Author Archive

Posted on March 11, 2010 - by Alvin

Your investment capital looks like this

Everyone has seen how stock charts look like. But have you seen the chart for your investment capital – how your capital rise and fall with time? The way your investment capital moves depend on the type of investor. I have heavily generalised 3 kinds of charts for the Buy-and-Hold investor, Trader and the Clueless investor. This is important because all of us would always monitor our capital time to time to see if it has grown. By doing this, we subject our happiness to it’s rise and dejection to it’s fall. And whether we still have the tenacity to continue investing when we feel dejected. The end point maybe the same, but the journey can be very different. Find out which of the capital movement chart you prefer and you can find out the type of investor best suits you.

The Buy-and-Hold Investor

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Posted on March 9, 2010 - by Alvin

Lessons Learnt as a Trader (so far)

It’s only been almost 2 years since I began trading and I must say I am still learning how to trade. I have summarized the lessons learnt so far in my trading journey:

Be patient and wait for the best opportunity to place a trade

Trading is really a patient game. It is not as quick as I imagined in the first place. The duration of the trade can be short, but the time waiting to place a trade is very much longer. The thought of profits urges me to be involved in the market and it just makes the wait feels like eternity. Sometimes, the charts do not show any opportunity but my eyes will try to find patterns to justify for a trade. And true enough, these forced trades usually end up in losses.

Statistics have shown that market generally spend most of the time consolidating (non-trending) or moving within a band. To understand more, read “90 days attribute to 95% of profits“. This is why traders have to spend most of their time waiting!

Back on forcing a trade. What I was doing (and still doing) was to demand the market pay me profits. Who am I to do that? I cannot force opportunities. The wise Sun Tzu said, “to secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself.”  (more…)

Posted on February 20, 2010 - by Alvin

Illusion of Winning

I have a fear.

It is more frightening than not having enough money.

Yet it is unknown and undeterminable. I do not know if it is lurking and waiting somewhere in the future and eventually haunt me one day.

I have a fear – the possibiliy of having a black swan that kills me in the end.

More about the black swan later.

Why is this fear frightening? Simply because it gives you the false illusion that you are right for a very long time, say 20 years, and then one day, something opposite happens and take away whatever you have. And you did not know the existence of this thing.

Lehman Brothers existed for 158 years, crashed and burnt in one mortgage crisis.

Long Term Capital Management armed with 2 Nobel prize winners collapsed in 4 years.

Victor Niederhoffer, a successful trader for 17 years, averaging 35% annual returns in 1996, went bankrupt in 1997.
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Posted on February 17, 2010 - by Alvin

The Risk of Focusing Investment in One Country

Globalisation is an overused word. People have been using the word but not sure how it actually affects them in the real world. I would say our mindset is still very country centric and one good example is investment. How many of us actually have investments well diversified all around the world? I believe most of us invest in our own country more than the others. As my title suggests, what is the risk of focusing the investment in one country? Kenneth Fisher would like to expose the risk to you.

Below is the table (extracted from “The Only Three Questions that Count”) that ranks the country with the best returns for each year (from 1990 to 2005). Read more…

Posted on February 4, 2010 - by Alvin

Trading Report Card – Jan 10

My trading goal that I set for this year is to make an average of S$2,000 every month. Please do note that trading income is never consistent, and it can vary greatly month to month. Although I use the word “average”, it may mislead to I aim to attain S$2,000 every month. It makes more sense to use the total value for the entire year where S$2,000 per month will translate to S$24,000 by end of this year. With this month’s profit of S$599.34, I am left with S$23,400.66 to achieve for the rest of the year. I think it is easier to measure this way. Read more…

Posted on February 2, 2010 - by Alvin

Applying Sun Tzu’s Art of War to Trading

Sun Tzu’s Art of War is a classic piece of work that is widely read and applied to many fields, due to it’s fundamental nature that is highly adaptable to many areas of our lives. In this post, I extracted parts of the work and applied to trading and in doing so, hope to introduce the important trading concepts to you. I have also group and categorize them for easy understanding.

To put it in the context of trading, I have rationalised the following terms:
- General = You, the trader
- Battle = Trading the market/making a trade
- Men, Soldiers = Your capital, dollars!

ON WINNING IN THE MARKET

“Now the general who wins a battle makes many calculations in his temple ere the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus do many calculations lead to victory, and few calculations to defeat: how much more no calculation at all! It is by attention to this point that I can foresee who is likely to win or lose.”
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Posted on January 29, 2010 - by Alvin

Capital is key to Profitable Trading

Today, I finally took action and made a step out of my comfort zone.

I think it started from my trading goals (guess by now some of you know about my trading goals for 2010). And this is why we must set goals. At first, we may not have a clue on how to achieve our goals. But along the way, we tend to see possibilities that we previously failed to recognise and begin to make adjustments. If you asked me, I did not know how to achieve my trading goals but I want to attain them.

Recently, T3B organised the annual gathering for 2010 where Keane shared his insights on the markets in 2010. I had a brief moment of enlightenment when Keane commented on people having not enough capital for trading. It kind of hit the bull’s eye of my current obstacle to my trading goals which I did not see as a real problem. Trading a large capital in turn requires stronger psychology when it comes to handling wins and losses, as well as money management. Initially I thought that by cultivating and having good trading skills, it would help me gain bigger profits and meet my goals. It was until the issue on capital that created the paradigm shift in my perception. The key to bigger profits is to have a sizeable capital and strong psychology. Read more…

Posted on January 26, 2010 - by Alvin

Fading Breakout with Trendlines for FOREX

It was said that amateurs like to trade breakouts (buy when price breaks resistance and sell when price breaks support) and the professionals like to do the oppposite. In fact, false breakouts are more frequent than real ones, hence, it may be profitable to trade with the pros. I read about this method from Grace Chang’s book, “7 Winning Strategies for Trading Forex“. There are many ways to fade breakouts but she recommends using a trendline. Note that this method is for FOREX and may not be proven in stocks or other markets.

Rules:

1) Use a time frame of at least an hour

2) Draw a trendline connecting 2 extreme points. (more…)

Posted on January 11, 2010 - by Alvin

My STI ETF Survived the Sub-prime Crisis

I have mentioned that I have been putting aside $400 every month into STI ETF, through POEMS Sharebuilder plan.

I started the investment about 2-3 years ago and only contributed $200 per month. It was only about mid-2009 that I increased the contribution to $400.

We all know that due to the US Sub-prime crisis, the market took a beating and plunged. My STI ETF sank too. But I held on to the Sharebuilder plan, believing that dollar cost averaging will work better for me in a down market. Dollar cost averaging (DCA) is to use a fixed sum of money to buy a particular shares on a regular basis, instead of a lump sum investment. The strategy works like how Singaporeans go for shopping. When there is a sale, Singaporeans will buy in bulk the items that are on discount. Likewise, with $400 each month, I buy more when the stock price falls, and buy less when the stock becomes more expensive. Overtime, I get a big discount for the shares I buy.

You may say that I could have profited more if I have bought near the low of STI but I must say I did not know when the market will bottom and never will I in the future. What I must emphasized is that ordinary folks who do not know how to time the market, can invest in this way and gain very decent profits. Since it is so simple and relatively safer than many other strategies or asset classes, it is highly recommended for people who do not have the interest to follow the market but like to profit from equities. Read more…

Posted on January 4, 2010 - by Alvin

Trading Report Card – Dec 09 and Year 2009

Coming to the end of 2009, I have decided to do a roundup on how I fared in trading for the entire year and not forgetting the regular monthly trading report for the month of Dec.

Let’s begin to take a look at the Dec results:

I have 3 realised losses but have 7 other stocks in positive region now, which I have brought over to the new year. IndoAgri is still my biggest winner in 2009 and right now I am still holding on to it. In fact I capitalize further by adding my position with another lot. I must admit that Ezra and HK Land are not the stocks that were showing the best potential. I have a problem, the impulse to trade even when conditions are not the best. If I want to improve my trading, I will have to overcome it. Read more…