Saturday, April 23, 2016

POS Malaysia Bhd - Trading Idea

POS Malaysia Bhd share has been on a long spell of decline until it formed a potential bottom sometime in mid Mar this year. It then surged higher to take out the late Feb peak at RM2.44 before reaching a new peak at RM3.10 on significantly high volume. It has corrected since but now it seems to be supported at RM2.60. Will this support hold? If it does we could be looking at a retest of the RM3.10 peak. If it fails then the next support is at RM2.44.

Disclaimer:
Trading and investment involves risk, including possible loss of principal and other losses. I shall not be responsible for any losses or loss profit resulting from trading or investment decision based on my posting and any information presented in this blog.

Sunday, March 27, 2011

The Business of Trading - Managing and Controlling Risk

All business involves risk. As for the business of trading, there is no method with 100% certainty that could allow us to buy cheap and sell dear all the time. The way that the financial market work we could not tell for sure whether the market is going to go up, down or sideway. The best we can do is to do our due diligence to study the market fundamental and technical and take a calculated risk when the potential reward is higher than the risk.

We therefore need to manage and control our risk so that we do not put our trading business at undue risk when our analysis turn out to be wrong.

How do we manage and control our trading risk?

The best advice I have read on the subject is the 2% and 6% money management rules given by Dr Alexander Elder in his best-selling book "Come Into My Trading Room".

How would we apply the 2% and 6% money management rules to trading?

Let's look at my EUR/USD long trade on 17 Mar 2011 as an example. See my earlier posting for detail in http://swingtrader188.blogspot.com/2011/03/eurusd-long-trade-17-mar-2011.html

The entry was made at 1.39291 and the initial stop-loss order was placed at 1.38600 giving an initial risk of -69.1 pips. The 2% money management rule means we should not risk losing more than 2% of our trading account size per trade.

Let's say you have a USD10,000 in your account. How many units of EUR/USD should you buy to limit your risk to 2% of your trading account size?
The maximum loss per trade calculation is shown below.
Maximum loss per trade = USD10,000 x 2% = USD200
The pip value of EUR/USD is USD10 per lot (100,000 units) per pip. The risk assumed for this trade is -69.1 pips. The maximum lots allowed = USD200/(69.1 pips x USD10/pip) = 0.28943 lot = 28,943 units.
This means that with your USD10,000 account you should not buy more than 28,943 units for this trade so that you would not lost more than USD200 per trade.

Can you buy 28,943 units? Yes, if you use OANDA FXTrade. Otherwise you have to round it down to 2.8 mini-lot (28,000 units) or 28.9 micro-lot (28,900 units) depending on what is allowed by your brokers.

The 6% money management rule means two things:
1. You should not risk losing more than 6% of your trading account size for all your opened trades.
2. Your maximum allowed loss per month is 6% of your trading account size.

With a USD10,000 account, the maximum allowed risk for all opened trades and the maximum allowed loss per month is USD10,000 x 6% = USD600.

Disclaimer:
Trading and investment involves risk, including possible loss of principal and other losses. I shall not be responsible for any losses or loss profit resulting from trading or investment decision based on my posting and any information presented in this blog.

Tuesday, February 15, 2011

The Business of Trading - Way Forward

The business of trading is simple but many lose money trading the markets.
The reasons why traders lost are because of their inability to control their emotions and the way the markets work. What can we do to deal with these issues?
1. Have a plan and system to structure how we would conduct our trading business. As with any good business, we need to work to a system to organise our decision making process. Having a system in place will help to guide us to think through what we want to do and why so that we would be rational instead of emotional.
2. Manage and control our risk. All business involves risk. With trading we know that we cannot assess the market with certainty even when we are rational. We therefore need to have risk controls in place and apply the control so that we do not put our business at undue risk when we are wrong.
3. Have a trading record keeping system in place. To improve we need to record our trading action and measure our results so that we can assess our trading performance.
4. Have a regular routine to monitor and review our trading performance so that we can subject us to the continuous improvement process.



Disclaimer:
Trading and investment involves risk, including possible loss of principal and other losses. I shall not be responsible for any losses or loss profit resulting from trading or investment decision based on my posting and any information presented in this blog.

Monday, February 14, 2011

The Business of Trading - The Challenges

Trading the financial markets is a business. The business goal is to make money and the return is potentially lucrative. The business is simple. We buy and sell financial instruments. We make money when we buy lower than we sell and when we sell higher than we buy. It is simple to make money from trading but many do the opposite and lose money.

Why is that? I think 3 of the reasons are emotional:
1. Our emotion of fear and greed. We are afraid to buy when what we trade is offered at a discount and we are too greedy to sell when what we trade is bid at a premium.
2. Our herd mentality. We tend to follow the crowd, fear missing out and chase price.
3. Our strong urge to trade even there is no good reason to do so. We sometimes forget that the reason why we trade, which is to make money.
I have been guilty too and occasionally still succumb to make the same emotional mistakes.

Besides that it is the way the markets work. Even when we are rational, it is not possible to assess the market with certainty so that we know when it is cheap to buy and when it is dear to sell. We cannot tell for sure whether it is going to move up, down or sideway. The best we can do is to do the due diligence and take a calculated risk when the expected reward is higher than the risk.



Disclaimer:
Trading and investment involves risk, including possible loss of principal and other losses. I shall not be responsible for any losses or loss profit resulting from trading or investment decision based on my posting and any information presented in this blog.

Saturday, May 1, 2010

Taking Profit - Malaysian Stocks

I wrote on June 14 2009 some suggestions on how to taking profit for Malaysian stocks.

My rules have not changed but I have to admit sometimes greed and fear did overtake my better judgement. It is good to remind myself what are the rules so I will not forget.

(1) Trade at least two units. 1 unit should be at least one lot minimum. The amount depends on what you can afford based on position sizing and the stock price. Let's say you can afford RM10,000 per counter, you see stock "A" is setting up for a potential swing trade and stock "A" is trading at RM1.00. As you can afford to buy RM10,000 per counter, you would buy 100 lots (10,000 shares). 1 unit in this example would be 50 lots.
(2) Monitor the stock price closely after it has increased 16% above its entry price. Watch the price action against the previous day low. This could go on for days if price continue to move higher. Exit half the shares once price close below the previous day low. Using the Stock "A" as example, you would have sold 50 lots. Why 16%? This is explained in my earlier posting.
(3) Adjust stop-loss to break-even for the remaining half. We now have a risk-free opportunity to find out how high the stock can go up.
(4) If price continue to move up raise the stop-loss to the latest swing low. Stock usually do not move straight up but in a zig zag manner. There is usually correction along the way, which create a new swing low. As an uptrend is defined a pattern of higher highs and higher lows, violation of the latest swing low suggest the market ability to sustain the uptrend is in question.
(5) Monitor the stock price closely after it has hit the projected price target. This could go on for days if price continue to move higher. Exit if price close below the previous day low.
How do I project the price target? You can use chart pattern projected target and Fibonacci ratio analysis but this is a separate topic all together.
(6) If you can afford a third unit then you could use either Chandelier Exit or monitor on the higher time frame chart (weekly or monthly) and look for bearish reversal sign there.

These are the rules, which I want to remind myself to follow all the time with no exception.

Disclaimer:Trading and investment involves risk, including possible loss of principal and other losses. I shall not be responsible for any losses or loss profit resulting from trading or investment decision based on my posting and information presented in this blog.

UNISEM

I posted this UNISEM swing trade in www.investlah.com on 2 Apr 10. The link is shown below
http://www.investlah.com/forum/index.php/topic,7509.0.html
This was the trade set-up.

Monthly chart

Weekly chart

Daily chart
Weekly chart: Weekly MACD is rising and above its signal line
Daily chart: Price has retraced 38.2% of upswing from 19 to 26 Mar 10 after the breakout of the cup with the handle pattern. MACD turned up on 1 Apr 10.
Entry: I bought UNISEM at RM2.82 on 2 Apr 10.
Exit: I sold half my UNISEM shares at RM3.34 on 22 Apr 10 to secure some profit. I did this for 2 reasons - (1) UNISEM has increased by 16% from my entry price (2) UNISEM has reached the 78.6% retracement target of monthly downswing from Jan 04 to Mar 09.
UNISEM went up for 2 days after I sold before declining but has since continued to move up. I still have half my UNISEM shares to ride this potential upswing. The stop-loss level is now closing below 27 Apr 10 swing low at RM3.19. The target is at RM3.61-4.13.


Disclaimer:
Trading and investment involves risk, including possible loss of principal and other losses. I shall not be responsible for any losses or loss profit resulting from trading or investment decision based on my posting and information presented in this blog.


AXIATA

I posted this AXIATA trade in www.investlah.com forum on 4 Feb 10. The link is shown below
http://www.investlah.com/forum/index.php/topic,6560.0.html
At that time AXIATA was setting up nicely for a swing trade. This was the trade set-up.


Weekly chart

Weekly chart (close-up)

Daily chart

Weekly Chart: Weekly MACD was rising after crossing above its signal line on w/e 22 Jan 10.
Daily Chart: Price has pullback to the 20-day SMA line on 27 Jan 10 as well as the 61.8% Fibonacci support. MACD turned up on 2 Feb 10.
Entry: I bought AXIATA at RM3.36 on 3 Feb 10. The stop-loss is at RM3.16 (6% below my entry price and below the 27 Jan 10 swing low). The target is at RM4.45 (Sep 08 peak).
Exit: I sold half my AXIATA shares at RM3.90 on 10 Mar 10 to secure some profit. I did this for two reasons - (1) AXIATA has increased 16% above my entry price. (2) The 9 Mar 10 close was below the previous day's low.
AXIATA consolidated for more than a month after that and now beginning to show sign of moving up again.
I still have half of my AXIATA shares to ride on the current potential upswing.

Disclaimer:
Trading and investment involves risk, including possible loss of principal and other losses. I shall not be responsible for any losses or loss profit resulting from trading or investment decision based on my posting and information presented in this blog.