Author: Dr Wealth

Recording your trades

Like many successful traders, Dr Alexander Elder advocates all to keep a record of the executed trades. As the saying goes, “what gets measured, gets improved”. Hence, a proper record enables a trader to review and learn from the mistakes. In “Come Into My Trading Room”, he recommends the following information to be captured for each trade: 1) Entry date 2) Long or Short 3) Ticker (stock symbol or the name of the contract) 4) Contract size 5) Entry price 6) Commission Read...

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Protect Yourself Against Irrecoverable Loss

Previously, I have written a post on how to minimize losses in trading through position sizing and stop loss limit. There is something that needs to be addressed further to ensure you can survive the unforgiving market. Stop loss limit is to prevent you from losing too much on a single trade and position sizing protects you from risking too much capital. The issue to be addressed is, “what if you have a string of losses?” The most effective answer to the question is to stop trading. Yes, stop trading. It is harder to stop when you are losing....

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Trading Report Card – Oct 09

The market has been consolidating for a long time. The last good trend was in Aug 09. Even the STI was able to break the 2700 barrier, it could not propel itself to greater heights. This just goes to show the weakness of the bull. It was a month where I was very stringent with the rules. I only went in those trades that have the best signals. Unfortunately, I have to accept what the market decides to do. Compared to the past few months, I only opened 2 counters. The first 2 counters in the table were carried...

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United FTSE/Xinhua China A50 ETF – Getting access to A Shares

UOB Asset Management is launching an A-shares ETF on SGX Mainboard. Buying and owning A-shares is limited to Chinese Nationals and selected foreign institutions. With this ETF, it realises the wish of many people to own China’s A-shares. The current China ETFs listed in SGX are db x-trackers FTSE/Xinhua China 25 and Lyxor ETF China Enterprise. The former consists of H-shares and red-chips while the later only contain H-shares. Hence, this new ETF is currently the only chance of retail investor to access China A-shares in Singapore. If you are still confuse among A-shares, B-shares, etc, you can read...

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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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