Tuesday, 28 April 2015

Did You Trade AGO With Me?

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Update: I have sold the other half of my position and I have a total profit of $694.60, hope you traded with me!

In one of my previous post, I mentioned a trading setup for AGO and yesterday night during the NYSE session, it finally hit my take profit of $26.63

It was an unrealised profit of $878. I have sold half my position to secure in about $440. I will be using the trailing-stop for the other half of my position.

This will be the first time I am implementing the trailing stop for equities and you can see that the most recent candle showed quite a bit of momentum. I will update you as this trade takes its place.

As always, happy trading.

Cheers.

Wednesday, 22 April 2015

Friday, 17 April 2015

Tuesday, 14 April 2015

Why Do 90% of Traders Lose Money?

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You've probably heard this phrase and because of that, you felt that the stock market is against you. There are so many books out there about investing, why is it that so many people still make losses in the long run?

In my opinion, the books out there can only teach you the technical part of trading and investing. Just like the stuff I am studying in school. Everything I learn is considered knowledge and information. But what sets you apart is how you use this knowledge and apply it to the real world situation.

Secondly, people let their emotions get the better of them. Trading has a very psychological effect on humans. Greed and fear of losses affect how we trade, but in order to make money in the stock market. We have to ignore those human instincts and stick to our individual trading plan.

Now I am not saying that if you are a emotionless trader, that guarantees profit. The market will against you and it will do it often. What you have to do is to limit those losses and in the long run, you should make a profit. Even if you don't make money in the first month, you have to keep trading according to your plan!

I say this over and over again because I feel that it is the single most important advice I have ever received.


Some people get emotionally attached to their trades. They feel that they have a need to be right and they cannot accept the fact that the market has not moved in their favour. I am guilty of this at times. Sometimes the trade setup is perfect but yet, when I enter, the market decides to go in the opposite direction leaving me stranded in disbelief. (That's why stop losses are important!)

The last reason why traders lose money is due to the fact that they believe trading is simply gambling. Making money is as simple as pressing buy and sell and hopefully they are right. If this is the mindset you adopt, I suggest you stop trading and start gambling instead, you can save the brokerage fee. 

Do not let the title affect you when you trade. Ignore this statistic and just remember to.. you guessed it. STICK TO YOUR PLAN.

As always, happy trading.

Cheers.

Saturday, 11 April 2015

What Is My Trading Strategy?

      1 comment  
I have received many question as to what is my trading strategy. Today, I will go through it while making sure that it is as simple to follow as possible. So without wasting any more time, here is my trading strategy.

First of all, I am looking for a reversal candle stick. More specifically, I am looking for a hammer, inverted hammer, shooting star or hanging man in the candlestick daily chart. I trade these as they seem to have the highest rate of success in my experience.

Here are some examples of how they look like.



I use screeners to look for them daily. Click here to see which screeners I recommend using. After identifying a chart with a hammer, I order 1 cent above/below the high/low of the candle (depending on whether it is a short or long trade) for the next trading day.

My stop loss will be 1 cent above/below the high/low of the candle as well.


Here's an example. The neckline will be where I enter the trade.

My take profit will be the previous high or the support/resistance.

After identifying, my entry, stop loss and take profit, I will also check the RRR ratio and see if it qualifies. Currently, I am looking for trades that are at least more than 1. If it does, I will enter the position.

This is the basic strategy I am currently using. I will post a more detailed entry about my strategy where I will discuss ATR and position sizing so stay tuned!

What are your trading strategies? I would love to hear from you!

As always, happy trading.

Cheers. 

Thursday, 9 April 2015

Losing Trade - M (NYSE)

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Yesterday I highlighted a shorting opportunity for Macys (NYSE).

The markets opened and it did hit my entry price. But the market went complete opposite of what I was expecting as seen below.


Making losing trades is part of trading. There will be no magic formula to guarantee 100% winning trades. Never allow your losses to affect how you trade. Sure, I might have lost some money, but there will always be another opportunity around the corner. But I am going to stick to my trading strategy regardless; and you should too.

As always, happy trading.

Cheers.

Wednesday, 8 April 2015

Which Technical Indicators To Use?

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I will be straight up honest with you. I don't use much technical indicators when I am deciding on which trade to take.

When I started out, I tried to develop the ultimate strategy that would have a high success rate. I went about studying different indicators, their purpose and limitations, and which one had the most success in determining the direction of the price.

But I found myself having a chart that was ineffective in telling me any useful information. Odd isn't it? One would expect more indicators to give more information, but instead, it seems to have diminishing returns after a certain point.

Let me show you an example.


Singtel (Z74) Daily Chart 

I've included some of the more commonly used indicators such as RSI, MAC, ATR, Moving Averages, Bollinger Bands and Ichimoku Kinko Hyo. Okay, maybe the last one isn't that commonly used. I was just trying to prove a point!

I used to look at charts like the one above and the problem was that I kept getting mixed signals. I kept changing my strategy to try to fit certain indicators into my plan only to be conflicted with another indicator that was telling me otherwise. 



This is what my charts currently look like. I use 2 indicators, mainly ATR (Average True Range) and Volume. The chart is cleaner, it is easier for me to focus on the price action rather than having a whole load of information which doesn't allow me to make a decision. 

Of course, these indicators are suited for my strategy and can differ from person to person. The point here is not to use the indicators that I use, but to stick to a few and be disciplined about it.

I will write another post as to why I use specifically ATR and Volume in another post.

As always, happy trading.

Cheers.

Tuesday, 7 April 2015

3 Reasons Why You Should Not Paper Trade

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Before I begin, for those of you who do not know what paper trading is, it is basically trading on a simulator.

Investopedia defines it as 
"Using simulated trading to practice buying and selling securities without actual money being involved."

Shouldn't it be a good thing to practice with virtual cash before moving on to the real thing? I beg to differ. I will share with you 3 reasons why I think paper trading is not just ineffective in teaching you how to trade, but also detrimental.




Learning To Deal With Losses

When you make a loss with virtual money, it is not even remotely similar to making a loss with your own money. The psychological stress you face when you see an unrealised loss in your account can make you do things you might not do if it were fake money.

When you make a loss on the virtual account, at the back of your mind, there is this "safety net" that is telling you that you can always restart and try again. Try telling yourself that when you have are actually at risk of losing your capital. You can easily brush aside losing virtual funds, but no one ever forgets losing real money. 

One must learn how to deal with losses properly and the only way to do that is by actually losing real money in the market. There's no substitute for that.

Risk Management

This is kind of related to the first point. Without that fear of losing money, paper traders will be more willing to take on bolder decisions, make high-risk decisions and even trade outside their trading plan. Over time, these can become bad habits when transitioning to trading with real money. If not, they will change their entire strategy to fit their risk level. Either way, what have they learnt?

Unrealistic View

For those of you who play Zynga poker, you know that it is all too easy to go all in with $10000 and earn a huge profit. But would you really go all in with $10000 in real life? It is the same with paper trading. Trading with $10000 virtual funds is not the same as trading with $10000 real cash. It simply isn't. If you paper trade for too long, I can assure you that when you transition into a real trading account, you will be making drastically different decisions and there will be a lot of conflicts with your trading strategy. 

Of course, there are benefits of paper trading, but I believe that one should only use it to get familiar with the functions of the platform and how everything works. Once you get comfortable with the platform, move on to the real account. If you are afraid, risk lesser. It is still better than paper trading for a long period of time. 

Just like life, failure is inevitable. But the point is to learn from it and avoid making the same mistake twice. Similar to trading, making mistakes and losses are all part of the process. How you deal with it and incorporate it into your trading philosophy and strategy is what makes the difference.

As always, happy trading.

Cheers. 




Monday, 6 April 2015

Top 5 Stock Screeners for FREE

      18 comments  

There are so many stocks out there, how do you shortlist the ones that fit certain criteria of your trading strategy?

By using stock screeners of course!

But then again, there are so many screeners out there, some of which might even cost you money. Fret not! I will be listing down the top 5 stock screeners that I use and they are all 100% free.

So, in no particular order, here are the Top 5 free stock screeners that I use!

1) Uncle Stock Screener






This is one of the first few screeners I found on the web when I started. It covers a broad range of markets including SGX. You can shortlist the stocks based on the sector and industries. Additionally, you can add your own conditions to filter out the stocks that meet your specific criteria.

This screener is suited for value investors who look at the fundamentals of a company. It takes a while in my experience to churn out the results but hey it's already free! Be patient.

You can even backtest your criteria to see how well they perform in the long run for minor tweaking to improve your overall strategy.

2) TradeSignum





This screener is specifically for Singapore stocks and is more for technical traders. Although it isn't very customisable, they still provide a range of filters, which are broken down into 2 broad categories, namely the bullish and bearish.

If you want to view the charts from there, they will prompt you to install Microsoft Silverlight. If you don't want to do that, you can do what I do and simply enter the ticker symbol into your charting software of choice.

3) Finvis





This is one of my all time favourite, Finvis. I don't know how I would go about trading without this screener. They both fundamental and technical screens which appeals to be because I do a combination of both.

You can save your custom screens if you make an account, which is free as well. The only drawback is that it caters to NASDAQ, NYSE and AMEX only. If you trade in markets other than these, you might want to consider the other screeners I have mentioned.

4) StockCharts.com




As the name implies, this is a technical screener, which has preset indicators for you to select from. You can screen by technical indicators, candlesticks and even patterns. They cater to a broader range as compared to Finvis and have more specific screens like Ichimoku Cloud and Bollinger Bands.

Overall, this is a great screener for any anyone interested in technical analysis. I sometimes use it in conjunction with other screeners.

5) NASDAQ Guru Stock Screener






If you are a value investor and want to follow a specific guru's strategy, then this is the screener for you. It includes gurus like Benjamin Graham and Peter Lynch just to name a few. Unfortunately, it does not cover Singapore stocks, so only if you trade US equities.

You simply go to the site; select the guru that you would like to follow and it will produce a list of stocks that fit the guru's criteria. You can also see how the stocks you are interested in fares when applying the different guru's analysis.

What are some of the screeners you use? I'd love to hear from you.

As always, happy trading.

Cheers.











Sunday, 5 April 2015

How Do I Start Trading Stocks?

      1 comment  

If I had a dollar every time I heard someone ask "How do I start investing?" or "How do I start trading stocks?" I wouldn't need to trade equities any more! Jokes aside, this is a valid question because before I started, I had the same exact questions. Let me break it down for you and I hope this will help all those soon-to-be traders and investors.


1) Capital

I've mentioned this in one of my previous posts. Ensuring that you have enough capital to begin with is vital to your success. Click here for more information on how much capital you should start out with. If you don't have enough, you should start planning on how much you need to save before you can consider starting an account.

2) Register for a Brokerage Account

 When I tell people that they need to sign up for a brokerage account, they usually stare at me like I've asked them to do the impossible.

It is actually very simple!

A brokerage account is basically a trading account, which allows you to buy and sell shares. There are many brokers to choose from and they all have their own pros and cons. They vary in terms of commissions, financial products (Stocks, ETFs, FX, Indices, etc.), the platforms they use (Web based, software, iOS & Android Applications) and many others.

Here are some brokers that you can easily open an account in Singapore.

DBS Vickers
Lim & Tan Securities
POEMS
City Index
OCBC Securities

These are just a handful of the many brokers that are available out there. I personally use City Index to trade for various reasons. But one of the main reasons is because of leverage, which I will explain in another post.

Opening an account is usually free and you can sign up any time. Simply follow their online instructions and you should be good to go! Do note that they might have certain policies that like "minimum deposit amount" which can differ from broker to broker. Remember to read up!

3) Never Stop Learning

 After registering for a brokerage account, you simply deposit money in and you are good to go. But remember, the journey does not stop there. I'm still learning every day, from people who comment, reading books/articles and learning from mistakes.

Here are some of the resources I use to further my financial literacy.

http://www.moneysense.gov.sg/
http://www.investopedia.com/
http://sgx.i3investor.com/index.jsp


There are even free seminars out there that you can apply for to help you get a better understanding of the stock market in Singapore. Click here to view some of the programs that the SGX provides.

I hope that this has helped you to understand how to go about starting your journey in trading stocks in Singapore. If you have more questions, feel free to leave them in the comments.

I wish you all the best in your journey in trading stocks and achieving financial freedom.

As always, happy trading.

Cheers.



Saturday, 4 April 2015

How is Playing Poker and Trading Stocks Similar?

      29 comments  
Want to get better at trading? You could start by playing poker.

If you play poker, you will know that it is all about probabilities. How do the top poker players in the world stay consistently on top? If it's purely based on luck and chance, there must be something else these people are doing differently that sets them apart from the rest of the retail gamblers who just hope the cards (stock market) go in their favour. 

So how does this apply to trading stocks? Well, in my opinion, the key to success when playing poker or trading is all about managing risk. I can't stress this enough!

The Table

 One of the key factors that influence a poker player's decision is the number of people still in the hand. Not only that, they also anticipate how each player would reach to the different decisions that could be made. They then evaluate the different outcomes and execute the best alternative.

Similar to the stock market, you have to understand the general market sentiments and how you can utilise them to your benefit.

Going On Tilt

Some times you get dealt a hand that is rubbish. You know you should immediately fold (throw away) the hand without a second thought. But some of us will continue to bet with such hands because of "tilt".


"Tilt" is defined by UrbanDictionary as

Gambling term (most common in poker) describing an angry or "reeling" state of mind usually caused by a big or unlucky loss. People playing on tilt play below their usual ability and usually make larger and more aggressive bets to try to quickly recover their loss.

 Just like the stock market, sometimes after a losing streak, humans will go on "tilt". They will take trades that they usually wouldn't just to cover their losses. This emotion is a very powerful one that can overwhelm us to make stupid decisions, which will only cause more damage to your account.

Analysing The Setups

Most poker players will look at their 2 cards dealt to them and have a pretty clear idea what they are going to do with it immediately. Within seconds, they analyse the number of people who are still playing, the risk involved, etc.

Just like trading, you have to be able to recognise a setup quickly. Whether you should long, short or even do nothing, all these will have to be clear to you or your trades will be inconsistent and subjective. If you can develop a trading plan that is objective and straight to the point, you will be less likely to trade with emotions and follow that trading plan of yours.

Going All In

 If you're an amateur poker player, chances are you will not go all in on a single hand. You will only do that if you are very certain that you have the winning hand.

Similar to trading, if you're new to trading, you will never risk your entire account size on one position. Instead, we diversify our risk by taking up multiple positions. Even if you are a seasoned trader, it is very unlikely that you will risk your entire account on one position because there's just no way to be 100% that the stock market will go your way.

What do you think? Is trading and playing poker similar to you? Leave your thoughts in the comments section; I'd love to hear your views.

As always, happy trading.

Cheers.




What Makes A Good Trader?

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When I started to trade equities, my first trade got me $60. It felt exciting, the adrenaline that surged through me for making money off the stock market made me feel invincible. The second trade brought in $30, not as much, but it was still a profit, so no complaints there.

The third, fourth and fifth trade all had a lost of about $250, each. That's a total of $750 net loss, not even factoring in commissions and other expenses.

At this point, what would you do? Accept the $750 loss as a lesson and never trade again? Start changing your strategy because it is obviously not working? 

Perhaps even start listening to what other people have to say and blindly follow their analysis. Even worse, start taking trades that you would never have taken or risk excessive amount of capital all in the hopes of recouping that lost. 



You are now thinking to yourself, "I should never have started trading, now I've lost money that could still be in the bank!"

Guess what, I stuck to my trading plan, ignored the losses (to the best of my ability!) and just took each trade as it came. In the following weeks, I made more than my losses to have a decent amount of profit.

So what am I driving at? 

Stick To A Trading Plan

Find a strategy that works for you and has been shown to be profitable in the long run and stick to it! Don't change it at the first sign of trouble. You'll never be able to make money like that. Sure, you could tweak the strategy after reviewing it periodically but definitely not from trade to trade.

Emotionless Trading

 I have to admit, this was my biggest problem when I started. I always took trades that I would normally avoid after losing on a previous trade. I can honestly tell you, it only made me lose more money and it's a vicious cycle.

You should view each losing trade as an opportunity to learn from your mistakes. What went wrong? Did you miss out something? Note everything down so that you will not commit the same mistake twice.

If you can adopt this emotionless trading mentality, I'm sure your results will improve.

Discipline

You have to be disciplined! I'm not saying that you can read this and immediately start being a better trader, or even make more money. But you have to make it part of your trading philosophy. It takes patience to wait for the proper trade setup, to wait for a better opportunity to enter the market. Wait for high probability trades which I will discuss in the future so stay tuned for that!

Also, have the discipline to do your homework. I didn't learn all this overnight, it took me a lot of reading and up till now, I'm still learning. It never stops! So if you want to be better at this, you have to invest time and effort into doing your homework.

Risk Management

 A good trader will know how much to risk and how to minimise it. You cannot eliminate risk, but you can mitigate it. Managing your risk is more important than profits. A few mistakes could easily wipe out all the profits that you have been accumulating for the past days, weeks, even months.

There will be times when your gut feeling tells you risk more because the setup is perfect. But always stick to what your risk management plan allows you to. If your plan tells you that the trade is beyond your risk appetite, then wait for a better day.

Remember, not making money beats losing money any time!

What do you think makes a good trader? Leave your thoughts in the comments section.

As always, happy trading.

Cheers.






What is Risk Reward Ratio?

      4 comments  
From some of my previous post, you might have seen me mention the term "Risk Reward Ratio" (RRR).

What is this and why is it important to me?

Well, as the name implies, it is simply the ratio between the amount of money I am risking and the amount of money I could potentially earn. How do you know how much you will lose or earn? That is determined by your entry, stop loss and take profit levels. Click here if for more information about them.


Lets take the most recent shorting opportunity that I have identified as an example.

So how do we go about calculating the RRR?

1) We first calculate in absolute value of the potential loss.

$35.72 - $37.66 = $1.94

2) Then, we calculate the absolute value of the potential gain.

$32.64 - $35.72 = $3.08

3) Finally, we divide the potential gain with the potential loss.

$3.08/$1.94 = 1.587

So what does this figure mean?

Basically, for every $1 we are risking, there is a potential to earn $1.59. The higher the RRR ratio, the better. Everyone will have their own predefined level that they are comfortable with. Some might prefer a RRR ratio of 1.5 and above.

But a good rule of thumb is to avoid those that are below 1. It does not really make sense to risk $1 to potentially earn $0.60. We want our risk to be justified.

I hope this has helped you understand what the Risk Reward Ratio is all about.

What are your thoughts about RRR? Leave them in the comments below!

As always, happy trading.

Cheers.

Friday, 3 April 2015

What is Entry, Stop Loss & Take Profit?

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What are all these mambo jumbo that you see on the charts? 
What is this indicator for? 
What in the world is the chart telling me? 
How can you tell where the price of a stock is heading based on the charts alone?

These were only a small fraction of the number of questions I had before I started trading. After reading a bunch of books about investing, surfing through countless sites and attending seminars which focused more on advertising their platforms rather than actually teaching me about trading, I came to a conclusion that trading is very subjective. There's no right way to trade or one magic formula you can apply to guarantee a 100% win rate.

But today I want to share with you what are "Stop-Loss" and "Take-Profits" and "Entry Price"

I have mentioned them before in previous post and some of you might be scratching your head wondering why are these price levels so important to me.

Entry Price

The entry price is the price that you set to enter the market, be it a long (anticipating the price to rise) or short (anticipating the price to fall) position. 

Take-Profit

This price level, TP for short, is the price level that you have determined to exit the market and take your profits. Before you even enter the market, you need to have a predefined plan as to when to exit. If not, you'll be entering the market without a goal in mind and this lack of objectivity could jeopardise your unrealised earnings. 

Stop-Loss

This price level, SL for short, is the price level that you have determined to exit the market with a loss. This level is more important than your TP because knowing where to cut your losses is more important than knowing when to take your profits.

Humans tend to take their profits to quickly and cut their losses too late. But when it comes to trading, it should in fact be the other way around. It's human behaviour, the point is to ensure that you are disciplined enough to make decisions not based on emotions and not let losses or greed affect how you trade. 

So, before even entering a trade. You should have these 3 price levels identified. The question now is how to identify them. That will be for another post.

As always, happy trading!

Cheers

Thursday, 2 April 2015

[Bearish Setup] - SPN (NYSE)

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A week ago, I mentioned a shorting opportunity for SPN. But when the market opened, it did not hit our entry price.

Today, SPN has yet another shorting opportunity.


My entry price will be $22.46, stop-loss $23.67 and take-profit $20.88

The risk reward ratio is 1.31 and I plan to risk USD$200 on this trade if it hits my entry price.

As always, good luck trading!

Cheers. 

Wednesday, 1 April 2015

How much do you need to start investing?

      15 comments  
Does this sound like a familiar?

One of the most common question I get from people is "How much money do I need  before I can start investing?"

$100? $500? $1000?

Personally, I feel that one has to have at least USD$5000 or roughly SGD$7000 as a start. 

Take note that this amount of money must be money that you do not depend on. Risking money that you cannot lose is one of the biggest mistakes you can make as an investor and as an individual.

But why so much?

For those of you who do not know, there is a commission that you have to pay to your broker for buying and selling shares. This buying and selling of shares are two separate payments.

The commissions charges varies, but lets assume it to be USD$15 or about SGD$20 for the US markets. For the Singapore stock exchange, it will cost you SGD$25

Imagine you are buying shares from Singtel.

If you bought (long) 100 shares,

At current prices, that would cost you 100*$4.18 = $418

Lets say that you sold the share when it is $4.30. That would give you a profit of $430 - $418 = $12 Lets factor in the commissions now which would be $25 dollars for both buying and selling.

$12 - $25 - $25 = $38 (Loss)

You made a loss even though the market went in your favour. This means that to break-even in this situation, you would need the share to move by $0.50 before you even start earning any profits.

However, if you were to buy 1000 shares instead of 100, the net profit for selling at $4.30 would be $120 - $25 - $25 = $70 (Profit)

 $70 dollars profit might sound good enough, but in terms of percentage, you have only made 1.67% of your capital ($4180). The commissions alone ate up almost half of your profits!

In conclusion, having more capital to begin with would ensure that your profits justifies the amount of risk they you are going to take as well as the cost that will be incurred. The cost mentioned here is just the commission fees, there are also other cost such as GST, service fees etc. Always make sure that you have considered such costs into your decision in buying shares or you could actually end up with a loss!

As always, if you have any questions, feel free to leave a comment.

Cheers.


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