1. Little Preparation or Training
When you enter the market arena, you had better be prepared. However, few traders perform the necessary due diligence before moving headlong into the markets: "The market is a food chain — the big fish eat the little fish."
Dr. Elder agrees that many people underestimate what it takes to be a profitable trader.
Recommendation: Enter the market with a sufficient amount of training, through vehicles such as books published on securities trading, educational courses, and trading conferences.
2. Being Too Emotional About Money
According to professionals, the reason many emerging traders fail to consistently earn profits is because of their perceptions of money.
There are ways to desensitize one's emotional connection to money. Start by trading smaller share size (such as 100 shares per trade). Trading in smaller quantities can help minimize both the losses and the emotional distress that often comes with losing larger amounts of capital.
Recommendation: Over time, as a trader becomes more successful, experts suggest slowly raising the share size — without raising your blood pressure — until a personal comfort zone is reached.
3. Lack of Recordkeeping
It's understandable why traders become emotional when trading stocks. To help bring these emotions under your control, keep a detailed trading diary.
Recommendation: Track your trading history by using a daily diary and study your progress.
4. Anticipating Profits
Most traders don't want to acknowledge that a trade could turn against them. They enter the market assuming they'll be successful, refusing to look in the rearview mirror. It's also common for emerging traders to use a calculator to predict how much they'll make and how they'll spend the unrealized profits! It's dangerous to anticipate how much you'll make in advance.
Recommendation: Enter a trade with the understanding that you may not be right. It can then be easier to acknowledge if a trade goes against you.
5. Blindly Following Mechanical Systems
A large percentage of traders use technology — in the form of online trading platforms that provide charting, research, and backtesting tools — to help them refine their strategies. A computer and software can provide important information about the technical and fundamental characteristics about stocks. However, many traders make the common mistake of relying too much on these tools without a full understanding of their capabilities.
Recommendation: Understand that computers and software trading platforms are only tools. Learn how to grasp the underlying trading concepts — such as reading and analyzing a chart —and know the reasons why you bought and sold a security.
6. Not Learning How to Short
If you fail to learn how to utilize short trading strategies, then you have cut yourself out of a number of profitable trades. Many people think that shorting is un-American or too risky.
By not learning know how to go short, you're removing a significnat percentage of potential trades, especially when the Bull market falters. The market is a two-way street, and the person who doesn't short is missing a part of the game.
Recommendation: Don't underestimate the importance of shorting stocks, and learn how to utilize this technique.
7. Lack of Specialization
Many people are attracted to trading because they think it's an easy vehicle for making money. However, there are several types of securities that can be traded in today's markets, including stocks, options, commodities, futures, and currencies. It is a daunting task to learn the characteristics of each security type. Therefore, it's often helpful to specialize.
Recommendation: Know what you trade. Don't spread yourself too thin by trading markets that you don't understand.
8. Improper Timing
It's very common for emerging traders to make timing mistakes. Quite often, a trader may have a good idea, but discovers that he or she bought the stock at an inopportune price. Timing a trade is never an exact science, but it's important for traders to recognize that there are times when it might be prudent to lock in a profit or cut a loss.
Recommendation: A detailed trading diary and experience could help minimize timing errors.
9. Placing Improper Stops
Many traders incorrectly place stop orders, causing their positions to get stopped out too early and failing to capture much profit. It's common for newbies to place stops according to a set percentage, such as 2%, or a set amount. How much a trader is willing to lose depends on his or her risk-tolerance.
Place stops according to what the market is telling you, such as support and resistance levels. When placing a stop, let the stock's behavior, or a standard deviation, tell you where the best stop placements are.
Recommendation: Try placing stops according to the stock's standard deviation, rather than on the basis of percentages or dollar amounts.
10. Not Calculating a Stock's Risk-Reward Ratio
Many traders do not calculate the risk-reward ratio of a stock trade before they establish a position. A stock's risk-reward ratio is the relationship between an investor's desire for capital preservation at one end of the scale and a desire to maximize returns at the other end.
How do you determine a stock's risk-reward profile? There are three common components of a stock's risk-reward ratio: current stock price (a known); and a profit objective and stop exit price (both subjective). Calculating a profit objective and a stop exit for a trade often involves many factors, such as standard deviation or technical indicators, including Fibonnaci and moving averages.
Recommendation: Before you enter a trade, the first question you should ask yourself is: What is the risk-reward ratio of trading this stock? If you are a novice trader, using a low risk-reward ratio could help lower your potential downside.
Monday, November 29, 2010
Tuesday, November 9, 2010
YTL Power & Maybank Lift FBM KLCI To Breach All Time High
KUALA LUMPUR, Nov 9 (Bernama) -- While share prices on Bursa Malaysia succumbed to profit taking, rotational play in heavyweights such as Maybank and YTL Power kept up the FBM KLCI at a new all time high in midafternoon trade today, said a dealer.
At 3.20pm, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) gained 4.98 points to 1,524.82 after opening 1.87 points higher at 1,521.71.
The Finance Index jumped 87.66 points to 13,903.38, the Plantation Index shed 25.39 points to 7,860.91 and the Industrial Index perked 2.87 points to 2,924.49 and the FBM Emas Index jumped 29.05 points to 10,325.47.
The FBM 70 Index was 13.36 points higher at 10,504.65 and the FBM Ace Index climbed 66.07 points to 4,674.79.
Turnover was at 1.0885 billion shares worth RM1.310 billion.
Decliners led advancers by 428 to 374 while 274 counters were unchanged, 320 untraded and 35 others suspended.
Among active stocks, Ranhill perked nine sen to 88 sen, Karambunai was flat at 23.5 sen and Talam inched down half a sen to 10 sen.
Among heavyweights, Maybank rose 19 sen to RM9.29, YTL Power rose 25 sen to RM2.60, Tenaga Nasional slipped two sen to RM8.80 and CIMB perked three sen to RM8.38.
-- BERNAMA
Monday, November 8, 2010
AZRB, EPIC climb in early trade
KUALA LUMPUR: Shares of AHMAD ZAKI RESOURCES BHD [] (AZRB) and Eastern Pacific Industrial Corporation Bhd (EPIC) advanced in early trade on Tuesday, Nov 9.
At 9.07am, EPIC had surged 42 sen to RM2.15 with 404,100 shares done while AZRB added 16 sen to RM1.19 with 2.61 million units transacted.
The FBM KLCI rose 1.74 points to 1,521.58. Turnover was 54.9 million shares valued at RM49.10 million. Sentiment perked up with 160 gainers, 62 losers and 153 stocks unchanged.
AZRB is selling its 21.26% stake in EPIC for RM111.5 million cash consideration to Lembaga Tabung Amanah Warisan Negeri Terengganu.
The proposed disposal will result in an estimated gain on disposal of approximately RM11.5 million at group level based on the financial results as at June 30, 2010.
Sunday, November 7, 2010
John Murphy's Ten Laws of Technical Trading
1. Map the Trends
Study long-term charts. Begin a chart analysis with monthly and weekly charts spanning several years. A larger scale map of the market provides more visibility and a better long-term perspective on a market. Once the long-term has been established, then consult daily and intra-day charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you're trading in the same direction as the intermediate and longer term trends.
2. Spot the Trend and Go With It
Determine the trend and follow it. Market trends come in many sizes – long-term, intermediate-term and short-term. First, determine which one you're going to trade and use the appropriate chart. Make sure you trade in the direction of that trend. Buy dips if the trend is up. Sell rallies if the trend is down. If you're trading the intermediate trend, use daily and weekly charts. If you're day trading, use daily and intra-day charts. But in each case, let the longer range chart determine the trend, and then use the shorter term chart for timing.
3. Find the Low and High of It
Find support and resistance levels. The best place to buy a market is near support levels. That support is usually a previous reaction low. The best place to sell a market is near resistance levels. Resistance is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old "high" becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies – the old "low" can become the new "high."
4. Know How Far to Backtrack
Measure percentage retracements. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points are in the 33-38% retracement area.
5. Draw the Line
Draw trend lines. Trend lines are one of the simplest and most effective charting tools. All you need is a straight edge and two points on the chart. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines usually signals a change in trend. A valid trend line should be touched at least three times. The longer a trend line has been in effect, and the more times it has been tested, the more important it becomes.
6. Follow that Average
Follow moving averages. Moving averages provide objective buy and sell signals. They tell you if existing trend is still in motion and help confirm a trend change. Moving averages do not tell you in advance, however, that a trend change is imminent. A combination chart of two moving averages is the most popular way of finding trading signals. Some popular futures combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20-day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.
7. Learn the Turns
Track oscillators. Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a market trend change, oscillators often help warn us in advance that a market has rallied or fallen too far and will soon turn. Two of the most popular are the Relative Strength Index (RSI) and Stochastics. They both work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Most traders use 14-days or weeks for stochastics and either 9 or 14 days or weeks for RSI. Oscillator divergences often warn of market turns. These tools work best in a trading market range. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.
8. Know the Warning Signs
Trade MACD. The Moving Average Convergence Divergence (MACD) indicator (developed by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Weekly signals take precedence over daily signals. An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a "histogram" because vertical bars are used to show the difference between the two lines on the chart.
9. Trend or Not a Trend
Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.
10. Know the Confirming Signs
Include volume and open interest. Volume and open interest are important confirming indicators in futures markets. Volume precedes price. It's important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an uptrend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the prevailing trend. Declining open interest is often a warning that the trend is near completion. A solid price uptrend should be accompanied by rising volume and rising open interest.
"11."
Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.
- John Murphy
Study long-term charts. Begin a chart analysis with monthly and weekly charts spanning several years. A larger scale map of the market provides more visibility and a better long-term perspective on a market. Once the long-term has been established, then consult daily and intra-day charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you're trading in the same direction as the intermediate and longer term trends.
2. Spot the Trend and Go With It
Determine the trend and follow it. Market trends come in many sizes – long-term, intermediate-term and short-term. First, determine which one you're going to trade and use the appropriate chart. Make sure you trade in the direction of that trend. Buy dips if the trend is up. Sell rallies if the trend is down. If you're trading the intermediate trend, use daily and weekly charts. If you're day trading, use daily and intra-day charts. But in each case, let the longer range chart determine the trend, and then use the shorter term chart for timing.
3. Find the Low and High of It
Find support and resistance levels. The best place to buy a market is near support levels. That support is usually a previous reaction low. The best place to sell a market is near resistance levels. Resistance is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old "high" becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies – the old "low" can become the new "high."
4. Know How Far to Backtrack
Measure percentage retracements. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points are in the 33-38% retracement area.
5. Draw the Line
Draw trend lines. Trend lines are one of the simplest and most effective charting tools. All you need is a straight edge and two points on the chart. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines usually signals a change in trend. A valid trend line should be touched at least three times. The longer a trend line has been in effect, and the more times it has been tested, the more important it becomes.
6. Follow that Average
Follow moving averages. Moving averages provide objective buy and sell signals. They tell you if existing trend is still in motion and help confirm a trend change. Moving averages do not tell you in advance, however, that a trend change is imminent. A combination chart of two moving averages is the most popular way of finding trading signals. Some popular futures combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20-day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.
7. Learn the Turns
Track oscillators. Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a market trend change, oscillators often help warn us in advance that a market has rallied or fallen too far and will soon turn. Two of the most popular are the Relative Strength Index (RSI) and Stochastics. They both work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Most traders use 14-days or weeks for stochastics and either 9 or 14 days or weeks for RSI. Oscillator divergences often warn of market turns. These tools work best in a trading market range. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.
8. Know the Warning Signs
Trade MACD. The Moving Average Convergence Divergence (MACD) indicator (developed by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Weekly signals take precedence over daily signals. An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a "histogram" because vertical bars are used to show the difference between the two lines on the chart.
9. Trend or Not a Trend
Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.
10. Know the Confirming Signs
Include volume and open interest. Volume and open interest are important confirming indicators in futures markets. Volume precedes price. It's important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an uptrend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the prevailing trend. Declining open interest is often a warning that the trend is near completion. A solid price uptrend should be accompanied by rising volume and rising open interest.
"11."
Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.
- John Murphy
RHB Research maintains Outperform on Sunrise
KUALA LUMPUR: RHB Research is maintaining its Outperform on SUNRISE BHD [] with a revised fair value of RM3 (cum dividend basis of the offer price) following a notice of conditional takeover offer from UEM LAND HOLDINGS BHD [].
The research house said on Monday, Nov 8 that given that the offer involves share swap, the share price performance of Sunrise will largely depend on the price performance of UEM Land shares. Some weakness in share price may be expected after ex-dividend date, as some shareholders may not want to own UEM Land shares but would like to benefit from the dividend.
“We maintain our Outperform rating on the stock with a revised fair value of RM3 (cum dividend basis of the offer price),” it said.
Last Thursday, Sunrise has received a notice of conditional takeover offer from UEM Land to acquire all Sunrise shares at an offer price of RM2.80 per share to be satisfied in either of the following manner, at the election of shareholders:
(i) through the issuance of new ULHB shares at an issue price of RM2.10 each and Sunrise shareholders will receive about 1.33 ULHB shares for every share surrendered; or
(ii) through the issuance of redeemable convertible preference shares (RCPS) at an issue price of RM1.00 each and Sunrise shareholders will receive 2.80 RCPS for every share surrendered.
Thursday, August 26, 2010
Bursa Malaysia: Supermax 2Q earnings jump 77.9% to RM45.8m
KUALA LUMPUR: Supermax Corp Bhd posted RM45.85 million in earnings in the second quarter ended June 30, up 77.9% from RM25.78 million a year ago, underpinned by strong revenue growth, cost savings and productivity.
The glove maker said on Thursday, Aug 26 group revenue rose by 24.6% or RM46.34 million to RM234.82 million from RM188.48 million a year ago, on the back of strong global demand for rubber gloves as well as higher selling prices.
?However, despite a challenging operating environment, the group did well to record profitability growth over the corresponding quarter a year ago,? it said.
Supermax said profit before tax and profit after tax rose by 55.8% (RM17.5 million) and 77.9% (RM20.1 million) respectively. The improvement in profitability is attributed to the revenue growth as well as cost savings from higher efficiency and productivity from improved processes and refurbished lines.
It declared dividend of 2.5 sen a share.
Wednesday, August 4, 2010
Zelan up 28.9% after US-based fund buys 5% stake
Zelan Bhd, a Malaysian builder, rose the most in eight weeks in Kuala Lumpur trading after Grantham Mayo Van Otterloo & Co bought a 5 per cent stake in the company.
The stock, controlled by MMC Corp, climbed 28.9 per cent to 78 sen at 5.00 pm local time, set for its steepest gain since June 9.
Boston-based GMO bought 28.3 million shares of Zelan on Aug. 2, according to a stock exchange filing today. - Bloomberg
Read more: Zelan jumps after Grantham buys stake http://www.btimes.com.my/articles/20100804171516/Article/#ixzz0vd5fdnNA
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