You’ve probably heard about Technical Analysis from my previous articles and may be wondering to yourself, “How should I begin?” I feel that a great start would be learn about Trend Lines because it is the first step to knowing what Support and Resistance mean. You may wonder why is it important, and I hope that by the time you reach the end of the article, you would see it’s effectiveness and be convinced yourself. Perhaps, even try it out for yourself! I have been using trend lines faithfully and they have always served me well in my investments.
What are Trend Lines?
Trend lines are basically lines that you draw on charts that shows you the general direction of a trend. It is useful to help find potential support and resistance levels so you can time your entry and exit better. And the best part of it all, it’s not hard at all and can be performed on any charts! All you need to do is to find the best fit support or resistance line via trial and error by connecting the bottoms or tops of a trend. Here’s an example:
Here I have presented you with a chart that shows you two support lines (S1 and S2) and one resistance line (R1). It definitely doesn’t look too hard to draw isn’t it? Simply connect the bottoms of a trend and there you have it, a beautiful trend line that can help you spot the next bottom to enter your trade! You’ve always heard of people trying to “time the market”, this is one of the ways traders time their trade. Take for example the trade towards the right of the chart, at S2. Look at how easy it would have been for traders to time their entry and exit just by drawing two lines! Buy when it touches S2, and sell when it touches R1.
Trend Lines Keep Changing!
Had you not drawn the trend lines, would you have known at what price you should enter and at what price you should have exited at? Drawing trend lines help to clearly show where the next potential support and resistance will be at. I place emphasis on the word “potential” because it is not a guarantee that the trend will stay the same forever. Look at S1, it stayed in effect for about 6 months before the trend line is broken, and then we ignore S1 and move on to S2. Same goes for R1 where it was effective for 7 months before it was penetrated in mid-March. This penetrating move then renders R1 meaningless now while S2 is still in play because it hasn’t been breached.
It’s All About Practicing
I understand it can get a little confusing, but when it comes to trend lines, it is all about practice! Keep drawing and fine-tuning your accuracy when drawing these trend line because you will be rewarded at the end of the day! You can practice charting using the software I’m using, Chartnexus. (Note: I’m not receiving any commission for introducing this software from Chartnexus, it’s just that it has helped me a lot and I wanted to share with readers who are interested in Technical Analysis and it would help when I teach more about TA in the future.) Some of you may already have access to charts, do give it a try! Some charts are harder to have their trend line drawn and some are easier. Keep trying and eventually move to harder charts to improve your accuracy!
Disclaimer: The above chart is for learning purposes only and not a recommendation to buy or sell. Always conduct due diligence when making a purchase or sale of a stock.
What is investment? Isn’t it just buying and selling an asset? That was what I thought so too when I first began investing. Along the way, I learnt a great deal about what investment is about. It goes beyond just buying and selling. I remember when I first begun investing, the questions that went through my head were questions like “What stocks should I buy?” or “How much does it cost?”. It was simple as that. Perhaps like me, you asked yourself these two questions and found your answers. Subsequently, the ‘Buy’ button was clicked and now you own your very own stock. You were happy, with emphasis on the word ‘were’. Maybe you got lucky, things went your way for awhile, and suddenly it happened. Your stocks went from profit to loss. You’re not alone and it’s not uncommon. When losing, you begin to enter the denial phase and convince yourself that it’ll go back up again. Weeks passed, and you suddenly realise that you’re holding onto a 20% loss. What now? Now, you learn that investing is not just buying and selling.
I’ve been there and done that, but most importantly, I’ve learnt from it and I want to share with you the lessons I’ve learnt so you don’t have to go through it yourself. But just like investing, easy to understand, hard to apply. However, I will still attempt to offer some practical tips that I use in my investment process. “Investment process”? You mean it’s not just buying and selling? Plainly speaking, it is, but there’s more to it. There’s a whole lot of thought process going on before the ‘Buy’ button is clicked.
The Plan
“If you fail to plan, you plan to fail.” – The overused quote indeed. But it’s only because indeed, it works. Here are some of the questions that go through my mind before I click that ‘Buy’ button.
What is this company that I am about to buy involved in? What is its business like and is it profitable? – This is your fundamental analysis phase.
What’s the price now, can it fall further or should I take action now? – This is your technical analysis phase.
What price am I going to buy at, and why? – Based on the above two analyses.
If I buy at $X, when do I take profit and when do I stop my losses? – Contigency plan: Setting profit targets and stop losses.
Why am I buying this stock? – Are you in for the long-run or a quick bite off the market?
If you can answer these questions, you’ve already answered “What”, “When”, “Why” and that should be almost good enough. Feel free to add on more questions to this list. The more you plan, the better prepared you are when emotions try to block out your rational thinking. When you plan well, you’re setting up barricades against emotions that confuse the rational mind after the ‘Buy’ is clicked. It will be useful to know that it has served me very well and I am confident that it will serve you well also.
The Execution
“Plan your trade, trade your plan” – So after you’ve done your planning and have convinced yourselves that this is a good and profitable company, you click the ‘Buy’ button. Congratulations, you’re now an official stockholder! The real challenge of investing starts now – “Trade your plan”. Anyone can plan, but how many can execute without allowing emotions to get in the way? When things go your way, you pat yourself on the back and say to yourself “Good job!”. Perhaps like myself, you were 20% up, and before you know it, it became 20% down and you feel the pinch. Now, what would you do? As good as my plan was, I found out that my emotions blocked out rational thinking and I started creating false beliefs and adopting a whole new plan(that’s based on emotions) to make myself feel better. Check if you’re saying or doing the same things to yourself.
From a short-term trade, you turned it into a “long-term investment”. – You’re suddenly trading for a whole new reason which doesn’t make sense.
Cut your profits and let your losses grow – Don’t get mixed up! It should be the other way around.
“It’s cheaper now, maybe I should buy more?” – It’s not a bad plan, but it only works if you’ve got deep pockets. Do you? And is it deep enough? Remember, you are adding to a losing position, why not add to a winning position?
Ignored your stop losses and allowed it to be breached.
If you’re saying or doing these things, sit down and reflect for awhile. Think about what your game plan was and if you are still following your plan. If you’re no longer trading the same plan based on rational thinking, you’re likely to be trading based on emotions. If you allowed yourself to trade on emotions, be prepared to see yourself wiped out of the market. It’s okay to lose a few battles, but win the war. Don’t get wiped out in one bad hand because you allowed your emotions to run wild.
The Review
After all is said and done, it’s always good to look back and ask yourself these two questions:
What went right, and what could I do to make it better?
What went wrong, and what could I have done instead?
Two simple questions, yet packed with so much wisdom and knowledge that will guide you on your next investment.
Hope this helps you realise that there’s more to investment than just buying and selling. When you have a comprehensive plan and discipline to carry out your plan, you immediately become a successful investor just based on that two criteria. Keep working on it with undying persistence and improve the accuracy of your trade plan. All the best in your investments!
Straits Times has reported today that the government will soon offer a new type of bonds in the market in the second half of the year.
Coined the Singapore Savings Bonds, being first of its kind, is different from the current SGS bonds which offers fix interest rates every year. It offers a step up interest starting with a smaller rates that rises over year. (Refer to the diagram in the newspaper article below)
Photo: Straits Times
The new bonds will be offered at a 10 years tenure linked to the long-term SGS Bonds Rate with no penalty for early redemption.
The minimum amount to invest is $500, with additional multiples of $500 up to a certain cap.
This roll out would really benefit the risk-adverse investors as it open up an alternative investment other than fixed deposits.
To sum up the features of the Singapore Saving Bonds:
Take control of your financial future and join many others in the SMART Investment & International Property Expo. With over 11 years of organizing investment expo in other parts of Asia, SMART Expo has invited hundreds of industry experts in their fields to provide useful advice and motivational talks to investors.
This year, Singapore will be its first stop in Asia, followed by Beijing, Hong Kong and Shanghai in later parts of the year.
There are different seminars held in this 2 days event, so whether you are someone who is looking for investment opportunities or one who wants to learn more about investing, you will definitely benefit from the insights shared by these quality professionals.
Property investment
If you have been following the news, you would have been aware of a slew of currency swings that are happening in the market.
The U.S. Dollar has been appreciating ferociously against other major currencies like the Euro, GBP and AUD.
Fortunately, the Singapore Dollar has strengthen against a basket of currencies. With a stronger S$, it makes properties investing abroad attractive as it costs less in dollar terms. This has been reported in the Straits Time recently and some of the overseas properties in Malaysia, Australia and Britain are popular among Singapore’s investors.
Some economists says that the central bank will likely keep its stance of letting the Singdollar appreciate against other currencies in the April meeting, albeit at a lower pace. This could be a good opportunity to leverage on for property investors.
If you one who plans to buy a retirement property or a weekend home to retreat to across the Causeway, look forward to Mike Chau’s seminar on “Why is Landed Property the Preferred Investment Choice in Iskandar, Malaysia for 2015?” on 28 March 2015 from 13:00 to 13:45. Mike is the managing director of eBizway Research Sdn Bhd and has invested in the Iskandar since 2008.
With the decline of the Aussie dollar, parents who are planning to purchase a property in Australia for their children who wishes to study or work abroad may find it a better deal now. Christian Numa from LK Property Group will share with you some tips and hindsight on how and why you should invest in properties in Melbourne – the World’s Most Liveable City. And Omar Butt from Find My Work Space will talk about the burgeoning marketing for flexible workspaces in the city.
You should also not missed Vina Ip’s talk on “Dirty Truths and Profitable Secrets to Building Wealth Through Properties” on the second day of the seminar. Vina is a founder of Property Club Singapore, and she blogs at PropertySoul.com where she shares her property investing experience on how she grows her wealth from one to five property in 4½ years. In 2014, she published a book “No B.S. Guide to Property Investment.” and was sold out in Kinokuniya and Times bookstores within 8 weeks.
If you are already planning to invest in some properties, there is a good selection of overseas properties that you can check out during the event.
There are many other seminars conducted by senior level industry experts giving their expert advice on property investment and how to succeed in the property market. If property investment is what you are interested in, check out the seminar’s timetable here: http://www.smartexpos.com/2015/MarSG/timetable.html
Personal Finance & Investment
Who say the SMART Expo is all about talks on property investments? For keen and young investors, look forward to some of the talks from renowned traders and professionals as they show you how to detect market trends, basics of assets allocation and how to create an ideal portfolio.
Jeff Sun is a professional trader and specialises in high probability trading strategies in index futures and equities trading of Singapore and US shares. He will show you his hindsight on proper risk and money management strategy and how to turn your portfolio into profits every month using some trading principles.
With over 15 years of experience in stocks, 11 years with options and futures and 8 years in Forex and CFDs as a full time investment manager, Terrence Tan will give you an overview on how to create a profitable portfolio yourself and how to achieve financial freedom without the need of experts.
For new investors, learn how to diversify your portfolio with Calvin’s enriching talk on “How To Setup Basic Asset Allocation“. Find out how each investment vehicles can make up an ideal portfolio from the experience of a Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP) holder. It is also worth mentioning that Calvin has managed deal size of over US$2 billion dollars as an investment banker in New York. He is now the managing director and co-founder of DrWealth.com.
Feng Shui and Fortune Telling
If you are a believer on Feng Shui, don’t miss the talk from Grandmaster Chang Qing Yuan where he share with you some Feng Shui Tips and Forecast for the year 2015. Being an expert in the fraternity, Grandmaster Chang is known for his practice of “Finger Divination” which allows him to accurately predict current and future issues of an individual. He also boasts the likes of looking at the fortunes and Feng Shui of some of the millionaires and billionaires in China and Taiwan. Grandmaster Chang will speak in the first day of the seminar, from 12pm.
If you are heading to the Expo on the second day, there is also a Feng Shui and Astrology talk by Master Trainer Kevin Foong. Kevin Foong is the founder of Kevin Foong Consulting Group and is devoted to using the “Four Pillars of Destiny 子平八字” to provide Life Readings.
Besides Feng Shui, you can also get your fortune told by Chinese Masters on both days of the event. Get a brief consultation to find out more about your future wealth prospects, health and how the interior design of your house affects Feng Shui.
Whether you are a seasoned investor or someone who wants to gain some insights from the professionals, there are so much activities and events to look forward to.
There will also be a lucky draw conducted during the events, and you can win exciting prizes such as digital cameras, watches, vouchers and gift cards.
We have often heard of the term “Income Investing”, but what is it and why it should concern you? Income investing is essentially investing into assets that produce income for you. This could range from investing in stocks that reward investors with dividends, purchasing a residential property and renting it out, etc. I particularly want to zoom into the stocks side because that’s what I have been doing and more people can benefit from this article because owning a property requires a good amount of capital, which not everyone may have at their dispense.
Why Income Investing?
What if I told you that your money has the capacity to grow at a “fixed” rate irregardless of market conditions. Would you be interested? I want to introduce you to dividend stocks where companies pay out dividends that could range all the way to double digit dividend yields if bought at low prices. The benefits of investing in dividend stocks is that you enjoy potential capital growth as well as get to take home some cash every year or even every 3 months.
Picture this, you bought Stock X at $1.00 and based on past dividend history, it has consistently given off $0.05 of dividend per year. This translates to 5% dividend yield per year. What it means is that even if the stock price goes to $1.10(Scenario A) or $0.90(Scenario B), you’ll still get your $0.05 per year. If you consider in terms of returns, for Scenario A, it would mean that you made a 15% return for the year and for Scenario B, it would mean just a 5% loss (-10% + 5%). Your capital gain/loss is amplified or mitigated by your dividend yield.
Fixed Deposit or Dividend Investing?
Some of you may be contemplating between FDs and Dividend Investing. I will leave it up to you to decide at the end of the day, but I will show a comparison between the two.
Fixed Deposit
Lump sum/Progressive capital investment with a minimum lock-in period.
Principle amount usually guaranteed.
Some allow you to take home a small sum every year while deducting it away from your principle amount. Meaning less compounding power.
Fixed but relatively low interest rates and long lock-in period with penalties for early surrender.
Dividend Stocks (Increase risk, increase return)
Increased risk, although not necessarily high if due diligence is conducted.
Potential capital gains.
Possibility of increasing dividend yields through increased dividends or averaging down the share price.
No lock-in period, no minimum sum.
For people who aren’t interested with stock markets at all or don’t know how to select companies may prefer the fixed deposit option. However consider this, when you take on a little more risk and spend time to learn and understand companies, you can mitigate the risks you take. There may be losses, but for the same period of say, 25 years, with dollar-cost averaging or other strategies that you may apply, you’ll likely see returns that fixed deposits can never offer you. And besides, have you ever heard of anyone getting rich by putting their money in fixed deposits alone?
