Author Archive

Posted on September 17, 2009 - by Mandy Ong

Risk of the unknown

The stock market is the most commonly traded investment and is known to give the best returns over time. It is easy to trade and investors just have to buy and hold, for capital appreciation or for dividends.

Yet, two recent events have shown that it is not as simple. One, the decision by the major shareholders of CK Tang to privatise the company. And two, ATIC’s ( Advanced Technology Investment Co, the technology investment company of the Abu Dhabi government) purchase of Chartered Semiconductor with plans to delist the stock from SGX and Nasdaq. Read more…

Posted on July 13, 2009 - by Mandy Ong

Watch out for volatility ahead!

Since the long red candle last tuesday, market has been hovering around the support / resistance 878 level. Technically it looks weak due to the formation of the head and shoulders, therefore we are comfortable to hold on to our 878 shorts from last week, with stop at 905. Lots of earnings from major companies this week, so watch out for the swings!

Source: TheMidnightStar

Posted on July 12, 2009 - by Mandy Ong

Pure greed or plain ignorance?

2 prominent cases came to a close recently. In Singapore, MAS, after much investigation, banned several financial institutions from selling structure products. And in the US, Bernard Madoff was sentenced to 150 years jail for fraud involving a ponzi scheme.

The actions taken may be stiff but it did nothing to relief the pain of the thousands of investors who lost their savings in the 2 cases.

Yet for others who were not affected, are they wiser from the experience of the unfortunate ones? Each day, investors continued to be offered opportunities of better returns. It can be the property agent who offers you the chance to buy a property to ‘flip’, the friend who offers you the hot tip about a certain stock or the guru who has a trading formula to share. Read more…

Posted on July 9, 2009 - by Mandy Ong

Did we miss the sell?

Last night, the ES made a feeble attempt to rally and traded to a high of 898.25 before giving way. With the formation of the long down candle last thursday, and another one last night, is the market too low to sell and have we missed the selling action? Read more…

Posted on May 20, 2009 - by Mandy Ong

Its too late when the pain becomes unbearable

It was reported last week that Temasek Holdings had divested all of its holding in Bank of America (BoA) in the first quater of this year and could have lost at least US$2.3 billion. Perhaps it is due to the change in Temasek’s investment objectives from developed markets to emerging markets. Or perhaps due to the different business stucture of BoA from Merill Lynch which Temasek had originally invested in.

I am not an economist or analyst, so I shall reserve my speculation. However, what we do know is that Temasek first invested into Merrill Lynch in late 2007, which was when the crisis was just unfolding and markets were still trading at the highs (as compared to current levels). And when they liquidated their holdings the last quater, March 2009 was the lows we have seen so far in the crisis. This brings to mind the trading pattern of many retail investors.

Of course it is difficult to predict where the market will be, and only after the highs or lows have been formed, then we can look back and say a top or bottom has been formed. Therefore, we cannot fault one for his entry level as high can go higher, and low can go lower. However, one do have control over how much he can lose. Investors often, for the fear of losses, hold on to their bad positions longer than they should. And when the pain becomes unbearable that they have to cut, its at the worst levels before market reverse like when Temasek sold BoA just before the market rallied sharply in the 2nd quarter. A successful trader should have in mind how much losses he is willing to take when he initiates his position so that he will not be unprepared when market turn against him. Only when you know your potential losses, then you can act to preserve your capital and fine-tune your trading to grow your account.

Source: TheMidnightStar

Posted on May 7, 2009 - by Mandy Ong

The who’s who list of the stress test due tonight

Bank of America   -  Judged to need roughly $34.0 Billion in additional capital
Wells Fargo  –  Judged to need roughly $15.0 Billion in additional capital
GMAC  -  Judged to need roughly $11.5 Billion in additional capital
Citigroup  -  Judged to need roughly  $5.0 Billion in additional capital
Morgan Stanley  -  May need to raise between $1 to $2 Bln in additional capital
Goldman  -  Judged not to need to raise additional capital
MetLife  -  Judged not to need to raise additional capital
JPMorgan Chase  -  Judged not to need to raise additional capital
Bank of NY Mellon  -  Judged not to need to raise additional capital
American Express  -  Judged not to need to raise additional capital

TOTAL 65.5 billion required. (And the market rallied last night on the good news that its not as much as expected?!)

Source: TheMidnightStar

Posted on April 21, 2009 - by Mandy Ong

Overwhelmed at ATIC – so many things to trade!

I was at the ATIC (Asia Trader & Investor Convention) today. There were about 33 exhibitors promoting their various products and systems. Then I realised, there are so many products available for the investor! You have never invested or traded, I guess you would be overwhelmed at the fair.

Although I am an advocate of futures trading, I shall give a brief summary of what products you can trade to grow your wealth. It is important to choose a product that is liquid and transparent to trade in, therefore I shall not touch on non-regulated products like wine and land investments.

Stocks – the most commonly traded financial product, also known as shares, you are buying a share of the listed company. When you buy a share, you become a part owner of the company and will have voting rights. Other than capital appreciation (which is when the price goes up) you can also gain dividends and bonus issues if the company do well. For shares, you can only buy and need to settle (ie pay up) within 3-5 working days, if you sell your shares within this period, you do not have to put up any cash upfront and only need to settle the difference (known as contra).

Forex – forex are traded in pairs, say, if u buy Eur/Usd, you are effectively buying Eur & selling Usd. Factors like economic conditions, news, data and interest rates differences will affect the movement of currencies. Other than the price fluctuations, investors also have to consider the ’swaps’ which is the difference in interest rates of the 2 currencies, as u are long one & short the other, you will receive or pay the difference on a daily basis. The market is highly liquid and traded 24 hours Monday to Friday. Read more…

Posted on April 9, 2009 - by Mandy Ong

Leverage is not a bad word

The scientific defination of leverage is the use of a smaller energy force to move an object of a greater energy force. Since the age of cavemen, the use of leverage in the form of simple tools has made the lives of mankind much easier.

Yet, in the financial markets, leverage is associated with high risk and investors often shunned leveraged products. The recent volatility in the markets also had many investors pointing their fingers at leveraged traders cutting losses to meet margin calls.

Indeed it is true that leverage trading carries a certain level of risk. With the investor only putting up a percentage of the total contract value, he runs the risk of losing his entire investment and more. For example, to trade 1 lot of Emini S&P at price 800, the contract value is Usd40,000 (usd50 x800pts), but the investor only has to have Usd 5000 to initiate a position. If the contracts falls by 100pts, the contract value drops by 12.5%, but the investors loses 100% of the amount he invested. Read more…

Posted on April 2, 2009 - by Mandy Ong

Higher margin requirements – is the bitter pill good for you?

Throughout my broking career, I often have clients lamenting that the increase in margins have made it very difficult for them to trade. The local broking firms, under the regulations of MAS, require clients to put up the required margins before they can initiate a position. When I joined the futures broking industry in year 2000, the margins required for 1 lot of SiMSCI is abt 5% or S$2000, but due to the current market volatility it has tripled to almost 15% or the current S$6000 despite the falling contract value.

Increases in margins are often viewed as a hindrance to futures traders seeking to maximise their profits through the use of leverage. The higher the margin requirements, the lesser the leverage.

However, traders must take a step back and look at it at a different light. Margins serve as a check for clients so that they do not over-leverage and lose their entire investment. Say, a trader has S$12,000 in his account, if margins are at 5% of the contract value which is about S$2000 and he choose to maximise his leverage by trading 6 lots of SiMSCI, his account would be wiped out if he had shorted at 2000 and the market rallied to 2100. At 15% margins, he can only trade 2 lots, and had market rallied to 2100, he loses S$4000 and preserves his capital for another trade to be able to recover his losses. Therefore, higher margin requirements is indeed a bitter pill, yet it is for your benefit.

Having said that, clients should not base their trading size according to margin requirements. Successful traders have a strategy and trade according to what their risk level allows them and will not max out their account to maximise their profits.

Source: TheMidnightStar

Posted on March 19, 2009 - by Mandy Ong

The allure of fast & easy money

In the news recently for the wrong reason is ‘Dr’ Clemen Chiang, an options trading ‘expert’ who misrepresented himself with a phD from an uncredited university. Many who have attended his course are now claiming for their money back. He is one, but there are many others. Why are there people who are willing to fork out $3-4k or more for a trading course? Open the newspapers and you will find many of such ads, trainers who claim to have made millions and promising a trading formula that will make you a millionaire too!

Many new investors are sucked in by the allure of fast & easy money from trading, thinking that there must be a secret formula and once u apply it, money will come rolling in.

However, the secret is that… there is no secret! Read more…