minor decline/pullback within the context of this uptrend, allowing the purchase of the stock at a discount to its recent prices.
These declines identify the start of a long swing trade. We will use a technique for entering the market called trailing buy-stop. When the trend is up and the daily trend declines, it activates a trailing buy-stop technique: place a buy order 1/16 above the high of the previous day. If prices break out, you will be stopped out when the rally takes out the previous high. If prices decline, your buy-stop will not be touched.
Short Swing -Looking more closely at the definition of an downtrend: "a downtrend is a series of successive declines that extend though previous low points, interrupted by increases/rallies that end below the high point of the preceding rally".
The Short Swing identifies shorting opportunities in stocks that are in clear downtrends on the daily chart. In addition, the stock must be experiencing a minor rally as part of this downtrend.
These increases identify the start of a short swing trade. We will use a technique for entering the market called trailing sell-stop. When the trend is down and the daily trend rallies, it activates a trailing sell-stop technique: place an order to sell short 1/16 below the low of the previous day. As soon as the market turns down below the previous low, you will be stopped out on the short side. If prices rally, your sell-stop will not be touched.
Swing Trading - set-up
Swing Trading
Swing trading is the process of holding onto a stock for a very short period of time. A Swing trader studies stock prices and identifies cycles or swings in prices. A cycle could span multiple days, weeks or even months. But, a swing trader does not hold stocks for the long term.
A Swing Trader uses Technical Analysis only to select stocks to buy. Identifying patterns or cycles that a stock moves in requires analysis of the stock’s price over time. Once a stock price is analyzed you will notice that price is not random, price anticipates fundamental change and that the relationship between price and time is linear.
Range bound, channeling, cycling or price patterns are all terms that describe stocks that are moving sideways.
There are countless patterns & cycles that constitutes a great rise or dip in the markets. Most people don’t know this but the markets tend to follow patterns & I’m not just talking about your fifty or two hundred day moving averages. There are several patterns that happen either on a daily basis or every few days.
The best way to swing trade while stock trading is to find a trend that suits you & stick to it. So in a bull market or bear market, stocks will be carried by the momentum for long periods but in one direction, this will suit some swing traders as they will not have too much to think about, there’s enough pressure on the trader so the less complicated the better. These traders will follow the momentum & take advantage of the longer term up & down trends.
So what’s the best position to be in when swing trading? The best market for a swing trader would have to be a market that not really moving at all. In this market there are many fluctuations on a daily basis but the market will never really move up or down significantly. This is a great environment for swing trading as the trader is best positioned to capture the rise & declining patterns on a daily basis.
By doing this the trader has many opportunities to capture patterns that will repeat again & again. Many traders will stick to the same stock trading it over & over again for months on end, usually the stock will be the same price it was when they started trading it but they will have made a lot of money from the many up & down patterns. Always use a technical analysis chart like Bollinger bands to figure out which way a trade may be heading.
So’ is swing trading for everyone? Not really. A swing trader should be well versed in swing trading before taking part & should not be trading with scared money i.e. They should have enough to cover themselves in case of loss & be willing to trade again soon after. There’s no time for second guessing while swing trading.
You either have a strict plan for yourself that you’ll stick to no matter what happens or you shouldn’t bother with swing trading. You should be willing to dump stock the moment it hits its upper band or crosses over the lower band. Overall, trend following is probably the best way for novice traders to make money, all you need to do is find a good stock that follows the same trend month after month & take advantage of it.
Where would I get more information about Swing trading?. Here we list the most comprehensive & important sites on Swing trading. So, can you improve your swing trading results by using the information here?, the short answer is Yes. Take a look at the following sites below & try to get a handle on how swing trading software really works & how you can make a lot of money in a short period of time.
Mr Swing - Without a doubt one of the best Swing Trading sites on the net today. This site has a a lot of emphasis on trading stocks on a strong up trend. The "master plan" is a brilliant book for swing trading, it explains everything including entry, protective stops & profit taking.
Trading Markets- Another great site for swing trading as well as lots of other information on how to trade the markets. You can start now by signing up for the free seven day trial.
Trading Tutor - Primarily based on the Fibonacci trading method, this site offers a weekly free newsletter once signed up. There is also a wealth of information on other trading methods in this free news letter.
FibTimer - Again another great site that also includes a free biweekly news letter. The information here is definitely for you if you need the real ins & outs of swing trading & how you can make it work for you.
Swing trading is the process of holding onto a stock for a very short period of time. A Swing trader studies stock prices and identifies cycles or swings in prices. A cycle could span multiple days, weeks or even months. But, a swing trader does not hold stocks for the long term.
A Swing Trader uses Technical Analysis only to select stocks to buy. Identifying patterns or cycles that a stock moves in requires analysis of the stock’s price over time. Once a stock price is analyzed you will notice that price is not random, price anticipates fundamental change and that the relationship between price and time is linear.
Range bound, channeling, cycling or price patterns are all terms that describe stocks that are moving sideways.
There are countless patterns & cycles that constitutes a great rise or dip in the markets. Most people don’t know this but the markets tend to follow patterns & I’m not just talking about your fifty or two hundred day moving averages. There are several patterns that happen either on a daily basis or every few days.
The best way to swing trade while stock trading is to find a trend that suits you & stick to it. So in a bull market or bear market, stocks will be carried by the momentum for long periods but in one direction, this will suit some swing traders as they will not have too much to think about, there’s enough pressure on the trader so the less complicated the better. These traders will follow the momentum & take advantage of the longer term up & down trends.
So what’s the best position to be in when swing trading? The best market for a swing trader would have to be a market that not really moving at all. In this market there are many fluctuations on a daily basis but the market will never really move up or down significantly. This is a great environment for swing trading as the trader is best positioned to capture the rise & declining patterns on a daily basis.
By doing this the trader has many opportunities to capture patterns that will repeat again & again. Many traders will stick to the same stock trading it over & over again for months on end, usually the stock will be the same price it was when they started trading it but they will have made a lot of money from the many up & down patterns. Always use a technical analysis chart like Bollinger bands to figure out which way a trade may be heading.
So’ is swing trading for everyone? Not really. A swing trader should be well versed in swing trading before taking part & should not be trading with scared money i.e. They should have enough to cover themselves in case of loss & be willing to trade again soon after. There’s no time for second guessing while swing trading.
You either have a strict plan for yourself that you’ll stick to no matter what happens or you shouldn’t bother with swing trading. You should be willing to dump stock the moment it hits its upper band or crosses over the lower band. Overall, trend following is probably the best way for novice traders to make money, all you need to do is find a good stock that follows the same trend month after month & take advantage of it.
Where would I get more information about Swing trading?. Here we list the most comprehensive & important sites on Swing trading. So, can you improve your swing trading results by using the information here?, the short answer is Yes. Take a look at the following sites below & try to get a handle on how swing trading software really works & how you can make a lot of money in a short period of time.
Mr Swing - Without a doubt one of the best Swing Trading sites on the net today. This site has a a lot of emphasis on trading stocks on a strong up trend. The "master plan" is a brilliant book for swing trading, it explains everything including entry, protective stops & profit taking.
Trading Markets- Another great site for swing trading as well as lots of other information on how to trade the markets. You can start now by signing up for the free seven day trial.
Trading Tutor - Primarily based on the Fibonacci trading method, this site offers a weekly free newsletter once signed up. There is also a wealth of information on other trading methods in this free news letter.
FibTimer - Again another great site that also includes a free biweekly news letter. The information here is definitely for you if you need the real ins & outs of swing trading & how you can make it work for you.
Welcoming in 2010
Now that the coast is clear and things are out in the open....I can safely say that next week and then 2010 shall be a great year for my experiments to be a full-time trader. After that...things can only get clearer and simpler as I shall only put all my focus on learning new skills and applying them...to make money! Not need for fast money but a constant amount every month to cover for my living expenses plus some for the holidays at the end of every year shall be nice to have.
Women thing....will be a thing of the past too since my life will get to the stage of simple living. No need for sex....the most maybe do a bit of self servicing hehehe. Once the spot-light is turn on....then the main focus shall be to just do well in trading.
Other free time...the program is to have a healthy lifestyle meaning that I shall have time to swim, go sauna, go to gym, go to spa...and facial while in between trades. No need to be on the screen from 9 to 5 thingy. That should be the way to trade and have a life.
From my plans....this can be possible, meaning if I fund it at 50K....I should be able to enjoy 10% or 5K easily. Whatever more than that amount shall be kept in the fund to roll-over. Or the other plan is that...I just kept the fund at 50K and roll-over the profit to snowball it to the end of the year.
Why this??? It is becoz there is no interest to earn from the funding and at the same time to be on the safe side to keep a limit of exposure to the fund at a manageable amount if things fall apart esp the co. Frankly even bigger co also went "kaput" so it is much safer if I put a cap to it. Or to put in another account with other co for
other different concept of trading.
My trading plan is....2 types of trades I shall be paying attention to. First one is core trade....meaning momentum trading which will be in for longer time frame ( until it breaks trough to exit )my aim for this type is to have max 2 to 3 positions with proper money management guideline and rule while the second one is day-trade or swing-trade....it will be a very short time-frame type of trade. For this....I will only do 1 trade at a time and until I closed the trade I shall be monitoring it like a hawk. Why this is important? This shall be my bread and butter thing....it is fast and simple like a "hit and run" thing! Will focus on it esp at the first 1hr of the opening trading day everyday for SGX or HK Market....to execute 1 trade a day which will be in larger volume to make up for the shorter time-frame. In fact....for the later form of day-trade....I have read that it should only be done in the first 30 mins of opening....that is the time, the amateur traders rush in to push up the stock or push down the stock. Then...the sharks will move in for the kills. Btw I want to be among the sharks moving in for the kill....to become a killer babywhale hehehe!
So this type of trading....doesn't need to have to much monitoring time but need 100% focus of mind and soul in that timeframe. That is why to be kept at 1 trade a day!
Women thing....will be a thing of the past too since my life will get to the stage of simple living. No need for sex....the most maybe do a bit of self servicing hehehe. Once the spot-light is turn on....then the main focus shall be to just do well in trading.
Other free time...the program is to have a healthy lifestyle meaning that I shall have time to swim, go sauna, go to gym, go to spa...and facial while in between trades. No need to be on the screen from 9 to 5 thingy. That should be the way to trade and have a life.
From my plans....this can be possible, meaning if I fund it at 50K....I should be able to enjoy 10% or 5K easily. Whatever more than that amount shall be kept in the fund to roll-over. Or the other plan is that...I just kept the fund at 50K and roll-over the profit to snowball it to the end of the year.
Why this??? It is becoz there is no interest to earn from the funding and at the same time to be on the safe side to keep a limit of exposure to the fund at a manageable amount if things fall apart esp the co. Frankly even bigger co also went "kaput" so it is much safer if I put a cap to it. Or to put in another account with other co for
other different concept of trading.
My trading plan is....2 types of trades I shall be paying attention to. First one is core trade....meaning momentum trading which will be in for longer time frame ( until it breaks trough to exit )my aim for this type is to have max 2 to 3 positions with proper money management guideline and rule while the second one is day-trade or swing-trade....it will be a very short time-frame type of trade. For this....I will only do 1 trade at a time and until I closed the trade I shall be monitoring it like a hawk. Why this is important? This shall be my bread and butter thing....it is fast and simple like a "hit and run" thing! Will focus on it esp at the first 1hr of the opening trading day everyday for SGX or HK Market....to execute 1 trade a day which will be in larger volume to make up for the shorter time-frame. In fact....for the later form of day-trade....I have read that it should only be done in the first 30 mins of opening....that is the time, the amateur traders rush in to push up the stock or push down the stock. Then...the sharks will move in for the kills. Btw I want to be among the sharks moving in for the kill....to become a killer babywhale hehehe!
So this type of trading....doesn't need to have to much monitoring time but need 100% focus of mind and soul in that timeframe. That is why to be kept at 1 trade a day!
Friday, December 25, 2009
2009 review
2009 to me....is a watershed year and at last, I am willing to go out to learn more about how to trade well and to make it as a "trader". Not just to give me...a passive income but to help me "grow" as a trader be it in forex and stocks.
After spending money to attend the courses for both...and also after do small live-trades for both with what I was taught from the courses, I found out that what they really teach is just very fundamental. For that level....doubt anyone can really made any money using them when trading. Yes...true, there are certain basic concepts used but truly if one is to really seriously want to be a so-called "trader" who can have a higher chance of winning...then one must be seriously attend more training or do more self study. Yes...there are lots of this self-help or self study stuffs in the internet for free. That is why....I copied quite a bit into my blog to go thru whenever I need to reflesh my thoughts.
My aim for 2010....is to make it a profitable for me as a "small-time trader" until I am out from my present job. By then...I should have enough experience to go "bigger" as a full-time trader. Frankly...I have got myself about 8 to 9 mths to gain this experience. After that....it is also like no choice but to make it "happen" or to die trying. Don't think.....I will change for a 9 to 5 job unless suddenly even what I supposed to learn also cannot "work". Remember...I have already said that I will have to die trying so it would take a totally different path to change my mind.
From my short experience using the system...I truly believed that with a proper plan and good money management, I should be able to make it "work" for me as a "trader". The only thing left is whether a hugely successful one or a mediocre one! For that, then maybe have to depend on my luck and fate.
After spending money to attend the courses for both...and also after do small live-trades for both with what I was taught from the courses, I found out that what they really teach is just very fundamental. For that level....doubt anyone can really made any money using them when trading. Yes...true, there are certain basic concepts used but truly if one is to really seriously want to be a so-called "trader" who can have a higher chance of winning...then one must be seriously attend more training or do more self study. Yes...there are lots of this self-help or self study stuffs in the internet for free. That is why....I copied quite a bit into my blog to go thru whenever I need to reflesh my thoughts.
My aim for 2010....is to make it a profitable for me as a "small-time trader" until I am out from my present job. By then...I should have enough experience to go "bigger" as a full-time trader. Frankly...I have got myself about 8 to 9 mths to gain this experience. After that....it is also like no choice but to make it "happen" or to die trying. Don't think.....I will change for a 9 to 5 job unless suddenly even what I supposed to learn also cannot "work". Remember...I have already said that I will have to die trying so it would take a totally different path to change my mind.
From my short experience using the system...I truly believed that with a proper plan and good money management, I should be able to make it "work" for me as a "trader". The only thing left is whether a hugely successful one or a mediocre one! For that, then maybe have to depend on my luck and fate.
Thursday, December 24, 2009
Trader's rules = to be happy
If you are after specific investment advice, stop reading now. We seek to explore one of Adam Smith’s obsessions: what it means to be happy. We also discuss why that’s important to investors, and how we can seek to improve our own levels of happiness. The list below shows our top ten suggestions for improving happiness.
1. Don’t equate happiness with money. People adapt to income shifts relatively quickly, the long lasting benefits are essentially zero.
2. Exercise regularly. Taking regular exercise generates further energy, and stimulates the mind and the body.
3. Have sex (preferably with someone you love). Sex is consistently rated as amongst the highest generators of happiness. So what are you waiting for?
4. Devote time and effort to close relationships. Close relationships require work and effort, but pay vast rewards in terms of happiness.
5. Pause for reflection, meditate on the good things in life. Simple reflection on the good aspects of life helps prevent hedonic adaptation.
6. Seek work that engages your skills, look to enjoy your job. It makes sense to do something you enjoy. This in turn is likely to allow you to flourish at your job, creating a pleasant feedback loop.
7. Give your body the sleep it needs.
8. Don’t pursue happiness for its own sake, enjoy the moment. Faulty perceptions of what makes you happy, may lead to the wrong pursuits. Additionally, activities may become a means to an end, rather than something to be enjoyed, defeating the purpose in the first place.
9. Take control of your life, set yourself achievable goals.
10. Remember to follow all the rules.
1. Don’t equate happiness with money. People adapt to income shifts relatively quickly, the long lasting benefits are essentially zero.
2. Exercise regularly. Taking regular exercise generates further energy, and stimulates the mind and the body.
3. Have sex (preferably with someone you love). Sex is consistently rated as amongst the highest generators of happiness. So what are you waiting for?
4. Devote time and effort to close relationships. Close relationships require work and effort, but pay vast rewards in terms of happiness.
5. Pause for reflection, meditate on the good things in life. Simple reflection on the good aspects of life helps prevent hedonic adaptation.
6. Seek work that engages your skills, look to enjoy your job. It makes sense to do something you enjoy. This in turn is likely to allow you to flourish at your job, creating a pleasant feedback loop.
7. Give your body the sleep it needs.
8. Don’t pursue happiness for its own sake, enjoy the moment. Faulty perceptions of what makes you happy, may lead to the wrong pursuits. Additionally, activities may become a means to an end, rather than something to be enjoyed, defeating the purpose in the first place.
9. Take control of your life, set yourself achievable goals.
10. Remember to follow all the rules.
Stock Trading Systems and Services
Stock Trading Systems are a good way to start stock trading. Stock trading consists of time, money and effort. When broken down to three simple categories stock trading sounds so simple - be forewarned though, stock trading is not simple. Stock trading becomes clearer and clearer as you become educated in the art of making a trade. One way of successful trading is the use of a Stock Trading System. Most of them are offering trading services.
First rule of stock trading is that you should stay away from unfounded recommendations. By that we mean disregard the people in the chat rooms recommending a hot stock and let that guy at the bar keep talking about the million dollar stock that you should buy. Stock trading is not about hot stocks and word of mouth tips or about stock tips in financial magazines. We selected for you several Stock Trading System that offer also trading services, and we are describing them below.
You should investigate stocks and particular sectors that you will trade - stock trading is all about education. With the invention of online trading tools there are no limits to what you can learn about stock trading. Stock trading is a serious matter. You do not want everybody's opinion on the market and individual stocks. Make a stock trading plan or strategy and stick to it. You should consider a Stock Trading System that has been proven and has a good record year over year.
If you do it by your own, plan your attack the evening prior to the day you will make you trades. You do not want your emotions to affect you stock trading plan. It is a good idea to predetermine an exit point before you stock trade takes place. However, most of the Stock Trading System will provide you with all this information and you could use their trading services.
Don't fight the stock trend and let missed opportunities pass right over you. Successful stock trading really does have a lot to do with suppressing human emotions or taking them out of the trade decision making all together.
The last stock trading rule of thumb - never risk more than you can afford to lose.
For good information on penny stock investing Penny Stock investing
Stock Trading Systems
We will now discuss several different approaches to get you involved with a Stock Trading System. We will briefly describe some services specialized in that area. However, we like to stress that all the discussed do not show their trading method. For all the others, you just must relay on their posted past performance record and follow their trading services.
Millenium Traders
Millemium is in business on the internet since 2001. They have 3 fabulous experts to guide you through succesfull day trading in either Stocks, Forex, Futures and Swing trading. Their performance according to their site is tremendous since the beginning. I looked through most of it and they never have a losing day. Their performance is over 90% plus winning trades. They offer the trading room concept where you can see a new trade coming in immedialtely and act on your own if you wish to do so. Their website is very attrative and I encourage you to take a look. Please click on the image below to enter the site.
GetFolio System
The average of this Stock Trading Systems recommendation for the past 16 years has made a remarkable 39.67% yearly gain. They produced this record by focusing on position sizing with two goals in mind - avoiding significant drawdown and sleeping well at night. This system tracks all stocks above $1 billion in Market Cap, combining technical, fundamental, sector, and risk/reward analysis all into one system. The strategy guides subscribers to invest strictly in high quality companies only at a time when they represent the most value, with the least amount of risk. According to them, this Stock Trading System has outperformed the market consistently for 16 years. The rate of success seems larger than 85%. Subscribers receive conditional 3 month money back guaranteed. Should any of the picked stocks fail during the trial, the subscription fee will be refunded.
http://stock-trading-ideas.com>Stock Trading Ideas
Stock Trading Ideas takes trading to a whole new level by providing quality trading resources and free stock picks essential to become successful trader.
Click here to learn more about GetFolio System
Fiasco System
This Stock Trading System identifies the stocks that are going up! It uses a simple and disciplined screening method and analyzes thousands of stocks every day, utilizing a proprietary trading system. The results of this analysis are shared with the subscribers. This trading system could use Autotrade directly into your account. The rate of success seems larger than 85%, which is one the best systems around.
They offer a one-week free trial period.
Click here to learn more about Fiasco System
Soler Investments System
Using an online Real-Time Stock Picks Alert Service, the user will be able to copy the trades based on a successful Professional Trader. They state that their Stock Trading Systems Work in all types of market conditions following years of experience of trading stocks. Whether the stock market is currently bullish or bearish (even flat), rest assured that we'll adjust our trading strategy to take advantage of the situation. To minimize the risk and maximum the profits of their stock trading system, they adjust the length of the holding period, from a few days to a few weeks. Their claimed percentage gain is about 65%.
First rule of stock trading is that you should stay away from unfounded recommendations. By that we mean disregard the people in the chat rooms recommending a hot stock and let that guy at the bar keep talking about the million dollar stock that you should buy. Stock trading is not about hot stocks and word of mouth tips or about stock tips in financial magazines. We selected for you several Stock Trading System that offer also trading services, and we are describing them below.
You should investigate stocks and particular sectors that you will trade - stock trading is all about education. With the invention of online trading tools there are no limits to what you can learn about stock trading. Stock trading is a serious matter. You do not want everybody's opinion on the market and individual stocks. Make a stock trading plan or strategy and stick to it. You should consider a Stock Trading System that has been proven and has a good record year over year.
If you do it by your own, plan your attack the evening prior to the day you will make you trades. You do not want your emotions to affect you stock trading plan. It is a good idea to predetermine an exit point before you stock trade takes place. However, most of the Stock Trading System will provide you with all this information and you could use their trading services.
Don't fight the stock trend and let missed opportunities pass right over you. Successful stock trading really does have a lot to do with suppressing human emotions or taking them out of the trade decision making all together.
The last stock trading rule of thumb - never risk more than you can afford to lose.
For good information on penny stock investing Penny Stock investing
Stock Trading Systems
We will now discuss several different approaches to get you involved with a Stock Trading System. We will briefly describe some services specialized in that area. However, we like to stress that all the discussed do not show their trading method. For all the others, you just must relay on their posted past performance record and follow their trading services.
Millenium Traders
Millemium is in business on the internet since 2001. They have 3 fabulous experts to guide you through succesfull day trading in either Stocks, Forex, Futures and Swing trading. Their performance according to their site is tremendous since the beginning. I looked through most of it and they never have a losing day. Their performance is over 90% plus winning trades. They offer the trading room concept where you can see a new trade coming in immedialtely and act on your own if you wish to do so. Their website is very attrative and I encourage you to take a look. Please click on the image below to enter the site.
GetFolio System
The average of this Stock Trading Systems recommendation for the past 16 years has made a remarkable 39.67% yearly gain. They produced this record by focusing on position sizing with two goals in mind - avoiding significant drawdown and sleeping well at night. This system tracks all stocks above $1 billion in Market Cap, combining technical, fundamental, sector, and risk/reward analysis all into one system. The strategy guides subscribers to invest strictly in high quality companies only at a time when they represent the most value, with the least amount of risk. According to them, this Stock Trading System has outperformed the market consistently for 16 years. The rate of success seems larger than 85%. Subscribers receive conditional 3 month money back guaranteed. Should any of the picked stocks fail during the trial, the subscription fee will be refunded.
http://stock-trading-ideas.com>Stock Trading Ideas
Stock Trading Ideas takes trading to a whole new level by providing quality trading resources and free stock picks essential to become successful trader.
Click here to learn more about GetFolio System
Fiasco System
This Stock Trading System identifies the stocks that are going up! It uses a simple and disciplined screening method and analyzes thousands of stocks every day, utilizing a proprietary trading system. The results of this analysis are shared with the subscribers. This trading system could use Autotrade directly into your account. The rate of success seems larger than 85%, which is one the best systems around.
They offer a one-week free trial period.
Click here to learn more about Fiasco System
Soler Investments System
Using an online Real-Time Stock Picks Alert Service, the user will be able to copy the trades based on a successful Professional Trader. They state that their Stock Trading Systems Work in all types of market conditions following years of experience of trading stocks. Whether the stock market is currently bullish or bearish (even flat), rest assured that we'll adjust our trading strategy to take advantage of the situation. To minimize the risk and maximum the profits of their stock trading system, they adjust the length of the holding period, from a few days to a few weeks. Their claimed percentage gain is about 65%.
Return on investment: ROI
When we have the opportunity to share with our family, friends, and close professional colleagues the successes we have enjoyed through stock investing, they are amazed and often times look at us in disbelief. The reality is that we have enjoyed tremendous success in stock trading through the trading system and stock investment strategies we have developed over time, through trial and error. Our stock trading system allows a person like you the chance to use tried and true stock market strategies that have proven successful for us for years.
Many so-called stock investing experts often times offer excuses rather than true stock market strategies. If you have dealt with a stock broker or other stock market specialist, you likely have heard statements such as:
"Invest for the long term"
Usually after your portfolio is down about 50%.
"Buy and Hold Blue Chip Stocks"
Their favorite stock has fallen 90% in the past 6 months.
"The stock market has gone up on average 15% over the past 50 years"
Trying to explain why your account is down over 50% and their strategy (if you call it that) … stinks.
"Even the best funds rarely outperform the stock averages”
The fact is most do not even perform with the averages of the stock market.
"Trading is risky and only professionals should do it”
Right ... Then why do so many fail dismally at it? The key is to develop a solid stock investment strategy with a reliable trading system.
"No-one can outperform the stock market averages"
A statement really designed to make you feel better about poorly performing portfolio management adviser.
In this day and age, we don't see too many money management professionals worrying about trying to outperform the market. These investment strategy professionals are concerned with management on a good day but pay little attention to stock investing success and financial growth
· Michael Marcus: Turned a $30,000 account into over $80 million.
· Tom Baldwin: Started with $25,000 , he got to over $2 Billion.
· Ed Seykota: 250,000 % return on his account over 16 years.
· Nicolas Darvas : $25,000 into $2,25 million (in just 18 months).
· Steve Lescarbeau: He developed a Trading system that has averaged a 70% return ever year.
· Steve Cohen: He manages billions of dollars and averaged returns of 90% during the past seven years.
· Mark Minervini: Averaged 220% annual returns in the past five years.
They are real people, who not only make massive gains from the stock market but do it with millions under money management.
Many so-called stock investing experts often times offer excuses rather than true stock market strategies. If you have dealt with a stock broker or other stock market specialist, you likely have heard statements such as:
"Invest for the long term"
Usually after your portfolio is down about 50%.
"Buy and Hold Blue Chip Stocks"
Their favorite stock has fallen 90% in the past 6 months.
"The stock market has gone up on average 15% over the past 50 years"
Trying to explain why your account is down over 50% and their strategy (if you call it that) … stinks.
"Even the best funds rarely outperform the stock averages”
The fact is most do not even perform with the averages of the stock market.
"Trading is risky and only professionals should do it”
Right ... Then why do so many fail dismally at it? The key is to develop a solid stock investment strategy with a reliable trading system.
"No-one can outperform the stock market averages"
A statement really designed to make you feel better about poorly performing portfolio management adviser.
In this day and age, we don't see too many money management professionals worrying about trying to outperform the market. These investment strategy professionals are concerned with management on a good day but pay little attention to stock investing success and financial growth
· Michael Marcus: Turned a $30,000 account into over $80 million.
· Tom Baldwin: Started with $25,000 , he got to over $2 Billion.
· Ed Seykota: 250,000 % return on his account over 16 years.
· Nicolas Darvas : $25,000 into $2,25 million (in just 18 months).
· Steve Lescarbeau: He developed a Trading system that has averaged a 70% return ever year.
· Steve Cohen: He manages billions of dollars and averaged returns of 90% during the past seven years.
· Mark Minervini: Averaged 220% annual returns in the past five years.
They are real people, who not only make massive gains from the stock market but do it with millions under money management.
Insider Trading: A Look at Facts and Myths
When it comes to the stock market and insider stock trading, there are some important facts that any person interested in stock investing should bear in mind. Additionally, there are a significant number of myths that deserve debunking..
Over the course of the past four or five years, the whole concept of insider stock trading has gained a significant amount of attention thanks to the plight of American Domestic Diva: Martha Stewart - which brings us to our first myth about insider stock trading.
When the Martha Stewart case is mentioned, most people automatically believe that she was convicted of and sent to prison for insider stock trading. That simply is not the case. Why a grand jury initially indicted Ms. Stewart on such a charge is because the judge through the charge out due to insufficient evidence. In short, Ms. Stewart never was found guilty of insider trading.
One important fact to keep in mind about insider trading in the United States and many other countries in the 21st century is that intent is no longer an element of the crime. Previously and historically you had to intend to misuse insider information in order to gain a benefit through the stock market. In today’s world, you merely have to make a stock trading or stock investing decision based on insider information that is in your possession whether you intended to misuse the information in violation of the law or not.
The most interesting myth associated with an insider trading case involves a fellow named Andrew Carlssin. Mr. Carlssin was charged by the United States government with insider trading in the past couple of years. The true part of the story is that with an investment of only $800, Mr. Carlssin invested in the stock market and ended up making millions of dollars in a very short period of time.
Mr. Carlssin was arrested. In his defense, Mr. Carlssin is asserting that he traveled back in time from 200 years in the future to buy and sell stocks -- armed with the knowledge of how certain stocks performed at certain times. “It was just too tempting to resist,“ Mr. Carlssin stated in a videotaped confession.
Prosecutors, naturally believe Mr. Carlssin’s contention to be bogus, writing him off as a “nut.” But, he did make $350 million U.S. And, interestingly, there is no record of Mr. Carlssin existing anywhere before December 2002, when he made his first stock trade.
Fact or myth? Man from the future? Take a guess!
Over the course of the past four or five years, the whole concept of insider stock trading has gained a significant amount of attention thanks to the plight of American Domestic Diva: Martha Stewart - which brings us to our first myth about insider stock trading.
When the Martha Stewart case is mentioned, most people automatically believe that she was convicted of and sent to prison for insider stock trading. That simply is not the case. Why a grand jury initially indicted Ms. Stewart on such a charge is because the judge through the charge out due to insufficient evidence. In short, Ms. Stewart never was found guilty of insider trading.
One important fact to keep in mind about insider trading in the United States and many other countries in the 21st century is that intent is no longer an element of the crime. Previously and historically you had to intend to misuse insider information in order to gain a benefit through the stock market. In today’s world, you merely have to make a stock trading or stock investing decision based on insider information that is in your possession whether you intended to misuse the information in violation of the law or not.
The most interesting myth associated with an insider trading case involves a fellow named Andrew Carlssin. Mr. Carlssin was charged by the United States government with insider trading in the past couple of years. The true part of the story is that with an investment of only $800, Mr. Carlssin invested in the stock market and ended up making millions of dollars in a very short period of time.
Mr. Carlssin was arrested. In his defense, Mr. Carlssin is asserting that he traveled back in time from 200 years in the future to buy and sell stocks -- armed with the knowledge of how certain stocks performed at certain times. “It was just too tempting to resist,“ Mr. Carlssin stated in a videotaped confession.
Prosecutors, naturally believe Mr. Carlssin’s contention to be bogus, writing him off as a “nut.” But, he did make $350 million U.S. And, interestingly, there is no record of Mr. Carlssin existing anywhere before December 2002, when he made his first stock trade.
Fact or myth? Man from the future? Take a guess!
Money Management strategy
Please note that while those money management ideas have been long tested and applied, we could not use them in our posted results due to their complex nature, but we are using them in our real life trading accounts.
In other words, our performance results have not been taken into account this Money Management strategy the fullest extent. The information contained within these strategies are conservative stock investing pointers and related information.
Even with the best tools and stock market strategies, learning to be a profitable trader takes money and time. Many traders make the mistake of thinking that a magic filter or method will allow them to make money without any effort. Greed, fear and the need to be right pave the road to stock market failure. Learn what stock market trading strategies and money portfolio management strategies work best for your acceptable risk level.
· One of the keys of a solid stock investing system is to watch your stocks during the first 15-30 minutes after the market opens. The ones that hold the gain (or loss if your shorting) for the first 15-30 minutes and are still under the 3% increase are considered good candidates.
· Never trade more than 10% of your total stock trading account in one trade. For example if your trading account is $25,000,your maximum amount for one stock trading should not be greater that $2500!
· Use mental stop losses of 10%, and hard stop losses of 25% for stocks over $10. Use more for stocks less than $10: 20% and 35%.
Mental stop losses means that you take a look at the end of the day at your portfolio and see if any of the stocks are down more than 10% since you purchased them. In this case you watch that stock carefully, read the corporate news, and see if any significant changes are making your stock to lose value. Hard stop losses are actual stop orders placed with your brokerages, and are your safety net for any unpleasant surprises the market might offer us. (As an example, see the 9/11 disaster)
· Use profits taken at 40% or more. When you stock reaches 40% profit you should take some profits, leaving the rest to follow its course. In this way you can secure some of your initial investing.
· When you have more than 15% profit, move your stop loss to the break-even point, and continue to do it so until you exit the position. We call this trailing stop. You should consider initiating such strategy after the initial 15% gain.
· One aspect of money management is the understanding of the simple mathematics of gain/loss: If you have a trading capital of $10,000 and you lose 50% it is not enough to gain 50% to break even. After a loss of 50% you now have $5,000. To break even you need to make 100% with your leftover 5,000 to reach your original capital of 10,000 again.. You see the importance of protecting against losses.
·Use margin stock trading wisely, or you might lose more than your initial investment. Margins are a great way of multiplying your initial stock market investment. But, if not followed closely and done properly, this type of stock investing strategy can result in big losses fast. A famous trader said it all: “Big positions mean big problems”.
Start out small and build up your confidence and your trading account slowly but surely. Don’t try to become rich quickly. Consistency is the name of the game. If you have consistent trade returns after a long time period (more than a year) and including riding through down periods in the stock market, you can slowly increase your exposure. Our method has been proved to work in different markets, but it's YOUR MIND SET that has to be trained.
·Diversification: If you have 20 stocks and one of your selections crashes unexpectedly and you have a total loss in that stock ( it is very rare but can happen) you have only lost 5% of your trading capital. Not too bad. You will survive and you can continue your trading without much damage. If you have a good strategy otherwise your profits will more than take of this eventuality. If you hold only 2 stocks you have now lost 50% of your trading capital. One more time and you are out, totally.
·Risk control: If you are a beginner we would suggest you start with a paper trading system. Keep a solid record of all your stock trading on paper and record all emotions and mistakes you are going through. After a month or so start small with real money. Yes, small! Remember: Big positions mean big problems. We have done all the hard work for you, now is your turn!
·Use LIMIT orders to enter and exit a position. Market orders can guarantee you a fill, but not the price.
A LIMIT order slightly BELOW the previous close would get filled 95% of the time. Why? Because a stocks usually does a retracement during the first part of the day.
If you cannot watch the market throughout day -- and many of us cannot -- then a stock market order would do the job. Keep in mind that the price you might pay when your order executed might be much higher or lower than what you expected.
We strongly encourage the use of limit orders, as sometimes the spread between bid and ask is big.
·You have multiple choices for existing a position when it comes to a stock investing strategy or stock trading system: 40% profit taken, 15% trail stop, or just wait for the next signal in the market. It all depends on your risk/reward tolerance associated with your investment strategy.Some investors prefer a smaller gain and smaller draw-downs; other ones want to risk more for a better reward -- it's all your personal choice and part of your own investment strategy and portfolio management.
In some of our performance data we used 20% stop loss and 40% profit taken, and if none of those conditions were met during the lifespan of a trend we would exit when another signal would appear on the market.
In other words, our performance results have not been taken into account this Money Management strategy the fullest extent. The information contained within these strategies are conservative stock investing pointers and related information.
Even with the best tools and stock market strategies, learning to be a profitable trader takes money and time. Many traders make the mistake of thinking that a magic filter or method will allow them to make money without any effort. Greed, fear and the need to be right pave the road to stock market failure. Learn what stock market trading strategies and money portfolio management strategies work best for your acceptable risk level.
· One of the keys of a solid stock investing system is to watch your stocks during the first 15-30 minutes after the market opens. The ones that hold the gain (or loss if your shorting) for the first 15-30 minutes and are still under the 3% increase are considered good candidates.
· Never trade more than 10% of your total stock trading account in one trade. For example if your trading account is $25,000,your maximum amount for one stock trading should not be greater that $2500!
· Use mental stop losses of 10%, and hard stop losses of 25% for stocks over $10. Use more for stocks less than $10: 20% and 35%.
Mental stop losses means that you take a look at the end of the day at your portfolio and see if any of the stocks are down more than 10% since you purchased them. In this case you watch that stock carefully, read the corporate news, and see if any significant changes are making your stock to lose value. Hard stop losses are actual stop orders placed with your brokerages, and are your safety net for any unpleasant surprises the market might offer us. (As an example, see the 9/11 disaster)
· Use profits taken at 40% or more. When you stock reaches 40% profit you should take some profits, leaving the rest to follow its course. In this way you can secure some of your initial investing.
· When you have more than 15% profit, move your stop loss to the break-even point, and continue to do it so until you exit the position. We call this trailing stop. You should consider initiating such strategy after the initial 15% gain.
· One aspect of money management is the understanding of the simple mathematics of gain/loss: If you have a trading capital of $10,000 and you lose 50% it is not enough to gain 50% to break even. After a loss of 50% you now have $5,000. To break even you need to make 100% with your leftover 5,000 to reach your original capital of 10,000 again.. You see the importance of protecting against losses.
·Use margin stock trading wisely, or you might lose more than your initial investment. Margins are a great way of multiplying your initial stock market investment. But, if not followed closely and done properly, this type of stock investing strategy can result in big losses fast. A famous trader said it all: “Big positions mean big problems”.
Start out small and build up your confidence and your trading account slowly but surely. Don’t try to become rich quickly. Consistency is the name of the game. If you have consistent trade returns after a long time period (more than a year) and including riding through down periods in the stock market, you can slowly increase your exposure. Our method has been proved to work in different markets, but it's YOUR MIND SET that has to be trained.
·Diversification: If you have 20 stocks and one of your selections crashes unexpectedly and you have a total loss in that stock ( it is very rare but can happen) you have only lost 5% of your trading capital. Not too bad. You will survive and you can continue your trading without much damage. If you have a good strategy otherwise your profits will more than take of this eventuality. If you hold only 2 stocks you have now lost 50% of your trading capital. One more time and you are out, totally.
·Risk control: If you are a beginner we would suggest you start with a paper trading system. Keep a solid record of all your stock trading on paper and record all emotions and mistakes you are going through. After a month or so start small with real money. Yes, small! Remember: Big positions mean big problems. We have done all the hard work for you, now is your turn!
·Use LIMIT orders to enter and exit a position. Market orders can guarantee you a fill, but not the price.
A LIMIT order slightly BELOW the previous close would get filled 95% of the time. Why? Because a stocks usually does a retracement during the first part of the day.
If you cannot watch the market throughout day -- and many of us cannot -- then a stock market order would do the job. Keep in mind that the price you might pay when your order executed might be much higher or lower than what you expected.
We strongly encourage the use of limit orders, as sometimes the spread between bid and ask is big.
·You have multiple choices for existing a position when it comes to a stock investing strategy or stock trading system: 40% profit taken, 15% trail stop, or just wait for the next signal in the market. It all depends on your risk/reward tolerance associated with your investment strategy.Some investors prefer a smaller gain and smaller draw-downs; other ones want to risk more for a better reward -- it's all your personal choice and part of your own investment strategy and portfolio management.
In some of our performance data we used 20% stop loss and 40% profit taken, and if none of those conditions were met during the lifespan of a trend we would exit when another signal would appear on the market.
The Key to Surviving a Bear Market:
Follow the Market by Shorting or Buying Special Mutual Funds that Trade Short Stocks
Many people who are contemplating becoming involved in the stock market do worry about what will happen when the day comes and they have to face a bear market. They worry about how they will survive a bear market and how they will develop an appropriate investment strategy for such a situation.
Of course, one of the most important aspects of surviving a bear market is to be prepared for such an eventuality. When it comes to the stock market and stock trading, it is important to keep in mind that where there is a bull market, there can be a bear market. In short, you need to develop a sound investment strategy that keeps in sight the reality that bear markets do occur.
In addition to planning on a general basis, you are well served by incorporating certain types of stock investing schemes into your overall investment strategy. Therefore, when it comes to dealing with the effects of a bear market, you are wise to follow the market. One accepted rule of thumb is that you should take advantage of shorting the stocks. By doing so, you will work to alleviate some of the negative effects and consequences of a bear market.
Beyond trading in short stocks, you will also want to take steps to diversify your portfolio a bit more significantly than your would in a bull market. For example, in addition to shorting the stocks, you should take a close look at investing in mutual funds that trade in short stocks as a matter of routine. By becoming involved in these types of mutual funds, you will significantly enhance your ability to survive the bear market with your portfolio management scheme well intact.
In our "Members Only area" we have compiled a list of Mutual Funds that have short selling stocks as their portfolio. Those funds are quite legit and widely used, as another instrument of investment.
Our trading system has strategies that can work in either type of market, and you can see from our results that during the recent bear market from 2000-2001, we have had very good returns on all the strategies used.
Many people who are contemplating becoming involved in the stock market do worry about what will happen when the day comes and they have to face a bear market. They worry about how they will survive a bear market and how they will develop an appropriate investment strategy for such a situation.
Of course, one of the most important aspects of surviving a bear market is to be prepared for such an eventuality. When it comes to the stock market and stock trading, it is important to keep in mind that where there is a bull market, there can be a bear market. In short, you need to develop a sound investment strategy that keeps in sight the reality that bear markets do occur.
In addition to planning on a general basis, you are well served by incorporating certain types of stock investing schemes into your overall investment strategy. Therefore, when it comes to dealing with the effects of a bear market, you are wise to follow the market. One accepted rule of thumb is that you should take advantage of shorting the stocks. By doing so, you will work to alleviate some of the negative effects and consequences of a bear market.
Beyond trading in short stocks, you will also want to take steps to diversify your portfolio a bit more significantly than your would in a bull market. For example, in addition to shorting the stocks, you should take a close look at investing in mutual funds that trade in short stocks as a matter of routine. By becoming involved in these types of mutual funds, you will significantly enhance your ability to survive the bear market with your portfolio management scheme well intact.
In our "Members Only area" we have compiled a list of Mutual Funds that have short selling stocks as their portfolio. Those funds are quite legit and widely used, as another instrument of investment.
Our trading system has strategies that can work in either type of market, and you can see from our results that during the recent bear market from 2000-2001, we have had very good returns on all the strategies used.
Stock Trading Systems
What are the Stock Trading Systems and how can you profit from them?
Whether you are a day trader, or a swing trader, or a buy or hold trader; to successfully move in the modern trading world you need efficient and effective investment strategies, trading tips, and market guide. Don’t be worried by thinking to hire a trading professional or signing up for a course: get a personalized stock trading system that really works!
A trading system contains a timing system, a set of stock filters and has money management strategies that help traders in making effective trade decisions. The timing system gives the general trend of the market while the stock filters criteria help in selecting the best stocks to be traded. The money management strategy saves the stock traders from straight trading losses and minimizes the risk taken while trading.
These trading systems are constructed using different technical analysis tools (indicators or studies) and economic data. Some of the technical studies used are Moving Averages, Stochastic, Oscillators, Relative Strength, and Bollinger Bands.
The combination of technical analysis and economics gives the trader the best from both worlds that, traditionally, have been proved to provide the necessary stock market edge to the successful traders.
An effective trading system must make money, limit risk, and must be composed of stable and optimized parameters.
Automated stock trading systems are a growing trend in trade industry. They use the simulation of the trading rules, parameters, and indicators in a completely automated fashion and provide the traders a tool to use for decision making. These systems work with trading software to find trades that best suit you, and then automatically place your trades with your broker. Automated trading systems give many benefits like increase efficiency, increase profit, and save time, however, the market is full of scams. Please beware while buying an automated trading system!
Stock trading systems are a great assistance for newbies and casual traders. Novice traders know very little about stock trading tactics, don’t come up with any trade plan, have poor money management, and overtrade. By adopting timing, filtering, and a money management system, they get a complete trade plan that guides them in selecting a right trade, locating a trend, and responding to trade signals. An effective stock system stops them from overtrading and ensures that they only pull the right trigger at the right time.
The trading systems are quite handy for experienced traders as well. They are objective and static and help traders to improve their investment strategies and money management rules. An equity trading system automatically generates trade signals and select the best stock type to be traded, thus saving traders from tedious market research and analysis. It helps in making quick and accurate trading decisions; hence saving tim and increasing performance and profit. Whatever economic cycle prevails in the market; you can attain consistent returns while minimizing the risk with a successful equity trading system.
Whether you are a day trader, or a swing trader, or a buy or hold trader; to successfully move in the modern trading world you need efficient and effective investment strategies, trading tips, and market guide. Don’t be worried by thinking to hire a trading professional or signing up for a course: get a personalized stock trading system that really works!
A trading system contains a timing system, a set of stock filters and has money management strategies that help traders in making effective trade decisions. The timing system gives the general trend of the market while the stock filters criteria help in selecting the best stocks to be traded. The money management strategy saves the stock traders from straight trading losses and minimizes the risk taken while trading.
These trading systems are constructed using different technical analysis tools (indicators or studies) and economic data. Some of the technical studies used are Moving Averages, Stochastic, Oscillators, Relative Strength, and Bollinger Bands.
The combination of technical analysis and economics gives the trader the best from both worlds that, traditionally, have been proved to provide the necessary stock market edge to the successful traders.
An effective trading system must make money, limit risk, and must be composed of stable and optimized parameters.
Automated stock trading systems are a growing trend in trade industry. They use the simulation of the trading rules, parameters, and indicators in a completely automated fashion and provide the traders a tool to use for decision making. These systems work with trading software to find trades that best suit you, and then automatically place your trades with your broker. Automated trading systems give many benefits like increase efficiency, increase profit, and save time, however, the market is full of scams. Please beware while buying an automated trading system!
Stock trading systems are a great assistance for newbies and casual traders. Novice traders know very little about stock trading tactics, don’t come up with any trade plan, have poor money management, and overtrade. By adopting timing, filtering, and a money management system, they get a complete trade plan that guides them in selecting a right trade, locating a trend, and responding to trade signals. An effective stock system stops them from overtrading and ensures that they only pull the right trigger at the right time.
The trading systems are quite handy for experienced traders as well. They are objective and static and help traders to improve their investment strategies and money management rules. An equity trading system automatically generates trade signals and select the best stock type to be traded, thus saving traders from tedious market research and analysis. It helps in making quick and accurate trading decisions; hence saving tim and increasing performance and profit. Whatever economic cycle prevails in the market; you can attain consistent returns while minimizing the risk with a successful equity trading system.
Trend Following Systems
One of the most successful trading strategies!
If you are a trader or an investor, definitely you would dream of sound, long-term financial growth with minimum risk. Don’t just dream; let it to become true!
Start using a Trend Following System and take benefit from both sides of the stock market: the UP and DOWN.
Trend following systems are the popular trading systems which work on the market trend mechanism. They use “moving averages” or “channel breakouts” to determine the general direction of the market and to generate trade signals. These systems normally enter in the market after the trend properly establishes itself and for this reason, they miss the initial turning point, but this does not diminish their returns, as there are many “fake” turning points where the casual trader might get caught.
If there is a turn opposite to the trend, these systems either exit or wait until the turn establishes itself as a trend in the opposite direction. In case of exit, they re-enter when the trend re-establishes itself. Trend following strategies take advantage of long-term moves that play out in various markets.
Getting started with a trending system is simple and easy. Latest technologies have developed powerful systems and Internet has made them accessible from the convenience of a PC. Just login to the Internet; subscribe yourself to a system and get successful trading strategies, latest trade signals, quotes, and recommendations without spending hours on searching and analyzing the stock market. Does your current stock trading system completely guide you during your trade by suggesting when is the best time to enter or exit? What to trade? How much to risk? Those are very important questions that you should ask yourself or your trading adviser!
Trend following systems have enjoyed the success and growth over the years and it is mainly due to those traders who have had the most success with these systems.
Many famous traders like Richard Dennis, Paul Rabar, and Jerry Parker say that following a market trend is their winning trading strategy. Its reactive and systematic nature helps them to get maximum benefit from the market trend.
Richard Dennis, the father of the trend following, was one of the most successful futures speculators of all time. He started trading with an initial stock of just a few dollars and used the power of trend following systems and strategies to turn his initial investment into $300,000,000.
He trained many people for this technique and these people are the successful traders of this era.
Jerry Parker, the most successful of Richard’s students, believes that trend following with rules works. The small town person from the Lynchburg, by using the powerful trend following technique, is now the president of the Chesapeake Capital. He is making well by earning over $100 million profit.
Another popular trend follower, John W. Henry, who started with $16,000, has earned $500 millions until now.
Base your trading decisions on a diversified, long-term trend following system and enjoy the profits from the ups and downs of the stock market!
If you are a trader or an investor, definitely you would dream of sound, long-term financial growth with minimum risk. Don’t just dream; let it to become true!
Start using a Trend Following System and take benefit from both sides of the stock market: the UP and DOWN.
Trend following systems are the popular trading systems which work on the market trend mechanism. They use “moving averages” or “channel breakouts” to determine the general direction of the market and to generate trade signals. These systems normally enter in the market after the trend properly establishes itself and for this reason, they miss the initial turning point, but this does not diminish their returns, as there are many “fake” turning points where the casual trader might get caught.
If there is a turn opposite to the trend, these systems either exit or wait until the turn establishes itself as a trend in the opposite direction. In case of exit, they re-enter when the trend re-establishes itself. Trend following strategies take advantage of long-term moves that play out in various markets.
Getting started with a trending system is simple and easy. Latest technologies have developed powerful systems and Internet has made them accessible from the convenience of a PC. Just login to the Internet; subscribe yourself to a system and get successful trading strategies, latest trade signals, quotes, and recommendations without spending hours on searching and analyzing the stock market. Does your current stock trading system completely guide you during your trade by suggesting when is the best time to enter or exit? What to trade? How much to risk? Those are very important questions that you should ask yourself or your trading adviser!
Trend following systems have enjoyed the success and growth over the years and it is mainly due to those traders who have had the most success with these systems.
Many famous traders like Richard Dennis, Paul Rabar, and Jerry Parker say that following a market trend is their winning trading strategy. Its reactive and systematic nature helps them to get maximum benefit from the market trend.
Richard Dennis, the father of the trend following, was one of the most successful futures speculators of all time. He started trading with an initial stock of just a few dollars and used the power of trend following systems and strategies to turn his initial investment into $300,000,000.
He trained many people for this technique and these people are the successful traders of this era.
Jerry Parker, the most successful of Richard’s students, believes that trend following with rules works. The small town person from the Lynchburg, by using the powerful trend following technique, is now the president of the Chesapeake Capital. He is making well by earning over $100 million profit.
Another popular trend follower, John W. Henry, who started with $16,000, has earned $500 millions until now.
Base your trading decisions on a diversified, long-term trend following system and enjoy the profits from the ups and downs of the stock market!
Risk Management
Know how to manage the risk taken in stock trading!
There are vast differences between traders that are considered professional or amateur. A professional trader will avidly try to control risks and understand his/her risks on a daily basis. A professional trader will always be mindful of risk management before, during and after all trading activities. Qualities that make up a particularly good trader involve two key assessments:
Risk exposure that will come from every stock trade
Level of risk they are willing to take
Once a good trader has thoroughly these two key items, they will begin to properly understand the value and profit they could make from a particular trade. A trader who is mindful about his or her risk management will evaluate their position or exposure throughout the trade activities, and if the chosen trade carries a high risk, they will cut down on both in order to control risks on the portfolio.
Many traders use a risk management program that is made up various procedures that are implemented to estimate risks. The methods are set up to obtain the best investment results and they include:
Quantify
Estimate
Control Risk
These are all areas of risk management that should be carefully considered, to quantify your risks and performance a financial analysts will apply these concepts and measure:
# Market Beta (linear regression slope of your portfolio or any single stock)
# Correlation (linear regression correlation of your portfolio)
# Volatility (standard deviation of the daily changes in percent of the portfolio price)
# Return and Risk Ratio (higher return or risk ratios mean better performance)
One very popular area of risk management is called the Value at Risk (VAR) concept. Many of the top investment advisors or trading houses use this concept to measure absolute risks of your portfolio. These are measured in dollars per day. In order to properly implement VAR it requires the person to study the price time series on all stocks within a particular portfolio. Many factors go into calculating the VAR concept, factors such as volatility of every stock, correlation among the entire portfolio, and stability of the relationships historically.
Risk management is only successful if the process begins prior to the start of a trade. Single trade risk management is implemented on a per trade basis. You must access many things before you are able to begin this risk management concept.
# First you must know the amount you are willing to lose prior to trading.
# Then you will need to ensure that the stock is active or sufficiently liquid, this is in case you would want to sell or buy promptly.
# Assess the “Cut Loss level” prior to any trading activity.
# Know the take profit level you are targeting.
# Only buy your stock when it as at the acceptable level of pricing.
# After your trade is confirmed, immediately enter a stop loss at market order with your previously determined level.
# Take your profit immediately when it reaches the profit target you determined.
When you manage your risks using the single trade risk management concept, you will find that your entire portfolio risks are under your control as well. Additionally, there are key areas you will want to assess in managing the risks of your portfolio as a whole, as well.
# Prior to building your portfolio, know the overall tolerance of risk
# Assess the overall level of cut loss, in general your portfolio as a whole should not lose in excess of 20% of the capital
# Maintain diversity with your investments, have at least three varied stocks
# Continually practice Single Trade risk management
# Assess the overall risk and the point where the risk comes
# If your risks limits are exceeded you must act quickly
# If your losses meet your overall stop loss level, it is time to close the entire portfolio
There are vast differences between traders that are considered professional or amateur. A professional trader will avidly try to control risks and understand his/her risks on a daily basis. A professional trader will always be mindful of risk management before, during and after all trading activities. Qualities that make up a particularly good trader involve two key assessments:
Risk exposure that will come from every stock trade
Level of risk they are willing to take
Once a good trader has thoroughly these two key items, they will begin to properly understand the value and profit they could make from a particular trade. A trader who is mindful about his or her risk management will evaluate their position or exposure throughout the trade activities, and if the chosen trade carries a high risk, they will cut down on both in order to control risks on the portfolio.
Many traders use a risk management program that is made up various procedures that are implemented to estimate risks. The methods are set up to obtain the best investment results and they include:
Quantify
Estimate
Control Risk
These are all areas of risk management that should be carefully considered, to quantify your risks and performance a financial analysts will apply these concepts and measure:
# Market Beta (linear regression slope of your portfolio or any single stock)
# Correlation (linear regression correlation of your portfolio)
# Volatility (standard deviation of the daily changes in percent of the portfolio price)
# Return and Risk Ratio (higher return or risk ratios mean better performance)
One very popular area of risk management is called the Value at Risk (VAR) concept. Many of the top investment advisors or trading houses use this concept to measure absolute risks of your portfolio. These are measured in dollars per day. In order to properly implement VAR it requires the person to study the price time series on all stocks within a particular portfolio. Many factors go into calculating the VAR concept, factors such as volatility of every stock, correlation among the entire portfolio, and stability of the relationships historically.
Risk management is only successful if the process begins prior to the start of a trade. Single trade risk management is implemented on a per trade basis. You must access many things before you are able to begin this risk management concept.
# First you must know the amount you are willing to lose prior to trading.
# Then you will need to ensure that the stock is active or sufficiently liquid, this is in case you would want to sell or buy promptly.
# Assess the “Cut Loss level” prior to any trading activity.
# Know the take profit level you are targeting.
# Only buy your stock when it as at the acceptable level of pricing.
# After your trade is confirmed, immediately enter a stop loss at market order with your previously determined level.
# Take your profit immediately when it reaches the profit target you determined.
When you manage your risks using the single trade risk management concept, you will find that your entire portfolio risks are under your control as well. Additionally, there are key areas you will want to assess in managing the risks of your portfolio as a whole, as well.
# Prior to building your portfolio, know the overall tolerance of risk
# Assess the overall level of cut loss, in general your portfolio as a whole should not lose in excess of 20% of the capital
# Maintain diversity with your investments, have at least three varied stocks
# Continually practice Single Trade risk management
# Assess the overall risk and the point where the risk comes
# If your risks limits are exceeded you must act quickly
# If your losses meet your overall stop loss level, it is time to close the entire portfolio
How do you know if a stock price breakout is real or not?
Stock breakouts can be a very profitable strategy you can follow.
When a stock has banged its head up against a resistance level in the past, and failed to execute the breakout, there are several factors working at the same time. One of those factors is that some of the people that bought the stock at the breakout level are still holding it. Some of them are nervous. They start to think that "if that stock gets back to where I got it, I'm outta here." So, that creates some overhead pressure. Then of course you have the professional short sellers lurking.
The short sellers watch resistance levels too. At the very first signs that a stock won't break out, they pile on the shorts, and that extra pressure will often lead to the stock failing its move. Between the "bag holders" that are stuck in it, and the shorts looking to crush it, you can see there's some warfare going on. The driving factor behind why it's challenging its breakout in the first place has to be pretty strong to overcome it all.
So, lets say the line in the sand is at $60. The stock has hit it twice in the past and now it's at $59.90 and "trying" again. If it gets to say $60.10, how on earth do you know it will hold? You don't. Some will tell you that you need to watch the volume to prove it or not, but that's not always reliable. As the "warfare" rages, the volume will indeed be higher as the bag holders, shorts and new buyers all exert their forces. So, there is indeed going to be higher volume anyway.
We have two ways to at least try and help the situation. First off, watch how far the stock exceeds the breakout area. In our example, if $60 is the breakout line, and the stock gets to $60.50, chances are better that it's going to stick than if it only gets to 60.08 and can't seem to get further. Secondly, is the stock going to close above that breakout level?
Over the years we've found that stocks that close above a past resistance level have a 75% greater chance of holding the breakout. Why? All those professional shorter's have to look at themselves and say "hmm. It broke out and now it's going to close above the breakout. If some big stock outlet picks up the breakout, it could roar and we'd get fried. I better close out my short now, and be sorry later."
Breakouts that hold into the close are the "most" reliable predictor of a true breakout that we've found. Even then they aren't perfect as we've seen them gap down the next morning, but in general, overall terms, it's about the best indicator we've found.
When a stock has banged its head up against a resistance level in the past, and failed to execute the breakout, there are several factors working at the same time. One of those factors is that some of the people that bought the stock at the breakout level are still holding it. Some of them are nervous. They start to think that "if that stock gets back to where I got it, I'm outta here." So, that creates some overhead pressure. Then of course you have the professional short sellers lurking.
The short sellers watch resistance levels too. At the very first signs that a stock won't break out, they pile on the shorts, and that extra pressure will often lead to the stock failing its move. Between the "bag holders" that are stuck in it, and the shorts looking to crush it, you can see there's some warfare going on. The driving factor behind why it's challenging its breakout in the first place has to be pretty strong to overcome it all.
So, lets say the line in the sand is at $60. The stock has hit it twice in the past and now it's at $59.90 and "trying" again. If it gets to say $60.10, how on earth do you know it will hold? You don't. Some will tell you that you need to watch the volume to prove it or not, but that's not always reliable. As the "warfare" rages, the volume will indeed be higher as the bag holders, shorts and new buyers all exert their forces. So, there is indeed going to be higher volume anyway.
We have two ways to at least try and help the situation. First off, watch how far the stock exceeds the breakout area. In our example, if $60 is the breakout line, and the stock gets to $60.50, chances are better that it's going to stick than if it only gets to 60.08 and can't seem to get further. Secondly, is the stock going to close above that breakout level?
Over the years we've found that stocks that close above a past resistance level have a 75% greater chance of holding the breakout. Why? All those professional shorter's have to look at themselves and say "hmm. It broke out and now it's going to close above the breakout. If some big stock outlet picks up the breakout, it could roar and we'd get fried. I better close out my short now, and be sorry later."
Breakouts that hold into the close are the "most" reliable predictor of a true breakout that we've found. Even then they aren't perfect as we've seen them gap down the next morning, but in general, overall terms, it's about the best indicator we've found.
Working till Sunday morning
Well...this is a norm for me to work during festive time as I don't have no plan to do any partying or drinking. The most....sit at home to watch Korean drama and eating tit-bit at the same time.
Yes....entered a couple of trades this morning before going to sleep. Bought Noble at 3.16 but it closed at 3.14....no problem about it. Also bought Yuexiu Property ( former Guangzhou Investment ) at HK$2.21 and it closed at HK$2.22. At same time...do nothing for my Epure except to watch it drops to 72.5 cents. At one point...it was at 74 cents and I was thinking of cutting loss but just too tired to wait, so went to sleep.
Merry X'mas everyone.....and god blessed.
Yes....entered a couple of trades this morning before going to sleep. Bought Noble at 3.16 but it closed at 3.14....no problem about it. Also bought Yuexiu Property ( former Guangzhou Investment ) at HK$2.21 and it closed at HK$2.22. At same time...do nothing for my Epure except to watch it drops to 72.5 cents. At one point...it was at 74 cents and I was thinking of cutting loss but just too tired to wait, so went to sleep.
Merry X'mas everyone.....and god blessed.
Wednesday, December 23, 2009
Is the market always right?
T'S always an interesting and useful exercise to question conventional wisdom in the stock market, either when the mood is overtly bullish or bearish. Of course, many observers would point to a time-honoured maxim that 'the market is always right' which if true, suggests that it is an exercise in futility to try and probe for hidden truths beyond what the markets are saying at any one time - just accept the message being conveyed and react accordingly.
As a general rule, this approach would be correct; you'd have to assume that the market is usually right and certainly, if you had stood still over the past five months and done nothing, you'd have missed out on a rebound that has, on average, added 40 per cent to equities round the world.
However, all rules have exceptions and this could well be one such instance when markets are, shall we say, less than correct. We say this because current wisdom, going by the large upward thrust in equities since March, says that because the US economy has turned a corner and is supposedly improving, then the outlook has to be rosy and thus stocks are cheap. This much most investors would be familiar with, the mantra from the broking community and investment banks that markets have more upside, that there are more earnings upgrades to bank on and that economic growth has only one direction - up.
But you'd have to ask, why is there still such widespread scepticism among an appreciable number of learned observers? In BT's Aug 20 Roundtable for example, the recovery was described as 'phony' by financial consultant Ernest Kepper. He said that 'a turn-up in the economy is not the same as the economy recovering lost ground'. Japanese professor and former finance vice-minister for international affairs Eisuke Sakakibara said that he was mystified because there is no good reason why stock prices are so high, either in Japan, the US or even in China, where he believes a major bubble is inflating.
Plenty to ponder
All of these concerns might be dismissed as simple, misplaced over-conservatism if stock prices are really cheap relative to future prospects, but here we find plenty to ponder.
In US financial weekly Barron's Aug 3 issue for example, former Merrill Lynch strategist David Rosenberg is quoted as being still doubtful that Wall Street's March low was a real market bottom. This is because, according to his reckoning, on March 6 US stocks were trading at two times book value, 13 times forward earnings and 18 times trailing earnings which were supported by a paltry 3 per cent dividend yield - all numbers which don't qualify as a true market low.
Worse, the dividend yield today has dropped to 2 per cent while the trailing price/earnings has climbed to 24, leading to the suggestion that 'the marginal buyer of equities today may well be the same person who was loading up on real estate during the summer of 2006'.
And what of US growth? Even here, questions can be asked. Thus far, the latest figures - which incidentally brought cheer to Wall Street when they were released - showed that the slide in US consumption is levelling off, but this was most likely due to tax cuts and the stimulus taking effect, both of which can only provide temporary relief. With no real improvement in employment and only 0.2 per cent private sector wage growth, it's not likely that US consumers can do their part to spend the economy out of trouble in the months ahead.
As some critics have correctly pointed out, stimulus packages may ultimately cause more damage than good because they delay the inevitable downturn and prevent economies from healing themselves. One editorial described stimulus packages as akin to juggling flaming torches - impressive while it lasts, but doomed to succumb eventually to the law of gravity. If and when the US's 'bailout bubble' bursts - or when the stimulus is withdrawn - Wall Street could be in serious trouble.
Liquidity driven momentum
So where does this leave the investor who is wondering where equities might head in the months ahead? First, it's best to acknowledge that a large part of Wall Street's rally since March was liquidity driven, possibly even fuelled by money from US bailout packages that was quietly channelled to investment banks. If the liquidity dries up, so will the momentum.
Second, government spending and stimulus can help ease some of the pain some of the time, but not all of the pain all of the time - especially when both are funded by government borrowing. This is because artificial growth of the sort being engineered in the US comes at a price, and this could take the form of higher inflation and higher taxes as many have forecast.
Third and perhaps most important though, is not to get too carried away by the pronouncements from the broking community that the worst is over and that it's all happy days ahead because there is plenty of room for scepticism.
Put differently, it's best not to place too much faith in the dictum that the market is always right because sometimes, it isn't.
As a general rule, this approach would be correct; you'd have to assume that the market is usually right and certainly, if you had stood still over the past five months and done nothing, you'd have missed out on a rebound that has, on average, added 40 per cent to equities round the world.
However, all rules have exceptions and this could well be one such instance when markets are, shall we say, less than correct. We say this because current wisdom, going by the large upward thrust in equities since March, says that because the US economy has turned a corner and is supposedly improving, then the outlook has to be rosy and thus stocks are cheap. This much most investors would be familiar with, the mantra from the broking community and investment banks that markets have more upside, that there are more earnings upgrades to bank on and that economic growth has only one direction - up.
But you'd have to ask, why is there still such widespread scepticism among an appreciable number of learned observers? In BT's Aug 20 Roundtable for example, the recovery was described as 'phony' by financial consultant Ernest Kepper. He said that 'a turn-up in the economy is not the same as the economy recovering lost ground'. Japanese professor and former finance vice-minister for international affairs Eisuke Sakakibara said that he was mystified because there is no good reason why stock prices are so high, either in Japan, the US or even in China, where he believes a major bubble is inflating.
Plenty to ponder
All of these concerns might be dismissed as simple, misplaced over-conservatism if stock prices are really cheap relative to future prospects, but here we find plenty to ponder.
In US financial weekly Barron's Aug 3 issue for example, former Merrill Lynch strategist David Rosenberg is quoted as being still doubtful that Wall Street's March low was a real market bottom. This is because, according to his reckoning, on March 6 US stocks were trading at two times book value, 13 times forward earnings and 18 times trailing earnings which were supported by a paltry 3 per cent dividend yield - all numbers which don't qualify as a true market low.
Worse, the dividend yield today has dropped to 2 per cent while the trailing price/earnings has climbed to 24, leading to the suggestion that 'the marginal buyer of equities today may well be the same person who was loading up on real estate during the summer of 2006'.
And what of US growth? Even here, questions can be asked. Thus far, the latest figures - which incidentally brought cheer to Wall Street when they were released - showed that the slide in US consumption is levelling off, but this was most likely due to tax cuts and the stimulus taking effect, both of which can only provide temporary relief. With no real improvement in employment and only 0.2 per cent private sector wage growth, it's not likely that US consumers can do their part to spend the economy out of trouble in the months ahead.
As some critics have correctly pointed out, stimulus packages may ultimately cause more damage than good because they delay the inevitable downturn and prevent economies from healing themselves. One editorial described stimulus packages as akin to juggling flaming torches - impressive while it lasts, but doomed to succumb eventually to the law of gravity. If and when the US's 'bailout bubble' bursts - or when the stimulus is withdrawn - Wall Street could be in serious trouble.
Liquidity driven momentum
So where does this leave the investor who is wondering where equities might head in the months ahead? First, it's best to acknowledge that a large part of Wall Street's rally since March was liquidity driven, possibly even fuelled by money from US bailout packages that was quietly channelled to investment banks. If the liquidity dries up, so will the momentum.
Second, government spending and stimulus can help ease some of the pain some of the time, but not all of the pain all of the time - especially when both are funded by government borrowing. This is because artificial growth of the sort being engineered in the US comes at a price, and this could take the form of higher inflation and higher taxes as many have forecast.
Third and perhaps most important though, is not to get too carried away by the pronouncements from the broking community that the worst is over and that it's all happy days ahead because there is plenty of room for scepticism.
Put differently, it's best not to place too much faith in the dictum that the market is always right because sometimes, it isn't.
Setting trading limit pays off?
WHEN one is trading on the stock market, it pays to set a limit and have the discipline to stick to it, whether in a good or bad economic climate, says Australian trader Stuart McPhee.
This strategy, he adds, is crucial in protecting one's money. It helped him reap 'several thousand dollars' in a day's work of trading derivatives in 2006.
Citing discipline as a vital factor when dabbling in stocks and shares, the former air-defence- system artillery captain tells my paper: 'Consistency is key. Being disciplined in sticking to your original trading plan sounds boring but it's important.'
Mr McPhee, 37, was one of the guest speakers at the Share- Investor Invest Fair held at Suntec Convention Centre. The two-day event, which attracted 25,000 visitors and ended yesterday, was organised by Singapore Press Holdings' online trading platform ShareInvestor, in collaboration with The Business Times.
A self-confessed 'conservative trader', Mr McPhee - the author of financial guidebook Trading In A Nutshell - shares some trading tips with my paper readers.
What are the most important things a trader must consider?
He has to know when to cut his losses. That means knowing when he is losing trades and exit the market when that happens. Don't trade randomly. Stick to a simple trading plan.
What is your trading plan?
I go by the 150-day moving average rule that author Stan Weinstein mentioned in his book, Secrets For Profiting In Bull And Bear Markets.
Basically, I don't trade when the market falls below the moving average, or closing prices.
Last August and September, I didn't trade at all because the market was so volatile.
What advice do you have for trading novices?
Know under what conditions you should get into a trade and be clear about how much money you want to put in. Most importantly, know the conditions under which you should get out.
How long did it take you to crack the market?
There is no such thing as an easy solution, so be realistic.
If you've just started trading, don't expect huge profits. Instead, be prepared to lose money for the first 12 months.
For example, I began trading full-time in 2000. That was when the Nasdaq crashed and I lost about A$150,000.
How do you trade with your head, not your heart?
Be disciplined and stick to your plan, whether you want to or not. As American general Norman Schwarzkopf said: 'The truth of the matter is that you always know the right thing to do. The hard part is doing it.'
This strategy, he adds, is crucial in protecting one's money. It helped him reap 'several thousand dollars' in a day's work of trading derivatives in 2006.
Citing discipline as a vital factor when dabbling in stocks and shares, the former air-defence- system artillery captain tells my paper: 'Consistency is key. Being disciplined in sticking to your original trading plan sounds boring but it's important.'
Mr McPhee, 37, was one of the guest speakers at the Share- Investor Invest Fair held at Suntec Convention Centre. The two-day event, which attracted 25,000 visitors and ended yesterday, was organised by Singapore Press Holdings' online trading platform ShareInvestor, in collaboration with The Business Times.
A self-confessed 'conservative trader', Mr McPhee - the author of financial guidebook Trading In A Nutshell - shares some trading tips with my paper readers.
What are the most important things a trader must consider?
He has to know when to cut his losses. That means knowing when he is losing trades and exit the market when that happens. Don't trade randomly. Stick to a simple trading plan.
What is your trading plan?
I go by the 150-day moving average rule that author Stan Weinstein mentioned in his book, Secrets For Profiting In Bull And Bear Markets.
Basically, I don't trade when the market falls below the moving average, or closing prices.
Last August and September, I didn't trade at all because the market was so volatile.
What advice do you have for trading novices?
Know under what conditions you should get into a trade and be clear about how much money you want to put in. Most importantly, know the conditions under which you should get out.
How long did it take you to crack the market?
There is no such thing as an easy solution, so be realistic.
If you've just started trading, don't expect huge profits. Instead, be prepared to lose money for the first 12 months.
For example, I began trading full-time in 2000. That was when the Nasdaq crashed and I lost about A$150,000.
How do you trade with your head, not your heart?
Be disciplined and stick to your plan, whether you want to or not. As American general Norman Schwarzkopf said: 'The truth of the matter is that you always know the right thing to do. The hard part is doing it.'
The making of a Savvy trader? Is it possible?
ADVERTISEMENTS for courses that claim to be able to turn you into a proficient or even savvy trader have mushroomed over the last few years.
The courses, which typically cost a few thousand dollars, will teach you trading techniques, which may be executed on a variety of assets - stocks, options, currencies, commodity futures. But beyond techniques, the courses will also teach you the psychology of trading, which some coaches argue is more important than pure techniques.
Trading, after all, is a discipline, and not a get-rich-quick route, even if some ads may seem to give that impression.
First, what is the difference between trading and investing? Retail investors are often encouraged to take a long-term view of their investments and warned not to speculate or time markets. Yet, the buy-and-hold route has often been an extremely painful exercise, as the recent bear market shows.
Yeo Keong Hee, master trainer and forex strategist at Adam Khoo Learning Technologies (AKLT), says that there are over-generalisations in the way the terms are commonly defined. Investing, for instance, is often seen as an activity that involves longer-term positions and more deliberate analysis.
'I believe . . . these (over-generalisations) are not helpful to one who wants to consistently profit from the market . . . In fact, long-term investing can very often be risky, especially when investments are based on misguided analysis such as public opinion.'
Short term trading, he says, can produce good returns 'if the trader is trained to consistently engage the market with systematic trading techniques and risk control'. An AKLT brochure claims that Mr Yeo, who teaches forex techniques, is able to consistently make US$15,000 to US$20,000 in monthly profits from forex trades.
So what are the characteristics that make a good trader? Or, how can you maximise your chances of success?
The first element is to have a plan for your trade and stick to that plan. But alongside that is what Keane Lee of T3B Holdings calls the 'right mindset'.
'To achieve consistency, one must be willing to stick by the rules within the trading plan, especially cutting losses when the market turns against one's trades. Over time, one manages the downside by taking small losses in some trades and allowing most winners to ride the trend as long as the market decides. In other words, keep in mind that taking care of the downside is our job; and the upside is the market's job.'
Mr Lee has designed a proprietary trading system to track the price movements of stocks and derivatives. The system generates buy and sell signals.
This brings us to the issue of risk control, a discipline that often falls by the wayside when emotions run high. Sticking to a trading plan is itself a form of risk control.
Adam Sprague, director of OptionsXpress says: 'Traders use strategies that limit their risks, while taking advantage of price volatility. A successful trader needs a good trading plan to identify and limit the risks with each trade. The key benefit of the plan is that it helps to take any emotion out of trading. Even before entering a trade, the trader must know what their exit points are for both the profit and loss.'
He adds: 'Problems for traders often arise when they have a plan, but they start to bend their own rules, such as adjusting the profit and stop levels.'
OptionsXpress offers a self-directed trading platform and free online education on products including stocks, options and futures.
AKLT's Mr Yeo believes that consistency depends on how trading techniques are implemented with systematic risk control. These together should help to rein emotions that can be wealth destructive.
'In my classes, I focus a lot on risk control and overcoming the psychological weaknesses that invariably sabotage a trader's success. There are too many courses and books that focus excessively on trading techniques, while glossing over or even ignoring the importance of trading psychology and systematic risk control . . . This is the reason why most traders lose money despite learning a wide variety of good trading systems.'
A trader, he says, should pick a technique or a few techniques that suit his personality. He must also 'respect and minimise the impact of market risk'. This includes setting limits to trades. The third is to master the 'emotional attributes' of trading.
Be willing, for instance, to take small losses. 'The unwillingness to take losses is rooted in the desire to make money, which of course is the motivation behind trading in the first place. Ironically, such an unwillingness will lead to greater losses eventually.'
Traders, he says, must make an effort to resist the impulse towards instant gratification 'in order to be among the minority of traders who emerge profitable against the odds'.
Yet another must is the discipline of money management. Says Mr Lee: 'A trader must set aside trading capital that he or she is emotionally detached from - not money that you are too afraid to lose as it will have a negative effect on trading psychology. Next comes money management, which includes position sizing and appropriate diversification. With this, a few losses would have little impact on the total capital.'
If you are mulling a trading coach, most centres offer free introductory or orientation seminar. Make sure you ascertain all the fees, as some may cost well over $5,000 when you include books and other material. Check, too, whether there are avenues for follow-up, such as a mentoring scheme or refresher courses. The latter may actually be free at some centres.
Do your research too on the track record of the trainers themselves, as well as the students. T3B's Mr Lee says: 'Track record is definitely important. But most significant is the students' track records as it is crucial that the coach's techniques should be easily replicated by the students. Furthermore, if the coach is highly successful, his or her personal portfolio should be sizeable - in the millions of Singapore dollars.'
Mr Yeo says that a trainer should be a successful trader as well, rather than just an analyst.
'If a trader is able to profit from the market consistently, we know that he not only knows about how markets work, but also that he is able to put his knowledge into practice . . . Of course, it is possible to get good training from a competent market analyst who doesn't trade. But such training is likely limited to the intellectual dimensions of trading.
'Only a successful trader can impart the nuances of trading psychology, which are crucial.'
The courses, which typically cost a few thousand dollars, will teach you trading techniques, which may be executed on a variety of assets - stocks, options, currencies, commodity futures. But beyond techniques, the courses will also teach you the psychology of trading, which some coaches argue is more important than pure techniques.
Trading, after all, is a discipline, and not a get-rich-quick route, even if some ads may seem to give that impression.
First, what is the difference between trading and investing? Retail investors are often encouraged to take a long-term view of their investments and warned not to speculate or time markets. Yet, the buy-and-hold route has often been an extremely painful exercise, as the recent bear market shows.
Yeo Keong Hee, master trainer and forex strategist at Adam Khoo Learning Technologies (AKLT), says that there are over-generalisations in the way the terms are commonly defined. Investing, for instance, is often seen as an activity that involves longer-term positions and more deliberate analysis.
'I believe . . . these (over-generalisations) are not helpful to one who wants to consistently profit from the market . . . In fact, long-term investing can very often be risky, especially when investments are based on misguided analysis such as public opinion.'
Short term trading, he says, can produce good returns 'if the trader is trained to consistently engage the market with systematic trading techniques and risk control'. An AKLT brochure claims that Mr Yeo, who teaches forex techniques, is able to consistently make US$15,000 to US$20,000 in monthly profits from forex trades.
So what are the characteristics that make a good trader? Or, how can you maximise your chances of success?
The first element is to have a plan for your trade and stick to that plan. But alongside that is what Keane Lee of T3B Holdings calls the 'right mindset'.
'To achieve consistency, one must be willing to stick by the rules within the trading plan, especially cutting losses when the market turns against one's trades. Over time, one manages the downside by taking small losses in some trades and allowing most winners to ride the trend as long as the market decides. In other words, keep in mind that taking care of the downside is our job; and the upside is the market's job.'
Mr Lee has designed a proprietary trading system to track the price movements of stocks and derivatives. The system generates buy and sell signals.
This brings us to the issue of risk control, a discipline that often falls by the wayside when emotions run high. Sticking to a trading plan is itself a form of risk control.
Adam Sprague, director of OptionsXpress says: 'Traders use strategies that limit their risks, while taking advantage of price volatility. A successful trader needs a good trading plan to identify and limit the risks with each trade. The key benefit of the plan is that it helps to take any emotion out of trading. Even before entering a trade, the trader must know what their exit points are for both the profit and loss.'
He adds: 'Problems for traders often arise when they have a plan, but they start to bend their own rules, such as adjusting the profit and stop levels.'
OptionsXpress offers a self-directed trading platform and free online education on products including stocks, options and futures.
AKLT's Mr Yeo believes that consistency depends on how trading techniques are implemented with systematic risk control. These together should help to rein emotions that can be wealth destructive.
'In my classes, I focus a lot on risk control and overcoming the psychological weaknesses that invariably sabotage a trader's success. There are too many courses and books that focus excessively on trading techniques, while glossing over or even ignoring the importance of trading psychology and systematic risk control . . . This is the reason why most traders lose money despite learning a wide variety of good trading systems.'
A trader, he says, should pick a technique or a few techniques that suit his personality. He must also 'respect and minimise the impact of market risk'. This includes setting limits to trades. The third is to master the 'emotional attributes' of trading.
Be willing, for instance, to take small losses. 'The unwillingness to take losses is rooted in the desire to make money, which of course is the motivation behind trading in the first place. Ironically, such an unwillingness will lead to greater losses eventually.'
Traders, he says, must make an effort to resist the impulse towards instant gratification 'in order to be among the minority of traders who emerge profitable against the odds'.
Yet another must is the discipline of money management. Says Mr Lee: 'A trader must set aside trading capital that he or she is emotionally detached from - not money that you are too afraid to lose as it will have a negative effect on trading psychology. Next comes money management, which includes position sizing and appropriate diversification. With this, a few losses would have little impact on the total capital.'
If you are mulling a trading coach, most centres offer free introductory or orientation seminar. Make sure you ascertain all the fees, as some may cost well over $5,000 when you include books and other material. Check, too, whether there are avenues for follow-up, such as a mentoring scheme or refresher courses. The latter may actually be free at some centres.
Do your research too on the track record of the trainers themselves, as well as the students. T3B's Mr Lee says: 'Track record is definitely important. But most significant is the students' track records as it is crucial that the coach's techniques should be easily replicated by the students. Furthermore, if the coach is highly successful, his or her personal portfolio should be sizeable - in the millions of Singapore dollars.'
Mr Yeo says that a trainer should be a successful trader as well, rather than just an analyst.
'If a trader is able to profit from the market consistently, we know that he not only knows about how markets work, but also that he is able to put his knowledge into practice . . . Of course, it is possible to get good training from a competent market analyst who doesn't trade. But such training is likely limited to the intellectual dimensions of trading.
'Only a successful trader can impart the nuances of trading psychology, which are crucial.'
Is it too late now to pick up stocks?
Plenty of investors are walking around dwelling on that most painful of questions: What if?
What if they had jumped back into the stock market in late March or April, soon after the market bottomed out?
Since then, the white knuckle panic of the global financial crisis has given way to optimism.
In Singapore, the Straits Times Index (STI) closed at a 13-month high of 2,712.15 on Oct 15. This was up a breathtaking 86 per cent from its March low of 1,456.95.
In fact, online unit trust distributor Fundsupermart.com is so bullish on the Singapore market that it recently announced it will donate $50,000 to a local charity if the STI does not hit its forecast level of 3,600 by the end of 2011.
Other market indexes also have enjoyed big rallies. The Dow Jones Industrial Average, a bellwether of top US stocks, crossed the psychologically important 10,000 level on Oct 14 for the first time in a year, boosted by robust US corporate results.
It is no wonder that investors are wondering if the bears have departed the scene for good. Also, what are the latest hot stock picks?
The Sunday Times polled some experts on their outlook on equities.
Q: Is the current rally sustainable?
Mr Timothy Wong, head of DBS and DBS Vickers Group Research:
'The current rally is not sustainable from a short-term two-month view. We think that upside will be capped at 2,800 over the next two months. However, the global economic recovery process is still panning out and we see more upside for the STI on a six- to 12-month basis. Our current 12-month forecast for the STI is 3,160.'
Ms Carmen Lee, head of research, OCBC Investment Research:
'We believe the momentum is still healthy, although the pace of appreciation may not be as sharp as what we witnessed in terms of the recent recovery.
'Confidence has also returned to the market. In the US, the Conference Board Consumer Confidence Index, which hit a low of 25.3 in February, has rebounded and is now at 53.1. With the renewed confidence from both businesses and consumers, together with the current liquidity and low interest rates in the market, this should continue to support interest in equities.'
Mr William Cai, director of GYC Financial Advisory:
'As the recovery is still at an early stage, investors still need to be cautious as we still have to see if sales growth and earnings data are sustainable early next year. The final drive that will swing us back to be more bullish will be further improvements on the job numbers, retail numbers and better corporate earnings. This could bring the STI to between 2,800 and 2,900 by year-end.
'However, from a technical perspective, in the short term, many equity markets look ripe for a correction of 5 to 10 per cent.'
Mr Wong Sui Jau, Fundsupermart general manager:
'Earnings have been battered to extremely low levels in 2009, and we expect earnings to be significantly higher next year and in 2011. Thus, we expect a sustainable rally, but only over the longer term as the recovery becomes more pronounced. We also do not rule out short-term corrections in the stock market, given the fickle nature of investor sentiment.'
Q: For investors still on the sidelines, what should they do?
Whilst some experts agree that the best part of the rally is over, it is not too late to get in now.
Instead of investing one lump sum, stock investors are advised to buy into the market in stages. Mr Cai's advice is for stock investors to stick to companies that are fundamentally sound. This means firms that have increasing sales revenue, high gross margins, free cash flows and healthy levels of borrowing.
'Start with 5 per cent of capital into each stock and increase only when it proves to be profitable. Limit the exposure to a stock or related stocks to 15 to 20 per cent,' said Mr Cai.
Stock picks
Here are some stock selections for investors who have set aside some cash for stock investments and have a five- to 10-year investment horizon. Before you buy any stocks, do note that you should do your own thorough research on the company first.
Mr Timothy Wong:
Investment: $10,000 to $20,000
'It is better to spread the risk and go for an exchange traded fund with exposure to emerging or Asia markets rather than an individual stock.'
Investment: $50,000 to $100,000
'Blue chips are preferred as they offer a much steadier return over the long term even as they undergo bull and bear markets. And in land-scarce Singapore, the property sector should offer long-term returns, so go for blue chips such as City Developments.'
Mr Gabriel Yap, senior dealing director at DMG & Partners Securities:
'Investors should set aside at least $50,000 if they want to invest in the stock market. Wait for a good pullback of 6 to 12 per cent to build up your investment portfolio.'
Here are his stock picks:
1) OCBC Bank: Banks normally outperform in the second stage of recovery.
2) DBS Bank: DBS currently has the cheapest valuation among Singapore banks.
3) Bukit Sembawang: The property developer owns a great landbank in the Seletar area which is undergoing rapid changes. Its cash flow is expected to improve.
4) CapitaMall Trust: It has a great portfolio of assets with respect to locations, yields and borrowing levels.
5) Ascendas Reit: Its high-tech properties are under-rented, so there is potential for higher rents. Its built-to-suit strategy and acquisitions are expected to propel growth further.
6) Frasers Centrepoint Trust: The acquisitions of Northpoint 2 and Yew Tee Point next year will propel growth. It also has conservative management and a robust balance sheet.
7) Noble Group: The recent investment by Chinese sovereign wealth fund China Investment Corp will open doors further for this commodities trading firm. It is expected to benefit further from increasing profit margins.
8) Midas Holdings: Midas engages in the manufacture of aluminium alloy extrusion products primarily for the rail transportation and infrastructure sectors in China.
It is therefore a great beneficiary of China's rail industry's booming growth.
Mr Kenneth Ng, head of CIMB-GK Research:
'Investors should ask themselves which Singapore company can truly turn into a pan -Asian leader in five to 10 years' time. Stocks I would own for a five- to 10-year investment horizon must be potential leaders in their field.'
Here are his stock picks.
1) Sembcorp Industries: The utilities division will give it a stable earnings growth profile, which will also benefit from the clustering of the petrochemical industry in Singapore. Its offshore & marine division will benefit in the next few years from orders.
2) Parkway Holdings: It is on the way to becoming a significant Asian health-care player. It already has an entrenched leadership position in Singapore which will improve further when its hospital at Novena opens in 2011. It will also benefit as Singapore builds its position as a health-care hub for the region.
3) Parkway Life Reit: We like Parkway Life Reit because we see health-care assets as one of the most stable asset classes and this Reit stands out as one of the few health-care Reits that can amalgamate such assets.
4) Ascott Reit: Its assets are diversified over Asia and serviced residences stand as a good asset class to benefit from increased business dealings in Asia. With Asia likely to grow in importance as the main growth driver for the world, travel for business projects will grow in tandem.
5) DBS: It is the cheapest among the three Singapore banks, but stands out as the Singapore bank which has established the overseas platform with the most potential. Its short-term risk is poor risk management.
6) Wilmar International: The management of the palm oil producer is proven. Its integrated exposure across the palm oil value chain allows it to manage prices and profit from market intelligence. And its leadership position for cooking oils in China is immensely valuable.
7) Genting Singapore: It is likely to remain as one of Singapore's top five market capitalisation stocks in future. Short-term risks are: high market expectations and the potential disappointment of first-year profitability if a gestation period is necessary.
8) Noble Group: It is enjoying increased volumes and value-added processing capabilities from projects coming online, as well as its expansion into the oil and gas segment. Emergence of a Chinese shareholder also solves capital requirement to fund future growth.
What if they had jumped back into the stock market in late March or April, soon after the market bottomed out?
Since then, the white knuckle panic of the global financial crisis has given way to optimism.
In Singapore, the Straits Times Index (STI) closed at a 13-month high of 2,712.15 on Oct 15. This was up a breathtaking 86 per cent from its March low of 1,456.95.
In fact, online unit trust distributor Fundsupermart.com is so bullish on the Singapore market that it recently announced it will donate $50,000 to a local charity if the STI does not hit its forecast level of 3,600 by the end of 2011.
Other market indexes also have enjoyed big rallies. The Dow Jones Industrial Average, a bellwether of top US stocks, crossed the psychologically important 10,000 level on Oct 14 for the first time in a year, boosted by robust US corporate results.
It is no wonder that investors are wondering if the bears have departed the scene for good. Also, what are the latest hot stock picks?
The Sunday Times polled some experts on their outlook on equities.
Q: Is the current rally sustainable?
Mr Timothy Wong, head of DBS and DBS Vickers Group Research:
'The current rally is not sustainable from a short-term two-month view. We think that upside will be capped at 2,800 over the next two months. However, the global economic recovery process is still panning out and we see more upside for the STI on a six- to 12-month basis. Our current 12-month forecast for the STI is 3,160.'
Ms Carmen Lee, head of research, OCBC Investment Research:
'We believe the momentum is still healthy, although the pace of appreciation may not be as sharp as what we witnessed in terms of the recent recovery.
'Confidence has also returned to the market. In the US, the Conference Board Consumer Confidence Index, which hit a low of 25.3 in February, has rebounded and is now at 53.1. With the renewed confidence from both businesses and consumers, together with the current liquidity and low interest rates in the market, this should continue to support interest in equities.'
Mr William Cai, director of GYC Financial Advisory:
'As the recovery is still at an early stage, investors still need to be cautious as we still have to see if sales growth and earnings data are sustainable early next year. The final drive that will swing us back to be more bullish will be further improvements on the job numbers, retail numbers and better corporate earnings. This could bring the STI to between 2,800 and 2,900 by year-end.
'However, from a technical perspective, in the short term, many equity markets look ripe for a correction of 5 to 10 per cent.'
Mr Wong Sui Jau, Fundsupermart general manager:
'Earnings have been battered to extremely low levels in 2009, and we expect earnings to be significantly higher next year and in 2011. Thus, we expect a sustainable rally, but only over the longer term as the recovery becomes more pronounced. We also do not rule out short-term corrections in the stock market, given the fickle nature of investor sentiment.'
Q: For investors still on the sidelines, what should they do?
Whilst some experts agree that the best part of the rally is over, it is not too late to get in now.
Instead of investing one lump sum, stock investors are advised to buy into the market in stages. Mr Cai's advice is for stock investors to stick to companies that are fundamentally sound. This means firms that have increasing sales revenue, high gross margins, free cash flows and healthy levels of borrowing.
'Start with 5 per cent of capital into each stock and increase only when it proves to be profitable. Limit the exposure to a stock or related stocks to 15 to 20 per cent,' said Mr Cai.
Stock picks
Here are some stock selections for investors who have set aside some cash for stock investments and have a five- to 10-year investment horizon. Before you buy any stocks, do note that you should do your own thorough research on the company first.
Mr Timothy Wong:
Investment: $10,000 to $20,000
'It is better to spread the risk and go for an exchange traded fund with exposure to emerging or Asia markets rather than an individual stock.'
Investment: $50,000 to $100,000
'Blue chips are preferred as they offer a much steadier return over the long term even as they undergo bull and bear markets. And in land-scarce Singapore, the property sector should offer long-term returns, so go for blue chips such as City Developments.'
Mr Gabriel Yap, senior dealing director at DMG & Partners Securities:
'Investors should set aside at least $50,000 if they want to invest in the stock market. Wait for a good pullback of 6 to 12 per cent to build up your investment portfolio.'
Here are his stock picks:
1) OCBC Bank: Banks normally outperform in the second stage of recovery.
2) DBS Bank: DBS currently has the cheapest valuation among Singapore banks.
3) Bukit Sembawang: The property developer owns a great landbank in the Seletar area which is undergoing rapid changes. Its cash flow is expected to improve.
4) CapitaMall Trust: It has a great portfolio of assets with respect to locations, yields and borrowing levels.
5) Ascendas Reit: Its high-tech properties are under-rented, so there is potential for higher rents. Its built-to-suit strategy and acquisitions are expected to propel growth further.
6) Frasers Centrepoint Trust: The acquisitions of Northpoint 2 and Yew Tee Point next year will propel growth. It also has conservative management and a robust balance sheet.
7) Noble Group: The recent investment by Chinese sovereign wealth fund China Investment Corp will open doors further for this commodities trading firm. It is expected to benefit further from increasing profit margins.
8) Midas Holdings: Midas engages in the manufacture of aluminium alloy extrusion products primarily for the rail transportation and infrastructure sectors in China.
It is therefore a great beneficiary of China's rail industry's booming growth.
Mr Kenneth Ng, head of CIMB-GK Research:
'Investors should ask themselves which Singapore company can truly turn into a pan -Asian leader in five to 10 years' time. Stocks I would own for a five- to 10-year investment horizon must be potential leaders in their field.'
Here are his stock picks.
1) Sembcorp Industries: The utilities division will give it a stable earnings growth profile, which will also benefit from the clustering of the petrochemical industry in Singapore. Its offshore & marine division will benefit in the next few years from orders.
2) Parkway Holdings: It is on the way to becoming a significant Asian health-care player. It already has an entrenched leadership position in Singapore which will improve further when its hospital at Novena opens in 2011. It will also benefit as Singapore builds its position as a health-care hub for the region.
3) Parkway Life Reit: We like Parkway Life Reit because we see health-care assets as one of the most stable asset classes and this Reit stands out as one of the few health-care Reits that can amalgamate such assets.
4) Ascott Reit: Its assets are diversified over Asia and serviced residences stand as a good asset class to benefit from increased business dealings in Asia. With Asia likely to grow in importance as the main growth driver for the world, travel for business projects will grow in tandem.
5) DBS: It is the cheapest among the three Singapore banks, but stands out as the Singapore bank which has established the overseas platform with the most potential. Its short-term risk is poor risk management.
6) Wilmar International: The management of the palm oil producer is proven. Its integrated exposure across the palm oil value chain allows it to manage prices and profit from market intelligence. And its leadership position for cooking oils in China is immensely valuable.
7) Genting Singapore: It is likely to remain as one of Singapore's top five market capitalisation stocks in future. Short-term risks are: high market expectations and the potential disappointment of first-year profitability if a gestation period is necessary.
8) Noble Group: It is enjoying increased volumes and value-added processing capabilities from projects coming online, as well as its expansion into the oil and gas segment. Emergence of a Chinese shareholder also solves capital requirement to fund future growth.
The trail of the smart money?
Timing an investment right is everything, a successful investor will tell you.
You may want to play it safe by hedging your bets by sticking to buying only blue chips.
But if you make your purchases just as the stock market is experiencing a bull run, you may find yourself staring at a loss when the market corrects, even though there is nothing wrong with the blue chips that you bought.
That is the unhappy experience confronting many investors who believed - rightly or not - that they could not go wrong by parking their nest eggs in a cache of blue chips.
Some of them had bought into household names such as DBS Group Holdings, Singapore Airlines and United Overseas Bank (UOB) when the great bull run of 2007 was in full swing.
But even after the rebound in the past six months that saw share prices gaining by more than 80 per cent, these investors are still sitting on losses.
So a pertinent question to ask is whether timing an investment right is really so difficult.
Take the global stock market collapse in October last year. The Dow Jones Industrial Average plunged 14 per cent within a month, while Singapore's benchmark Straits Times Index (STI) lost 24 per cent.
The resulting loss in market confidence was so immense that many jittery investors bailed out of stocks altogether.
But around this time, legendary investor Warren Buffett took a contrarian view, and spent more than US$20 billion (S$28 billion) investing in United States corporate giants such as General Electric and Goldman Sachs.
He explained his rationale: 'Let me be clear on one point. I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether stocks will be higher or lower a month - or a year - from now. What is likely is that the market will move higher, perhaps substantially so, before either sentiment or economy turns up. So if you wait for the robins, spring will be over.'
His advice to investors: Be fearful when others are greedy, and be greedy when others are fearful.
Events in the past six months bore him out. He made a paper gain of US$2.8 billion on his Goldman Sachs investment alone.
Still, if you think that Mr Buffett is too tough an act to follow, there are local corporate titans worth tracking, like UOB chairman Wee Cho Yaw.
After keeping his powder dry in the past two years when share prices rose to record levels, Mr Wee sprang into action in March when the STI sank to a six-year low of 1,456 points.
While market gloom kept most investors on the sidelines, he picked up 800,000 UOB shares for between $8.25 and $9.01 apiece that month. Since then, UOB shares have doubled in price.
That same month, Mr Wee bought 680,000 shares in Haw Par Corporation for between $3.35 and $3.41 apiece. Its price has now almost doubled as well.
To cap what had turned out to be a remarkably busy but fruitful month for him, he launched a takeover on property conglomerate United Industrial Corporation (UIC), whose share price was then languishing well below its break-up value.
Despite the relatively low price of $1.20 apiece he offered for the rest of UIC shares, big investors such as Morgan Stanley - which presumably wanted to get out at any cost - sold their shares to him.
This enabled him to raise his stake in UIC from 30 per cent to 45 per cent and he made a tidy paper profit of $180 million as its price recovered.
The moves made by Mr Buffett and Mr Wee provide valuable pointers on investment strategies for investors.
For one thing, take with a pinch of salt the advice given by your financial adviser or bank relationship manager about the need to make your hard-earned cash work harder to give you better returns.
Even though bank deposits attract a paltry return in the current near-zero interest rate environment, it is good to hold some cash.
Otherwise, you may find yourself in the same boat as other cash-strapped investors who wish they had the means to snap up blue chips at bargain basement prices, as when the stock market went into convulsions last year.
The other lesson for investors is not to let their emotions cloud their judgment, as they react to the daily share price movements.
Take events in the past six months. In March, when share prices sank to their lowest levels in seven years, investors were so fearful that nothing could convince them to even look at the stock market any more.
Then in the past two months, they were panicked into buying shares at far higher prices, for fear that they might miss out on the rally altogether.
Is that the right approach to take in making your investments?
Surely not. A prudent way to take emotion out of the equation is to compile a list of companies you would love to own for the long term and the prices that you would like to pay for them.
If, for whatever reason, they suddenly become available at these prices, you should revisit your investment thesis, check if it is still valid and make your decision accordingly.
If you think you do not have what it takes to make your investment decisions on your own, try tracking the moves made by a corporate chieftain like Mr Wee instead.
He has spent his life tracking the share prices of the various companies he owns - UOB, Haw Par, United Overseas Land and UIC - and the timing of his purchases reflects a deep understanding of when they offer great value as investments.
You can't go far wrong in timing your investment decisions by emulating the moves made by such canny investors.
You may want to play it safe by hedging your bets by sticking to buying only blue chips.
But if you make your purchases just as the stock market is experiencing a bull run, you may find yourself staring at a loss when the market corrects, even though there is nothing wrong with the blue chips that you bought.
That is the unhappy experience confronting many investors who believed - rightly or not - that they could not go wrong by parking their nest eggs in a cache of blue chips.
Some of them had bought into household names such as DBS Group Holdings, Singapore Airlines and United Overseas Bank (UOB) when the great bull run of 2007 was in full swing.
But even after the rebound in the past six months that saw share prices gaining by more than 80 per cent, these investors are still sitting on losses.
So a pertinent question to ask is whether timing an investment right is really so difficult.
Take the global stock market collapse in October last year. The Dow Jones Industrial Average plunged 14 per cent within a month, while Singapore's benchmark Straits Times Index (STI) lost 24 per cent.
The resulting loss in market confidence was so immense that many jittery investors bailed out of stocks altogether.
But around this time, legendary investor Warren Buffett took a contrarian view, and spent more than US$20 billion (S$28 billion) investing in United States corporate giants such as General Electric and Goldman Sachs.
He explained his rationale: 'Let me be clear on one point. I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether stocks will be higher or lower a month - or a year - from now. What is likely is that the market will move higher, perhaps substantially so, before either sentiment or economy turns up. So if you wait for the robins, spring will be over.'
His advice to investors: Be fearful when others are greedy, and be greedy when others are fearful.
Events in the past six months bore him out. He made a paper gain of US$2.8 billion on his Goldman Sachs investment alone.
Still, if you think that Mr Buffett is too tough an act to follow, there are local corporate titans worth tracking, like UOB chairman Wee Cho Yaw.
After keeping his powder dry in the past two years when share prices rose to record levels, Mr Wee sprang into action in March when the STI sank to a six-year low of 1,456 points.
While market gloom kept most investors on the sidelines, he picked up 800,000 UOB shares for between $8.25 and $9.01 apiece that month. Since then, UOB shares have doubled in price.
That same month, Mr Wee bought 680,000 shares in Haw Par Corporation for between $3.35 and $3.41 apiece. Its price has now almost doubled as well.
To cap what had turned out to be a remarkably busy but fruitful month for him, he launched a takeover on property conglomerate United Industrial Corporation (UIC), whose share price was then languishing well below its break-up value.
Despite the relatively low price of $1.20 apiece he offered for the rest of UIC shares, big investors such as Morgan Stanley - which presumably wanted to get out at any cost - sold their shares to him.
This enabled him to raise his stake in UIC from 30 per cent to 45 per cent and he made a tidy paper profit of $180 million as its price recovered.
The moves made by Mr Buffett and Mr Wee provide valuable pointers on investment strategies for investors.
For one thing, take with a pinch of salt the advice given by your financial adviser or bank relationship manager about the need to make your hard-earned cash work harder to give you better returns.
Even though bank deposits attract a paltry return in the current near-zero interest rate environment, it is good to hold some cash.
Otherwise, you may find yourself in the same boat as other cash-strapped investors who wish they had the means to snap up blue chips at bargain basement prices, as when the stock market went into convulsions last year.
The other lesson for investors is not to let their emotions cloud their judgment, as they react to the daily share price movements.
Take events in the past six months. In March, when share prices sank to their lowest levels in seven years, investors were so fearful that nothing could convince them to even look at the stock market any more.
Then in the past two months, they were panicked into buying shares at far higher prices, for fear that they might miss out on the rally altogether.
Is that the right approach to take in making your investments?
Surely not. A prudent way to take emotion out of the equation is to compile a list of companies you would love to own for the long term and the prices that you would like to pay for them.
If, for whatever reason, they suddenly become available at these prices, you should revisit your investment thesis, check if it is still valid and make your decision accordingly.
If you think you do not have what it takes to make your investment decisions on your own, try tracking the moves made by a corporate chieftain like Mr Wee instead.
He has spent his life tracking the share prices of the various companies he owns - UOB, Haw Par, United Overseas Land and UIC - and the timing of his purchases reflects a deep understanding of when they offer great value as investments.
You can't go far wrong in timing your investment decisions by emulating the moves made by such canny investors.
Invest in Asia for 2010?
Overseas markets and exotic investments may sound much more exciting than the tried and true financial environment of home that you are familiar with.
But plonking your money in your own backyard may not be a dull option at all.
In fact, the Asian region - excluding Japan, which is regarded as a developed market like the United States - should be one of the first areas where Asians in search of investment opportunities should look.
Emerging Asia is enjoying much better growth prospects than the West and Japan.
This is something that international portfolio managers have started cottoning on to, and they have begun allocating more funds to the region.
Seven years ago, the Asia ex-Japan region accounted for barely 3 per cent of the widely followed MSCI World Index - or to give it its full name, the Morgan Stanley Capital International index, which is a global stock market index - but today, that share has nearly tripled. But even this proportion is small, given Asia's superior growth potential compared to other regions and its significant share of the world economy.
Today's Asia is not what it was two decades ago. Thanks in part to the 1997/98 Asian financial crisis, the region has gone through drastic changes - and for the better.
Many governments and corporations were brought to their knees , leading to significant restructuring and belt-tightening. This has bolstered reserves and strengthened Asia's financial position, allowing it to weather the current global financial crisis better than the West.
Corporate governance in Asia has also improved markedly. Companies recognise the importance of greater balance-sheet transparency and safeguarding shareholders' interests, and have done a lot to promote investor relations.
Ironically, the current financial crisis has been another blessing in disguise for Asia, as it has highlighted the region's strengths to international investors, resulting in a significant flow of money into Asian bourses this year.
The net inflow in Asia ex-Japan funds so far this year already stands at more than US$15 billion (S$20.8 billion), and may even exceed the US$16.8 billion that poured in during the 2007 bull run.
This flood of funds into Asia has helped markets in the region outperform their developed peers by a wide margin this year. In the year-to-date, they have soared by 40 per cent to 90 per cent, compared to only about 10 per cent to 20 per cent for developed markets.
Asia's policy response to the present crisis has also been impressive, and this has helped the region recover faster from the global downturn than developed economies.
The International Monetary Fund (IMF) expects developing Asia to grow by 6.2 per cent this year, compared to a 1.1 per cent decline for the world economy. Next year, growth in developing Asia is expected to gain pace to hit an impressive 7.3 per cent, double the IMF's 3.1 per cent growth projection for the world economy. And Asia's economic prosperity looks set to continue for several years.
The gross domestic product of China is expected to equal that of the United States by 2030, said Minister Mentor Lee Kuan Yew, who spoke at a National University of Singapore forum last month.
And US Federal Reserve chairman Ben Bernanke told a conference in California recently that 'Asia appears to be leading the global recovery. Recent data from the region suggests that a strong rebound is, in fact, under way'.
Asia is clearly not facing the same hang-ups as the West and this crisis has boosted its worldwide profile and appeal among global fund managers.
Asia ex-Japan may make up only a small proportion of global fund managers' portofolios, but its weighting in the world economy is significant - close to 25 per cent.
Its share in global funds will increase significantly over the next decade or more as more global fund managers shift money from the West to the East. This will underpin regional markets and help Asia to outperform its Western peers in the medium to long term.
In terms of valuations, many Asian markets may seem fairly valued at the moment, based on current year earnings. However, if investors take a three- to five-year timeframe, bourses in the region are still attractively priced for the medium-term investor relative to growth prospects.
However, this does not mean that Asian markets come with no risk. On the contrary, Asian equities are more suitable for those with a strong risk appetite.
Markets in the region are prone to speculative inflows and outflows as they still do not have the same depth as developed markets. Consequently, big movements of capital in and out of bourses can cause Asian markets to whipsaw.
But if you are able to withstand such volatility, Asia is an attractive proposition. There is a lot going for the region - the banking sector is in a better shape than that in the West, its consumers are under-leveraged and have excessive savings, companies are lowly geared and resilient to a downturn, and governments have the means to launch further stimulus packages, if need be.
So, if you have the risk appetite and are prepared to take a view of five to 10 years, there is no need to look further afield.
Asia will no longer play second fiddle to developed markets. It is emerging rapidly from the shadows of the West and will take the lead in the coming century. The sooner investors realise this, the better.
But plonking your money in your own backyard may not be a dull option at all.
In fact, the Asian region - excluding Japan, which is regarded as a developed market like the United States - should be one of the first areas where Asians in search of investment opportunities should look.
Emerging Asia is enjoying much better growth prospects than the West and Japan.
This is something that international portfolio managers have started cottoning on to, and they have begun allocating more funds to the region.
Seven years ago, the Asia ex-Japan region accounted for barely 3 per cent of the widely followed MSCI World Index - or to give it its full name, the Morgan Stanley Capital International index, which is a global stock market index - but today, that share has nearly tripled. But even this proportion is small, given Asia's superior growth potential compared to other regions and its significant share of the world economy.
Today's Asia is not what it was two decades ago. Thanks in part to the 1997/98 Asian financial crisis, the region has gone through drastic changes - and for the better.
Many governments and corporations were brought to their knees , leading to significant restructuring and belt-tightening. This has bolstered reserves and strengthened Asia's financial position, allowing it to weather the current global financial crisis better than the West.
Corporate governance in Asia has also improved markedly. Companies recognise the importance of greater balance-sheet transparency and safeguarding shareholders' interests, and have done a lot to promote investor relations.
Ironically, the current financial crisis has been another blessing in disguise for Asia, as it has highlighted the region's strengths to international investors, resulting in a significant flow of money into Asian bourses this year.
The net inflow in Asia ex-Japan funds so far this year already stands at more than US$15 billion (S$20.8 billion), and may even exceed the US$16.8 billion that poured in during the 2007 bull run.
This flood of funds into Asia has helped markets in the region outperform their developed peers by a wide margin this year. In the year-to-date, they have soared by 40 per cent to 90 per cent, compared to only about 10 per cent to 20 per cent for developed markets.
Asia's policy response to the present crisis has also been impressive, and this has helped the region recover faster from the global downturn than developed economies.
The International Monetary Fund (IMF) expects developing Asia to grow by 6.2 per cent this year, compared to a 1.1 per cent decline for the world economy. Next year, growth in developing Asia is expected to gain pace to hit an impressive 7.3 per cent, double the IMF's 3.1 per cent growth projection for the world economy. And Asia's economic prosperity looks set to continue for several years.
The gross domestic product of China is expected to equal that of the United States by 2030, said Minister Mentor Lee Kuan Yew, who spoke at a National University of Singapore forum last month.
And US Federal Reserve chairman Ben Bernanke told a conference in California recently that 'Asia appears to be leading the global recovery. Recent data from the region suggests that a strong rebound is, in fact, under way'.
Asia is clearly not facing the same hang-ups as the West and this crisis has boosted its worldwide profile and appeal among global fund managers.
Asia ex-Japan may make up only a small proportion of global fund managers' portofolios, but its weighting in the world economy is significant - close to 25 per cent.
Its share in global funds will increase significantly over the next decade or more as more global fund managers shift money from the West to the East. This will underpin regional markets and help Asia to outperform its Western peers in the medium to long term.
In terms of valuations, many Asian markets may seem fairly valued at the moment, based on current year earnings. However, if investors take a three- to five-year timeframe, bourses in the region are still attractively priced for the medium-term investor relative to growth prospects.
However, this does not mean that Asian markets come with no risk. On the contrary, Asian equities are more suitable for those with a strong risk appetite.
Markets in the region are prone to speculative inflows and outflows as they still do not have the same depth as developed markets. Consequently, big movements of capital in and out of bourses can cause Asian markets to whipsaw.
But if you are able to withstand such volatility, Asia is an attractive proposition. There is a lot going for the region - the banking sector is in a better shape than that in the West, its consumers are under-leveraged and have excessive savings, companies are lowly geared and resilient to a downturn, and governments have the means to launch further stimulus packages, if need be.
So, if you have the risk appetite and are prepared to take a view of five to 10 years, there is no need to look further afield.
Asia will no longer play second fiddle to developed markets. It is emerging rapidly from the shadows of the West and will take the lead in the coming century. The sooner investors realise this, the better.
2010 - what is in story for us?
ASIA is rapidly approaching the end of its sharpest V-shaped recovery on record. It's been quite a ride on both sides of the trough: two quarters of double-digit GDP contraction for most countries (ending in 1Q 2009), followed by two quarters of double-digit expansion. We are now halfway through the second of the upside quarters with Singapore, China and Korea having reported double-digit growth rates (in q-o-q, seasonally adjusted terms) in 3Q 2009. Malaysia, Thailand and Taiwan will likely report similar numbers over the next two weeks.
If the end is nigh - and it is - let's not rush there just yet. There's plenty of time to prepare for what's coming and there's little to fear anyway. Let's first take a minute to consider how extraordinary the recovery has been. One way to get a sense of it is to look at Singapore.
Back in January, most government and private sector professionals expected to see a 2.4 per cent contraction in the Singapore economy in 2009. By May, those expectations had plunged a full five percentage points to an alarming -7.5 per cent. But only five months later, in October, expectations were right back where they were at the start of the year: to a contraction of 2.6 per cent. That's how convincing the downward head fake was, that's how sharp the V-shaped recovery was. We all would have come closer to the truth if we had left our 2009 forecasts untouched back in January.
Naturally, the 'thought leaders' who led consensus in predicting Armageddon in the first half of the year had more backtracking to do later on. One lesson they and everybody else learned this year is that it's not about being 'ahead of the curve'; it's about being right at the end of the day. Not many were this year.
For Asia overall, the roller coaster was almost as wild as it was in Singapore. Industrial production - Asia's economic backbone - peaked in the summer of 2008; not surprisingly, just before the Beijing Olympics in August. But the downturn continued with the collapse of Lehman Brothers in September 2008 and by January 2009, industrial production in the Asia-9 had fallen by 14 per cent. That's twice the drop that occurred during the financial crisis of 1997/98 or the high-tech global recession of 2000/01.
Not surprisingly, exports led the collapse on the demand side of the GDP equation. In US dollar terms, Asia's exports dropped by 40 per cent between July 2008 and January 2009. Like the drop in industrial production, the export drop was twice as big as what occurred during the global tech recession of 2000/01 and four times bigger than the export contraction in 1997/98.
What continues to surprise is that Asia's export collapse had almost everything to do with China and almost nothing to do with the US, either directly or indirectly. Between July 2008 (when exports peaked) and January 2009 (when they hit bottom), Asia-8 exports to China fell by 45 per cent. To the US they fell by less than half that, or 21 per cent.
But the percentage drops don't tell the real story, because China is a bigger buyer of Asia's exports than the US. And it's the dollar changes that make or break a business. In revenue terms, Asia-8 exports to China fell by US$111 billion between July 2008 and January this year. To the US, they fell by US$27 billion. In other words, in the revenue terms that matter, the export shock delivered by China was four times greater than the shock delivered by the US.
This explains why the countries hit the hardest were those with the closest links with China. And it helps explains why Asia was able to bounce back with no help from the US.
And bounce back it did. Exports and industrial production hit bottom in January and by July, Asia's industrial production had fully recovered its pre-crisis levels. Six months down, six months back up - the very definition of 'V'. By September, though, output had advanced another 2-3 per cent. So it's no longer just a V-shaped recovery. We've passed that. Now it's a V+.
V, V+, no matter. What is so amazing, to some, is that Asia pulled it off with no help from the US. Think about it: Asia's industrial output recovered to pre-crisis levels by July while US imports turned north only in June. It's a big deal. But is it really so surprising? Not when you remember that Asia's export collapse was related to China, not the US.
Moreover, it isn't the first time this has happened. Back in 2000/01, Asia beat the US in getting out of recession by a good four months. This fact - and the reasons behind it - is what allowed DBS to say, way back in December last year, that Asia would pull the same trick this time, but even more forcefully. This was when everyone else was saying that Asia would have to wait for the US to recover before it could.
Times change, and the biggest change underway in the global economy today is how much Asia contributes to global growth each year relative to how much the US does, or did. This structural shift - it's been going on for 20 years and will go on for the next 20 - explains much of why Asia was able to pull off the V-shaped recovery with no help from the US.
The question now is, will Asia's double-digit GDP growth continue? The answer is, of course not, for any of a thousand reasons. Double digit growth will soon give way to sideways movement in output levels. Asia's V-shaped recovery will turn into a 'square root' shaped recovery: that is, a sharp drop, a sharp rise, and then a palpable turn sideways.
When will Asia hit the kink in the square root sign? Probably by the end of the year or early 2010. In terms of GDP growth, Asia will experience a second quarter of double-digit growth in 3Q 2009 that should drop to high single-digits (6-8 per cent) in the fourth quarter. By 1Q 2010, growth should be back to normal.
Three things will constrain growth very soon: demand, supply, and policy. On the demand side, growth is running at double-digit rates now only because it fell at double-digit rates earlier on. What Asia is experiencing is the snapback from a series of four to five one-off events in late 2008 that included, perhaps most notably, the shock from the collapse of Lehman Brothers in September 2008. That sharp downturn had a bottom. The sharp upswing will have a top. With speeds on both sides of the 'V' about equal, the upswing will last for as long as the downswing: two quarters. But only as long as the downturn, because the upturn is nothing but its flipside.
And if demand does manage to surge for longer, there's the supply side to contend with. Output can grow as fast as demand does when there is excess capacity, as there is today. But with demand soaring back, excess capacity will soon vanish. And once demand hits the brick wall of capacity constraints, output can grow only as fast as those walls can be moved.
Finally, policy will have a hand in slowing growth, and probably sooner than most imagine. Because once excess capacity is exhausted - and it will be by year-end - double digit demand growth starts to imply double digit inflation in most countries. That's too high. Policies will change.
Throughout Asia, monetary tightening will be a key feature of 2010, with higher interest rates and stronger currencies expected to share the burden about equally. In general, we expect tightening will begin in earnest around 2Q 2010, with a few exceptions. On the tighter side, Korea and India will move sooner, probably in January or February. On the slower side, Thailand seems unlikely to tighten until the third quarter.
For Asia overall, much will depend on China, where we expect rate hikes and currency appreciation to begin in 2Q 2010. We look for the benchmark one-year lending rate to rise by 81 basis points (to 6.12 per cent) by the year-end. We also expect the yuan to resume its appreciation vis-a-vis the US dollar in 2Q 2010 and to strengthen to 6.61 per dollar by the end of 2010. This will set the stage for currency appreciation elsewhere in Asia, allowing other currencies to rise more comfortably than if they went solo. Asia's currencies have risen by 6-7 per cent on average against the dollar since the start of this year and we expect to see another 6-7 per cent appreciation by the end of 2010.
Other things being equal, currency appreciation and higher interest rates will help cool regional economies and keep a lid on imported inflation as well. The trouble is, higher rates and the prospect of local currency gains have the tendency to attract foreign inflows. And inflows have the tendency to wreak havoc with the best laid monetary plans. They drive interest rates back down and push currencies further north than authorities might have wanted. Raise interest rates again and you just get another round of inflow: Asia-vu.
The only 'solution', if you can call it one, is to control inflows. Nobody likes controls and for good reason. They are clumsy and messy and have the awful tendency to change from week to week. But they do afford central banks a greater ability to control interest rates and currencies at the same time. And for this reason the controls debate always comes back when inflows are pounding on the door. Asia's strong recovery means that higher interest rates and stronger currencies will be two key features of Asia in 2010. Capital inflows and another debate over controlling them seem likely to be two more.
If the end is nigh - and it is - let's not rush there just yet. There's plenty of time to prepare for what's coming and there's little to fear anyway. Let's first take a minute to consider how extraordinary the recovery has been. One way to get a sense of it is to look at Singapore.
Back in January, most government and private sector professionals expected to see a 2.4 per cent contraction in the Singapore economy in 2009. By May, those expectations had plunged a full five percentage points to an alarming -7.5 per cent. But only five months later, in October, expectations were right back where they were at the start of the year: to a contraction of 2.6 per cent. That's how convincing the downward head fake was, that's how sharp the V-shaped recovery was. We all would have come closer to the truth if we had left our 2009 forecasts untouched back in January.
Naturally, the 'thought leaders' who led consensus in predicting Armageddon in the first half of the year had more backtracking to do later on. One lesson they and everybody else learned this year is that it's not about being 'ahead of the curve'; it's about being right at the end of the day. Not many were this year.
For Asia overall, the roller coaster was almost as wild as it was in Singapore. Industrial production - Asia's economic backbone - peaked in the summer of 2008; not surprisingly, just before the Beijing Olympics in August. But the downturn continued with the collapse of Lehman Brothers in September 2008 and by January 2009, industrial production in the Asia-9 had fallen by 14 per cent. That's twice the drop that occurred during the financial crisis of 1997/98 or the high-tech global recession of 2000/01.
Not surprisingly, exports led the collapse on the demand side of the GDP equation. In US dollar terms, Asia's exports dropped by 40 per cent between July 2008 and January 2009. Like the drop in industrial production, the export drop was twice as big as what occurred during the global tech recession of 2000/01 and four times bigger than the export contraction in 1997/98.
What continues to surprise is that Asia's export collapse had almost everything to do with China and almost nothing to do with the US, either directly or indirectly. Between July 2008 (when exports peaked) and January 2009 (when they hit bottom), Asia-8 exports to China fell by 45 per cent. To the US they fell by less than half that, or 21 per cent.
But the percentage drops don't tell the real story, because China is a bigger buyer of Asia's exports than the US. And it's the dollar changes that make or break a business. In revenue terms, Asia-8 exports to China fell by US$111 billion between July 2008 and January this year. To the US, they fell by US$27 billion. In other words, in the revenue terms that matter, the export shock delivered by China was four times greater than the shock delivered by the US.
This explains why the countries hit the hardest were those with the closest links with China. And it helps explains why Asia was able to bounce back with no help from the US.
And bounce back it did. Exports and industrial production hit bottom in January and by July, Asia's industrial production had fully recovered its pre-crisis levels. Six months down, six months back up - the very definition of 'V'. By September, though, output had advanced another 2-3 per cent. So it's no longer just a V-shaped recovery. We've passed that. Now it's a V+.
V, V+, no matter. What is so amazing, to some, is that Asia pulled it off with no help from the US. Think about it: Asia's industrial output recovered to pre-crisis levels by July while US imports turned north only in June. It's a big deal. But is it really so surprising? Not when you remember that Asia's export collapse was related to China, not the US.
Moreover, it isn't the first time this has happened. Back in 2000/01, Asia beat the US in getting out of recession by a good four months. This fact - and the reasons behind it - is what allowed DBS to say, way back in December last year, that Asia would pull the same trick this time, but even more forcefully. This was when everyone else was saying that Asia would have to wait for the US to recover before it could.
Times change, and the biggest change underway in the global economy today is how much Asia contributes to global growth each year relative to how much the US does, or did. This structural shift - it's been going on for 20 years and will go on for the next 20 - explains much of why Asia was able to pull off the V-shaped recovery with no help from the US.
The question now is, will Asia's double-digit GDP growth continue? The answer is, of course not, for any of a thousand reasons. Double digit growth will soon give way to sideways movement in output levels. Asia's V-shaped recovery will turn into a 'square root' shaped recovery: that is, a sharp drop, a sharp rise, and then a palpable turn sideways.
When will Asia hit the kink in the square root sign? Probably by the end of the year or early 2010. In terms of GDP growth, Asia will experience a second quarter of double-digit growth in 3Q 2009 that should drop to high single-digits (6-8 per cent) in the fourth quarter. By 1Q 2010, growth should be back to normal.
Three things will constrain growth very soon: demand, supply, and policy. On the demand side, growth is running at double-digit rates now only because it fell at double-digit rates earlier on. What Asia is experiencing is the snapback from a series of four to five one-off events in late 2008 that included, perhaps most notably, the shock from the collapse of Lehman Brothers in September 2008. That sharp downturn had a bottom. The sharp upswing will have a top. With speeds on both sides of the 'V' about equal, the upswing will last for as long as the downswing: two quarters. But only as long as the downturn, because the upturn is nothing but its flipside.
And if demand does manage to surge for longer, there's the supply side to contend with. Output can grow as fast as demand does when there is excess capacity, as there is today. But with demand soaring back, excess capacity will soon vanish. And once demand hits the brick wall of capacity constraints, output can grow only as fast as those walls can be moved.
Finally, policy will have a hand in slowing growth, and probably sooner than most imagine. Because once excess capacity is exhausted - and it will be by year-end - double digit demand growth starts to imply double digit inflation in most countries. That's too high. Policies will change.
Throughout Asia, monetary tightening will be a key feature of 2010, with higher interest rates and stronger currencies expected to share the burden about equally. In general, we expect tightening will begin in earnest around 2Q 2010, with a few exceptions. On the tighter side, Korea and India will move sooner, probably in January or February. On the slower side, Thailand seems unlikely to tighten until the third quarter.
For Asia overall, much will depend on China, where we expect rate hikes and currency appreciation to begin in 2Q 2010. We look for the benchmark one-year lending rate to rise by 81 basis points (to 6.12 per cent) by the year-end. We also expect the yuan to resume its appreciation vis-a-vis the US dollar in 2Q 2010 and to strengthen to 6.61 per dollar by the end of 2010. This will set the stage for currency appreciation elsewhere in Asia, allowing other currencies to rise more comfortably than if they went solo. Asia's currencies have risen by 6-7 per cent on average against the dollar since the start of this year and we expect to see another 6-7 per cent appreciation by the end of 2010.
Other things being equal, currency appreciation and higher interest rates will help cool regional economies and keep a lid on imported inflation as well. The trouble is, higher rates and the prospect of local currency gains have the tendency to attract foreign inflows. And inflows have the tendency to wreak havoc with the best laid monetary plans. They drive interest rates back down and push currencies further north than authorities might have wanted. Raise interest rates again and you just get another round of inflow: Asia-vu.
The only 'solution', if you can call it one, is to control inflows. Nobody likes controls and for good reason. They are clumsy and messy and have the awful tendency to change from week to week. But they do afford central banks a greater ability to control interest rates and currencies at the same time. And for this reason the controls debate always comes back when inflows are pounding on the door. Asia's strong recovery means that higher interest rates and stronger currencies will be two key features of Asia in 2010. Capital inflows and another debate over controlling them seem likely to be two more.
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