Book : Winning Psychology of defensive traders - Conrad Alvin Lim

The importance of economics and financial risk management

To be a successful trader, one needs to learn macroeconomics. This is the essence of how money flows from one asset to another and how it affects the economy as a whole as well as individual companies. Some finance and economics concepts are discussed in the book as well. It was also mentioned that if successful traders at wall street attend the best universities in the world to learn about finance and economics and later on undergo years of intensive training and mentorship, what makes ordinary people like us think that we can make money easily through trading?

Thus, if we really want to succeed in trading, it takes hard work and also we need to be defensive in order to stay in the game. The book discusses on risk management, how to manage your psychology in trading and I particularly like the section on the pyramid system of financial management. This is a book not only about trading but the principles discussed can be applied into your life in general too.


The book "Winning Psychology of defensive traders" is now available at all major bookstores islandwide in Singapore.

Conrad Alvin Lim's Trading Philosophy

Taken from here.

I think I’m blessed. Well, if I’m not, then I’d have to be realistic and brag about my ability to pick up a book and soak it up like a sponge. But the truth is, I am eternally grateful to the Man for blessing me with this gift of learning. And not just a gift for learning, mind you … but also the ability of applying what I have learned into practice. And then learning from that practice to better the system and find improvements and improvisations. And then writing it all out so that others may understand and re-apply it and then teaching it at a level that all can benefit from.

This was something I took for granted for the longest time. I ignorantly assumed that just about anyone could do this. Until I started teaching. After my first few tutorials in my apartment, I came to the hard realization that not everyone is built the same way. At this point in time, you might be wondering how anyone could be so dumb. Truth is, I was.

I had to simplify what I was teaching. At least I thought that it would solve the problem. And even after that, the problem of having dumbstruck students in my home persisted. Something else was wrong and it would be almost a whole year before I discovered what it was.

The first thing I discovered was that my students could be broken down into three types of people; the kind that will gobble a book and know it all, the kind that only understand illustrations or visual examples and the kind that have to put their hands into the fire to feel the heat. I had to come up with a teaching style that would suit all three types and still be comprehensive.

Coming from the media business, graphics were my strength. So illustrations were not a problem. Writing in simpler terms took a bit of work but I got there non-the-less. The final piece of this solution was to make the lessons more hands-on and practical. Thus, the mechanics of the Tutorial were born.

The second discovery was in my delivery of the lesson. I had been speaking in terms which I could understand and assumed others would not have difficulty understanding. This was until I learned about “chunking down” – the practice of speaking in terms that even a child will comprehend – that I realized that I had been extremely “high chunk” which was why my students were often dumbfounded. The remedy to this discovery is still in progress but I can say that I have made leaps and bounds in getting down on my chunks. More interactive and experiential learning systems were put into my tutorial to ensure that the students were given ample opportunity to sound off their queries should they get stumped again. This style of learning helps students process information faster and more efficiently.

The third and final discovery was the time in which students needed to process all the information, practice what they learned and understand their purpose. For this, keeping it simple, sticking only to basic and making the lessons more hands-on than academic proved to be a winner. And to aid the students in their learning curve, they were given a week between lessons to complete certain assignments, practice and compare notes with their class mates. Communication became a crucial factor so I made myself available should questions arise during the week. Through the use of on-line forums, email and discussion groups, information was easily and quickly disseminated to give the students uninterrupted progression instead of having to wait a week for their answers. Students were also encouraged to address their class mates’ questions if they knew the answer – a good way to improve on their learning, simply by challenging themselves to teach.

Getting back to simplifying the lessons …

I soon made the biggest discovery of why my students loved what and how I taught. By going back to basics, I was about the only person around who was teaching from the very ground up. Where most seminars claim to be able to accommodate absolute beginners, they actually move very quickly into strategies without completely covering all the basics. Graduates of such seminars often become “stock-centric” or strategy based in their trading mentality. Nothing wrong in that unless you consider that the stock does not make the market and that the market will move the stock!

Strategy based traders then become reliant on certain market conditions or certain stock behaviors in order to get profitable trades. Nothing wrong in that unless you consider that the market and the stocks in it are so dynamic that no handful of strategies are going to cover all the dynamic conditions the market will throw at you. And it surely will.

In a nutshell, having a handful of strategies to take on the market would be akin to having only an M16, a few grenades and maybe an anti-tank weapon to go fight a war; what kind of war? what kind of terrain? how many enemies? what armament do they posses? are they logistically prepared?

To trade with strategies, you need the whole army, all the weapons, ammunition, supplies and intelligence that you can lay your hands on. Using the wrong strategy or a limited knowledge of strategies is no different from using the wrong weapon to engage the enemy – like ramming a square peg into a round whole.

Thus, by teaching basics and getting my students to understand the business of the financial markets, it made it very easy for me to teach how each instrument works and when to maximize the effectiveness of each instrument, be it forex, futures, equities or options. Think of it as having a backbone before putting on the organs and muscles and flesh – no backbone, no life.

Then came the question that wanna-be students ask, “which instrument is the easiest to learn?”

I do trade forex along with equities and futures. Thus to tell you that one is easier to learn or do than the other, would be depriving you of an honest view of what you should learn. What I can say is that it is very necessary to learn about the markets, all its instruments and securities. Its only then that you will find the instrument that you will be comfortable with and trade it efficiently.

This predicament is not unique and the reason so many people get killed in this business is because of the education system available here. Many jump into what they believe is something they will be able to do; like forex, because its “easier” … or Options, because its more “suitable”. Its only upon getting killed that they realize that they didn’t know enough even after being “educated”.

Trading is never only about the system, the technique, the security or the instrument. Its about knowing what you’re doing in the environment in which you are doing it. To say otherwise would be ignorant and you will surely fail in this business.

“Know the enemy, know yourself; your victory will never be endangered.
Know the ground, understand its nature; your victory will then be total.” -Sun Tzu

Learn the business first then pick the instrument. Never limit yourself by believing that this or that instrument is better or easier or quicker to learn. Learn everything and then pick what best suits you.

Singapore Stocks Analyst recommendation

Website :

BTInvest

i3 Investor

4 Traders

http://www.macroaxis.com/invest/market/H23.SI--euNetworks-Group-Limited

SGX reduce board lot size starting 19 Jan 2015

SGX reduce board lot size starting 19 Jan 2015 :

Exit those stocks by then

The Lowdown on Penny Stock

Taken from here.

Successful companies aren't born, they're made and they have to work their way from humble beginnings and through the ranks just like everyone else. Unfortunately, some investors believe that finding the next "big thing" means scouring through penny stocks in the hope of finding the next Microsoft or Wal-Mart. Unfortunately, this strategy will prove to be unsuccessful in most cases. Read on to find out why pinning your hopes on penny stocks could leave you penniless.

SEE: How To Evaluate A Micro-Cap Company 

Penny Stocks 101The terms "penny stocks" and "micro-cap stocks" can be used interchangeably. Technically, micro-cap stocks are classified as such based on their market capitalizations , while penny stocks are looked at in terms of their price. Definitions vary, but in general, a stock with a market capitalization between $50 and $300 million is a micro cap. (Less than $50 million is a nano-cap .) According to the Securities & Exchange Commission (SEC), any stock under $5 is a penny stock. Again, definitions can vary; some set the cut-off point at $3, while others consider only those stocks trading at less than $1 to be a penny stock. We consider any stock that is trading on the pink sheets or over-the-counter bulletin board (OTCBB) to be a penny stock.

The main thing you have to know about penny/micro stocks is that they are much riskier than regular stocks.

A Fortune for a Penny?
What makes penny stocks risky? Four major factors make these securities riskier than blue chip stocks.

1. Lack of Information Available to the Public
The key to any successful investment strategy is acquiring enough tangible information to make informed decisions. For micro-cap stocks, information is much more difficult to find. Companies listed on the pink sheets are not required to file with the Securities and Exchange Commission (SEC) and are thus not as publicly scrutinized or regulated as the stocks represented on the New York Stock Exchange and the Nasdaq. Furthermore, much of the information available about micro-cap stocks is not from credible sources.

2. No Minimum Standards
Stocks on the OTCBB and pink sheets do not have to fulfill minimum standard requirements to remain on the exchange. Sometimes, this is why the stock is on one of these exchanges. Once a company can no longer maintain its position on one of the major exchanges, the company moves to one of these smaller exchanges. While the OTCBB does require companies to file timely documents with the SEC, the pink sheets have no such requirement. Minimum standards act as a safety cushion for some investors and as a benchmark for some companies.

3. Lack of History
Many of the companies considered to be micro-cap stocks are either newly formed or approaching bankruptcy. These companies will generally have poor track records or none at all. As you can imagine, this lack of historical information makes it difficult to determine a stock's potential.

4. Liquidity
When stocks don't have much liquidity , two problems arise: first, there is the possibility that you won't be able to sell the stock. If there is a low level of liquidity, it may be hard to find a buyer for a particular stock, and you may be required to lower your price until it is considered attractive to another buyer. Second, low liquidity levels provide opportunities for some traders to manipulate stock prices, which is done in many different ways - the easiest is to buy large amounts of stock, hype it up and then sell it after other investors find it attractive (also known as pump and dump ).

Penny-Baited Traps
Penny stocks have been a thorn in the side of the SEC for some time because lack of available information and poor liquidity make micro-cap stocks an easy target for fraudsters. There are many scams used to separate investors from their money. The most common include:

Biased Recommendations
Some micro-cap companies pay individuals to recommend the company stock in different media, such as newsletters, financial television and radio shows. You may receive spam email trying to persuade you to purchase particular stock. All emails, postings and recommendations of that kind should be taken with a grain of salt. Look to see if the issuers of the recommendations are being paid for their services as this is a giveaway of a bad investment. Also, make sure that any press releases aren't given falsely by people looking to influence the price of a stock.

Offshore Brokers
Under regulation S, the SEC permits companies selling stock outside the U.S. to foreign investors to be exempt from registering stock. These companies will typically sell the stock at a discount to offshore brokers who, in turn, sell them back to U.S. investors for a substantial profit. By cold calling a list of potential investors (investors with enough money to buy a particular stock) and providing attractive information, these dishonest brokers will use high-pressure " boiler room " sales tactics to persuade investors to purchase stock.

SEE: What is a boiler room operation? 

The Penny Stock FallacyTwo common fallacies pertaining to penny stocks are that many of today's stocks were once penny stocks and that there is a positive correlation between the number of stocks a person owns and his or her returns.

Investors who have fallen into the trap of the first fallacy believe Wal-Mart, Microsoft and many other large companies were once penny stocks that have appreciated to high dollar values. Many investors make this mistake because they are looking at the "adjusted stock price," which takes into account all stock splits . By taking a look at both Microsoft and Wal-Mart, you can see that the respective prices on their first days of trading were $21 and $16.50, even though the prices adjusted for splits was about eight cents and one cent, respectively. Rather than starting at a low market price, these companies actually started high, continually rising until they needed to be split.

The second reason that many investors may be attracted to penny stocks is the notion that there is more room for appreciation and more opportunity to own more stock. If a stock is at 10 cents and rises by five cents, you will have made a 50% return. This, together with the fact that a $1,000 investment can buy 10,000 shares, convinces investors that micro-cap stocks are a rapid, surefire way to increase profits. Unfortunately, people tend to see only the upside of penny stocks, while forgetting about the downside. A ten cent stock can just as easily go down by five cents and lose half its value. Most often, these stocks do not succeed, and there is a high probability that you will lose your entire investment.

The Bottom Line
Sure, some companies on the OTCBB and pink sheets might be good quality, and many OTCBB companies are working extremely hard to make their way up to the more reputable Nasdaq and NYSE. However, there are good stock opportunities out there that aren't trading for pennies. Penny stocks aren't a lost cause, but they are very high-risk investments that aren't suitable for all investors. If you can't resist the lure of micro caps, make sure you do extensive research and understand what you are getting into.