Author: Dr Wealth

Categorize Your Stocks

Peter Lynch has a very effective way to categorize his stocks. As a successful fund manager holding shares of thousand over companies, it serves to follow his method. By categorizing the stocks, he can identify the companies that would potentially become big winners. 1) The Slow Growers These are usually the large companies that have gone past the growing stage. Now, they are only growing slightly faster than the gross national product. The dividends given are generous and regular. You should not have many slow growers in your portfolio. This is because their potential earnings growth is small and...

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Investing from the Money Lending Perspective

I would like to draw some commonalities between the considerations that one makes when he lends money and when he invests. As the former is something most people have encountered and are familiar, I hope you would be able to draw the relations and aid you in making better investing decisions. So what do you go through in your mind when you lend money to others? The first question you will ask yourself is that do you trust the borrower to pay you back as promised? Let us assume that you charge an interest to the borrower. How sure...

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Trading Report Card – Sep 09

This is really a bad month for trading. The market was trendless and consolidating most of the time. The evidence can be seen in the holding period of the counters in the table. You can see I held many of them for almost an entire month, yet they ended in losses. The mistake I made was overtrading. I opened too many counters without any sign of a strong trend. Hence, losses were accumulated unnecessarily. This is the problem when the rejection of trades is not strictly practised. With the 8% stop loss, there was enough room for the stock...

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Buying Commodities in Singapore

Remember commodities were rather hot during the bull run in 2007? Many banks and fund management companies began to introduce new commodities fund to feed the desperate demands in Singapore. Many people who bought commodities at that time would have suffered a great loss as the commodities dived with the stock prices during the crash. But how about now? Jim Rogers is still pretty bullish on commodities. He said that if the economy does improve, likewise the stock market, commodities will be back in demand and prices will increase. Otherwise, if the market does not recover, he believes the...

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Improving your trading accuracy by following a bigger trend

As the saying goes, “trend is your friend”. It does not pay to go against the trend, especially the bigger ones. What do I mean by bigger trends? Bigger trends are trends that are only visible at longer time frame. For example, if you are trading using a day chart, a bigger trend can be identified from a weekly chart. If you are trading an hourly chart, a bigger trend can be identified on a daily chart. Dr Alexander Elder developed a triple trading screen to catch such trends and align his entries to them. Here is a brief...

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Triple EMA crossover trading system for FOREX

One of my friends has started trading FOREX with triple Exponential Moving Averages (EMA) crossovers. He came upon the method from Yeo Keong Hee’s book, Secrets of FOREX Millionaires. I have always been interested in trading systems and it is rare that books talk about them. Most books would only talk about indicators and trading psychology. I remember one of the New Market Wizards mentioned that moving averages can make a profitable trading system if coupled with good money management and position sizing techniques. It may seem too simple for most but who says trading has to be complicated....

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Trading Report Card – Aug 09

End July and beginning of August has been a good run for stocks. It is also the biggest win I ever had. This was due to the fact that I went for the “jugular” as suggested by George Soros (see this post, it was mentioned by Stanley Druckenmiller, “Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular.”). Seeing the strong trend, I leverage 3 times of my capital to increase my profits. The stocks began to slow and retrace after the first week of August till now. Number...

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Insurance should protect against your worst case scenarios

I believe everyone should buy insurance to cover his/her “worst case scenarios” and not just buy because it is likely to happen. In fact, your worst case scenarios are likely to be low probability events and hence, unlikely to occur. But because they are unlikely to occur, most people are unprepared for them (just when you think you are healthy). This causes the impact of such low probability events to have big detrimental effects. Analogous to betting where odds are involved, the payout for the outcome is the highest when the probability of happening is the lowest. If you...

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3 questions to ask yourself before investing in stocks

Peter Lynch wants everyone to look inside themselves first before investing in any stocks. He came out with 3 important questions that will evaluate whether your situation is suitable for investing (from his book, “One Up On Wall Street“). I find it very apt to share with you, especially if you are intending to play stocks the very first time. These 3 questions are the very first few questions you have to ask yourself. Sadly, many people’s first question to ask is “what stock to buy?”. In fact, you should NEVER NEVER ask this question. Question 1: Do I...

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Why investing in mutual funds or unit trusts may not be a good idea – part 2

Followers of bigfatpurse will know that I am not a definitely not a fan of mutual funds or unit trusts. I stated my reasons in this earlier post: Why investing in mutual funds or unit trusts may not be a good idea. It rekindled my thoughts about mutual funds when I was reading Peter Lynch’s “One Up on Wall Street“, who as a fund manager, believes an investment professional may not do as well as an ordinary retail investor. In his book, he provided elaboration that was not covered in my post and it was his view from the...

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Darren’s Trader Curve

Recently, I attended a T3B mentoring session where mentor Darren talked about his own understanding of trading profits in relation to how much you know about trading. He drew a graph to capture this relationship: Darren’s Trader Curve Profits do not grow with increase in trading knowledge Basically, he was saying that T3B graduates are equipped witht the necessary skills to earn money in the market. The system is simple without the compromise of profits. T3B graduates start at point 1 on the curve – a little trading knowledge and enjoys a little profit. Read...

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T3B Forex Course Preview

I have long wanted to attend this preview as I am interested to trade FOREX as an alternative market to stocks. Prior to this preview, I have attended Kishore’s preview but did not like his hard selling style. He is indeed a great speaker and salesman. I have learned a thing or two about trading and FOREX from Clarence Chee, which it did not feel like the preview was a waste of 3 hours. Hence, I would like to share some of the interesting and useful tips shared during the preview. Stock market has Panic Selling Stocks Read...

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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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