Author: Dr Wealth

Trading Report Card – July 09

This is the month that I was trying out Dr Alexander’s Elder Ray indicator and Triple Trading Screen system. I made a mistake that any unseasoned trader would have made – getting excited and want to trade many counters to see if the system works. Initially, I was looking for a shorter term system with a higher accuracy but lower payout, so I thought this system would meet the criteria. However, my assumption of it being a relatively shorter term trading system than T3B, I got in and out trades too fast, resulting in small but unnecessary losses. The...

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When stop loss order fails

The pain for traders is the loss beyond control or expectation. Successful traders have a habit of limiting the size of losses, such that even many losses are incurred, they will not affect their capital for future investment. A typical method to limit a loss is to set a stop loss order, where any price movement below a particular price, the order will be executed. To illustrate, if a trader set a (sell) stop loss order at $1.00, the order will be filled if the price goes below $1.00. In other words, he could be filled in between $0.95...

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When can you take a profit if you bought shares at the peak?

Stock market goes up and down unpredictably. I believe some investors have experienced buying at the wrong time – at the peak or near peak of the stock market, and to their horror witnessing the stock price plunge. Many of these investors will find it hard to swallow losses and will want to switch to ’safer’ instruments like bonds. A few investors will hold on but not sure how long will there see their account turn green again. The good news is if you hold long enough, stockholders will eventually be better off than bondholders. The question is how...

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Why Stocks?

Most people find stocks attractive as it promises quick money to be made. It is only when they get into the market and lost money that they realized that money does not fall from the sky. On the contrary, the bookstores and the press are not short of successful stories about someone raking millions from the market. This gives constant motivation to the public that there is still a chance for them to make it big in the market. I would say for most people there is a love and hate feeling towards stocks. So, can stocks really build...

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Trading Report Card – Jun 09

Trading Summary I entered this month following a strong uptrend from the previous month. You can see most of the profits were made in first week. The trend did not last long and the market began to consolidate for the rest of the month. The mistake that I made this time is that I did not fully utilize the chance presented in this uptrend. If George Soros is my mentor, he would have advised me to maximise my capital and take as much leverage as I can. A good trader knows that such chance does not come very often...

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How does the stock broker earn your money?

There are mainly 2 ways that your stock broker earns money from you and it is important you are aware of it. Commissions When you buy or sell any stocks, the broker charges you a commission for the service of facilitating the transaction. Commission generally cost about S$25 per transaction (a buy or a sell) for Singapore brokers. A round trip of both buy and sell will consitute 2 x S$25 = S$50. This will affect your trading as your winning trade results in lesser profits and your losing trade results in larger losses. For example, if you bought...

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Q&A on Traded Endowment Policies (TEPs)

  Have you heard of Traded Endowment Policies (TEPs)? You should read on with eagerness if you have not. I have posted several questions to Mr Dennis Ng, who owns TEP Pte Ltd that handles this investment product. This Q&A would be able to help you understand TEPs better and hope that they may fit your financial needs or investment portfolio perfectly. 1) Are TEPs whole life policies or investment linked policies? Neither. TEPs are Traded Endowment Policies. They are basically UK Endowment Policies bought from the secondary market in U.K. 2) When one purchases a TEP and take...

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Trading Report Card – May 09

Summary of trades: This month put me back into profits and I am thankful for what the market was willing to give me. Similar to last month, I was focusing my trades on Chinese companies listed in Hong Kong but I have learnt my lesson that profit protection is beneficial in a volatile market and this set me to push up my stop loss limit higher as the price goes up. You can see that the profits are smaller as my stops were tighter. In the later part of the month where the rally was stronger, I was more...

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Support and Resistance

Most traders use support and resistance levels to determine buy and sell signals, but have traders question the significance of these levels? Technical analysts believe strongly that traders and investors have price memories affecting them when they make trades. For example, they will remember the highest price of the stock they traded have reached. The memory will be stronger if there are emotions attached to it. If the trader had not sold the stocks at its high, he will be disappointed and will want to get even with the market. He is then inclined to hold on and sell...

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Trading Profits in relations to Time and Accuracy

The size of profits of a trading system, is related to time and accuracy. They are inter-related and it is not possible to get the best out of all 3 factors in any trading system. Before I elaborate further, I shall define what these 3 factors mean. Size of profits – I am referring to the average amount of profits the system will earn per trade. Time – The average length of time you held on to a trade. Accuracy – The percentage that the system is correct and earns you a profit. Big Profits = Long Time =...

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Minimize loss = Position Sizing and Stop Loss Limit

William O’Neil said that, “The whole secret to winning the stock market is to lose the least amount possible when you’re not right.” A successful trading system hence must be able to reduce losses in order to preserve the capital as much as possible. Losing 10% of your capital will need 11.1% to bring you back to your original capital. The problem about trading is that you can never be 100% right, hence, it is very important to minimize the loss when you are wrong. There are 2 critical elements that must be present in every trading system in...

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Buy and hold is not as easy as you think

I am not against buy and hold strategy. Instead, I believe it can really bring you great wealth – note that the world’s richest investor is a buy and hold strategist. Many investors are familiar with this strategy and often practise it, but not many are successful. Here are some of the reasons that may have caused their failure: 1) Fail to plan for future money needs Many people are myopic such that they only see the near future of 3 to 5 years ahead, and some may even see shorter than that. When it comes to investing, they...

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