First of all, I had to warn that not everyone can become a trader! It is only suitable for people who have high risk appetite. In order to become a trader, you need to be decisive and emotionally stable. You have to ask yourself, do you have two of this? If the answer is yes, then, I would say congratulation to you.
The first thing you need to learn as a trader is to manage the risk. Without that, you will end up like a gambler and losing all your money.
2nd thing, you never borrow money to do trading. It’s absolutely like kamikaze action if you do that. It’s like double edge sword when you are losing the money!
How to manage the risk? It’s a good question. Most of the trader will ask this. You need to have a trading plan and understand your tolerance for loss and profit as well.
For example, if I am trading forex, I will have the trading plan as below:
i) What is the odd for losing and winning? If the odd is losing 1 tick vs winning 2 ticks -> in If the odd is losing 1 tick vs winning 1 tick -> out Always maintain the same risk and reward ratio.
ii) Cut loss and taking profit point? -depend on your tolerance. You shouldn’t aim for the top and bottom, as most likely you will not get it.
I use an example of a trading stock (Capitaland) to explain how to use candlestick and technical indicator (Slow stochastic) as guidance.
From the chart, you see two selling signal and one buying signal:
i) First signal is an evening star, which the candlestick has a long tail at up body. It is a reverse signal, corresponding with stochastic that pointing lower trend.
ii) Second signal is bearish engulfing pattern .Again, it is confirmed by down trend of stochastic!
iii) Third signal is bullish engulfing pattern. The signal is again corresponding to uptrend sign of stochastic!
Dow Jones has successfully broken through 8100. It is very likely Dow going to test 8600 soon. 8600 will be a critical resistance point. The first break through is most likely to be retraced back. It is interesting to see how it settles down, either above or below 8600.
As i had stated previously, KLCI is going to test 1000 and indeed, it not only test it and break through successfully. Now, we shall see how KLCI settle down. A rally has started. Along the way, there will be some profit taking. Let’s see how it settles down and we can conclude which direction it heading to by end of the week.
For STI, the top-notch resistance has been broken through! Too fast and too furies! This is what I can say. STI has up >5% in one day. It is absolutely absurd and amazing in the same time. The high buying volume only means one thing to me, the traders is pushing up the price, to trap speculators and those who can’t resistance the temptation of GREED! Yes, indeed this is a significant breakthrough. STI has back to positive area this year. In this case, same as I had explained previously, it is important to see how it settles down and finding a foothold. Amazing week started with some amazing thrust from all over the World stock market!
In this website, I would like to continue share out some of my investment knowledge. I will try to balance the contents, either from technical analysis method or value investing method in coming post.
In my opinion, value investing is the best for people who want to have a soundness sleep at night. All you need to do is to understand a business. I had layout the guidance for value investing in my previous post. If you are willing to work hard and dig more info from the business, and try to understand it, the chances for making a good profit are high!
The last thing you need is to be disciplined and have a cool mentality. “Fear is your friend, Euphoria is your enemy!” Warren Buffet clearly points out the differences from a good investor and a bad one! When the market is on uptrend move, it is best to avoid the most popular stock at the market. More often, all of this superstar end up in super-dust! I will layout a few of these market darlings in 2007 to 2008. For instant, KNM, Dialog, Petra, Muhibah, LCL in KLSE and Cosco, SC Global, Keppel Corp, China Oilfield, Raffles Education, China XLX, Hong Xing, in SGX. There are more of them and I can’t list out everyone. If you still hold on to all this stock, most likely your portfolio return now is –40% to -50% or even more!! All of the stocks I mentioned above are all well recommended for buying from the analyst previously.
I don’t want to say that all of the analysts are stupid! It is the best that you don’t follow blindly the advice from them. You have to go out and check on the business yourself.
In the coming post, I will discuss more in details on how to do a good trading without burning a hole on your pocket!
It is very interesting to use Fibonacci tool to analyze the movement of stock index. Dow, again, unable to hold on early gain to successfully making a foot mark at above 8100.
The longer head tail of the candlestick suggests that profit taking and more sellers at upper end. Dow has trying several times to break through this 61.8% level (8100). However, it was not successful.
Next week, It goings to get more exciting, as any significant breakthrough will be signal another round of rally. Let us sit down relax and watch how the market unfold next week.
Market has continuously defied the odd to hanging on, despite consecutive 2 weeks of over buy. This is what I called Sucker Rally! A very typical bear rally, which up more than 20% from the bottom we see at last month.
The traders are pumping up the price and supplying all the juices. Adrenalins are flowing, making the brain getting excited and ecstasy. Everyone is trying to jump into the market, as they fear that they may miss out the train.Let us use Fibonacci tool to make some analysis on Asia regional index to determine the market direction:
STI index has up more 25% for the past month. if we take 1950 as the peak and using Fibonacci Retracement analysis, STI is well supported at 1830 now. The last 2 candlestick pattern have showing consolidation has taking place.If STI drop below 1830, it will find support at 1760.May is the reporting month for many blue chips in STI. Any result which is not "WORST" than expected will send STI testing 1950 again!
Let us look at KLSE index. Absolutely amazing. The good news from M'sia government to abolish 30% Bumiputra Equity limit has helped lifting the market, despite we see Evening Star appear at Wednesday.It is more and more likely that KLSE going to test 1000 points now. However, 1000 points will prove to be a very strong resistance!
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