Wednesday, 27 April 2016

Trendline drawing is fun!

Decided to do some trendline drawing practice out of boredom. Just a few stocks I was watching.
Pictures paint a thousand words? (Hack care about macd, stoch, rsi and what not... just kidding)

Keppel
Can't seem to break out of its downtrend channel. Secondary uptrend occurred since my previous update but uptrend broken once ex-dividend. :(

 Lippomall
Going sideway soon?
 Noble
After being ditched by STI, will this salted fish break out to life again?

OCBC
On a happy steep climb. For now.


* Disclaimer: These are NOT investment advice. Your own discretions apply in the chart usage.



Charting workflow in a nutshell

- Zoom out to 5 years or maximum, zoom in to 2 years, zoom in to 6 months or even more recent depending on your trade time horizon. See the macro and micro trends.

- Find trend, draw lines. Lines should be touching closing price of candles.
(no trend don't enter. sideway stocks don't enter. downtrend can consider shorting.)

- Determine the entry price based on an established trend, indicators or a break-out.

- Weigh the downside versus upside potential (risk to reward ratio).

- Determine the stop-loss price somewhere below the support. (eg. Stanchart can set stop-loss, put minimum selling price much lower cos if price breaks below it that would deactivate the stop loss.)

- Position sizing, calculate what is a fair amt of shares to buy (eg. not more than
x% of investment capital).

- If price follows trend channel, let your profit runs. If it fails, get out.

- Set trailing stop losses (based on new suport levels) to reap profit before trend-reversal happens.

- Sell if bad news about the company broke out or major support level broken.

6 rights, 2 wrongs... can still be costly

Is that a right overall? Wrong.


"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." - George Soros

Back to school - SGX academy

Yoz! Am back from Taiwan. Since now I am so free and officially a slacker, I thought I would sign up for course or two at SGX academy. Good to be student again once in a while.

My advise for this is don't attend FOC preview courses, because most of the time you will be listening to just-some-ideas and much self-selling (to make you attend the actual course). For better learning experience and not waste time, go for the paid courses that suit your level.

The recent course I went for is on technical trend trading for beginners (3 hours). Prior to this I have had some knowledge on technical analysis but going for live talk on it was far more entertaining and enriching than book-reading I feel. Reasons being:

- Case studies on Singapore stocks
- Some experience sharing by speaker
- Gist of the books summarized in slides format
- No distractions of wanting to do other things or skip chapters

The basic trading principles and best practices coincide neatly with what I have learnt over the years from reading blogs and books. Those information I have gathered earlier through reading are like jigsaw puzzles - I got to slowly sort them out and piece them together forming various pictures over a long period. Some of blog posts I came across was too 'cheem' for me when I was an investment novice and I simply got tuned out as I couldn't make sense of them. The course on the other hand, would paint an organized picture right away for the learners without a need to piece any puzzle. Key points I took years to realize suddenly stared at me in bold.

Amidst a revision of the main TA principles, I also managed to catch some other useful pointers like on risk management, where to set stop-loss and position sizing. A little more advanced thinkers or hybrid lovers would start to think of strategies to marry TA and FA nicely thereafter. No, no such course yet.

Some people would say why go for talks or courses, isn't it better to learn by experience? My answer to that is yes and no. Use the knowledge and understanding to experience - yes definitely.

Last but not least, one very important thing I learnt lately about investment is to PLAN. As the saying goes "If you fail to plan, you plan to fail." Same goes for investment. Entry, exit, time horizon, trade size...

Then it goes on to the battle with the mind. Because the hardest part is always the ACTION or plan execution. Now we need some ninja discipline here.

***

"The fastest way to go broke in the stock market is to prove that you are right and the market is wrong."

No matter whether we are using TA or FA, ultimately we are utilizing past data to help us extrapolate the future so as to estimate the potential returns of an investment. But who can truly predict the future? That is why risk management and minimization of bias are important.

Thursday, 14 April 2016

Recent reads: The Next Apple, Bull's Eye Investing


The Next Apple

I find that the strategy that the authors advocate is applicable only in the start of a bull run or in good market times (stable economy) because it's main tactic is to pick stock when it keeps climbing and goes past its 52-week high with at least 50% break out from a technical base. More of a technical read than fundamental. Teaching us how to ride on momentum stocks.

However, it contradicts itself by saying you should buy stocks that fulfilled the momentum criteria when not many people of the public know about the stocks yet (that probably means institutional investors are the ones driving the stock prices up and not so much of retail investors?).

Some take-home points about risk management:
  • pick stocks that have potential to appreciate substantially (think Earnings growth).
  • make sure our inevitable mistakes are not going to hurt our returns too much.
  • stay with our winning stocks long enough to make a difference in our returns.
  • be careful of down crash, use stop-loss (as per usual) - I am thinking of trailing stop-loss though that's not covered.
  • make sure our position sizing doesn't hurt our performance, sleep and confidence.
  • to be active in the market when it is worth being active. To do nothing when there's nothing to do.

"Before every stock reaches 200% return in a year, it is up only 50% at some point in that year."



Bull's eye investing

This is a refreshing read from the boring old FA stuff.
Many times it mentioned that we are in a secular bear market since 2000 (what now?) and talked about how we could tackle it. It also flagged out something we often overlooked in our course of investing - that at different times, different 'trending' stocks push the market up (means at different time points in the stock market centuries, different hot industries drove the economy). Then there's some draggy parts about mutual funds which I skipped.

Interesting bits on investor's psychology here... 6 mistakes of investors:




Rules for value investing (ok some boring stuff do popped up )
  • Cut your losers and let your winners ride.
  • For every stock you buy, set target prices for selling to collect your profit in stages. Set targets.
  • Be patient. Trust your research. (read more at the Graham's number part)
  • Don't try to time the stock,
  • Do not fall in love with your stock.
  • Diversify.
"Numbers don't lie, but you can lie with numbers."

-------------------------------------------------------------------------------------------------
Here's an example of a secular bear market chart I plucked off google if you don't know what that means:



***

This marks the end of my very brief book summary. If you have read them, do share with me what other 'gems' you found inside ok?

Time to pack for my Taiwan trip tomorrow. Ciao~

Tuesday, 5 April 2016

What you need to trade SIP / CFD

Besides money that is. The most important one is...

KNOWLEDGE

SG brokerages may require clients to take tests before they are allowed to trade SIPs (specified investment products) or CFD (contract for difference) if they are not working finance-related field, do not have prior finance certifications or have no trading history of such instruments for at least 6 times in the preceding 3 years. It's basically the same idea as having to pass the driving theory tests before we could get into the driver's seat and start engine.
Maybe the next thing you know they would start making risk management course compulsory. Shhh.

\You could take the courses and tests at:

SGX e-learning (takes about 2-3 hours to complete)

and

http://sips.abs.org.sg/Default.aspx# (each course consists of about 60 slides with a 15-question quiz at the end of each set)

They would then send you a soft copy certificate. For POEMS account opening, you need to indicate your scores on the application form under the respective SIPs.

Model answers?

Sorry you are not gonna find cheat sheet here. Go and study!

Personally, I would not advise anyone to dabble in SIPs if you are not sure of what you could do with them and what they could do to you.


“Risk comes from not knowing what you’re doing.” - Warren Buffett
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