Peter Leeds - Invest In Penny Stocks

 

Today I am going to recommend a book by Peter Leeds, titled "Invest In Penny Stocks". I have just finished reading through the book and is now studying the book. This book has taught me immensely about the world of investing in penny stocks. For someone like me with limited capital, I believe that penny stocks in Singapore will be the way to achieve my first bag of gold. After reading the book, I strongly believe that it is possible for someone with limited capital to become successful in trading and investing.

 

In his book, he touched on the 2 commonly known analysis: technical and fundamental analysis and a new analysis founded by Peter Leeds himself. As for what is the new analysis, you should definitely purchase his book in order to learn more. This book is definitely a must read for aspiring investors as I believed that the fundamental analysis one use in analysing both penny stocks and stocks in general is roughly similar.

 

Also, throughout this book, he constantly review different trading strategies in order to educate his readers more. Once one finished this book and apply what they have learnt from the book, I am very sure that the way they look at companies will be much more insightful and accurate. 

Opening My First Trading Account

Yesterday after work, I went to open my first ever trading account. I was filled with both excitement and anxiety as I walked into the financial centre. The whole place looked so grand and I get the feeling like someday, sometime down the road, I will be standing here, as an influencer, as a leader in the field of banking and finance.

My macroeconomics lesson in university has taught me that nobody knows the market. Even now, nobody know how effective fiscal policies and monetary policies can work. We are in a period of vagueness. A possible influence I could exert in the future might revolve around this exact same uncertainty. As I stand in the financial centre and observe the various banks and financial institutions around me, I know I want to be a part of all that is going on. I want to be at the centre of the market.

I plan to start real life trading in 3 months time. To start off, I will purely be purchasing penny stocks by using the Leeds Analysis, a recent system I read about in a book. I will be doing a book review soon about penny stocks soon after learning so much from Peter Leeds, a distinguished penny stocks investor and one of the most highly subscribed financial professional.

The world of investment and trading is really very fascinating to me. As I continue with my prop trading work, I am slowly getting drawn into the industry. I am learning about things that I never thought I would be learning. I am reading about news and stories and drawing links between different events and how they trigger market reactions. Economic calendars are now not so foreign to me and I can see a huge potential for profits in the market right now, with a depreciating Yen, sharp fall in gold prices and rally in the equities market.

My first trading account will be live soon. I was informed it will take about 5 days to process the application and I just cannot wait anymore. I will however, not be jumping recklessly into the market. The minimum time I will take before jumping in is 3 months. I will need to know the trading platform really well, as well as building on my core knowledge before jumping into the dangerous place known as "The Market".

Forex Tutorials Part 10 - Japanese Candlesticks Summary Sheet

First, we will take a look at the summary sheet for only 1 candlestick. Check out the figure below:

 

 

Next, we will look at the summary sheet for 2 to 3 candlesticks. Check out the figure below:

 

 



Do take note that all these candlestick indicators are mainly used as a guide. You should be testing them out repeatedly and find something that works for you. A true profitable trading strategy is only achieved through repeated trial and error. With that said, do print out these summary sheets and use it as a guide for your trading exercises, better if you can commit it to memory.

Typical Day At Prop Trading Firm

I thought it would be a good idea to post about my typical day at the prop trading firm. Refreshing the mind of my readers, I am currently working at a prop trading firm dealing with futures of stock indexes. As there is limited number of firms in my country, I will not talk about the specific product I am dealing with.

I am only doing the morning shift and is simply taught how to trade in the morning markets. Morning and afternoon market movements are vastly different. I do look forward to trading the whole day in the future but for now, I am satisfied with just 1 time slot due to my schedule.

Due to the firm being relatively small, the house rules are not especially stringent. Therefore, I feel that I can make a real difference to the company should I continue persisting in this job. The company has about 10 traders, of which around 5 are trading live accounts.

0600HRS: Wake up for the day. Exercise and wash up

0650HRS: Eat breakfast and prepare to go to work

0800HRS: Reached office, start up computers and prepare the proprietary trading software

0810HRS: Prepare for the opening of the market

0815HRS: Market opens

From 0830HRS to 1230HRS: Will be watching the market and doing some data entry and seeing how the market moves

1235HRS: Morning market closes, prepare to go home

1245HRS: On my way home

My schedule at this prop trading firm might shock many. I was shocked myself as we do not really have a morning brief about the market movements, and many times, the traders are really quiet and not doing any trades. However, since the MD is the one doing most of the trades, I believe there is in fact good experiences to be gained here.

My goal is to start trading a mock account in 2 weeks time, and understand the prop trading software really well. Hopefully, by the end of this year, I will be assigned a live account and start making some real money for the company.

I will post regular updates about my experience and hopefully, people will be able to benefit from my live experiences.

Forex Tutorials Part 9 - Advanced Candlestick Patterns (3) Candlesticks

This tutorial, we are going to touch on interpreting 3 candlesticks indicators. The more candlesticks you have that show a possible uptrend, downtrend or reversal, the more confident you can be when you buy or sell in the market. With no further ado, lets move on to learning how to interpret 3 candlesticks in the market.

Evening And Morning Stars

You can usually find evening and morning stars at the end of a trend. They usually signal a possible reversal to a large extent. You can identify an evening or morning star through these signals:

1. The first candlestick is a part of a recent trend (uptrend or downtrend)
2. The second candlestick has a small body, indicating indecision in the market. The candlestick can be either bullish or bearish
3. The third candlestick confirms that a reversal is in place. The third candlestick will usually close beyond the centre point of the first original candlestick that you used for identifying an evening or morning star

Three White Soldiers And Three Black Crows

 

Like the evening and morning stars, the three morning soldier and three black crows signal a downtrend or uptrend reversal respectively. This is one of the most accurate reversal patterns. This is especially true during a period of extended uptrend or downtrend or a short period of random opposing movements in the market.

In order for this indicator to be accurate, the 3 candlesticks must follow this rule:

1. The first candlestick, also known as reversal candlestick ends the previous market trend or implies that the previous market trend is ending
2. The second candlestick should be larger than the first candlestick, and should close at or near its high for a three white soldiers pattern and close at or near its low for a three black crows pattern
3. Finally, the third candlestick should be at least the same size or bigger than the second candlestick and have a negligible shadow  

Do refer to the figure above on the application of analyzing a three white soldiers or three black crows pattern.

Three Inside Up And Down

The three inside up candlestick pattern is a trend-reversal pattern that is found at the bottom of a downtrend. It signals a possible end of a downtrend and that a new uptrend is coming. Do look for these signal for a possible three inside up pattern:

• The first candlestick should be found at the bottom of a downtrend, and is characterised by a long bearish candlestick
• The body of the second candlestick should be a green candlestick that is at least half of the first candlestick in its body
• The third candlestick should close above the high of the first candlestick to confirm that buying pressure is stronger than selling pressure

In contrast, the three inside down candlestick pattern is a trend-reversal pattern that is found at the peak of an uptrend. It signals a possible end of an uptrend and that a new downtrend is coming. Do look for these signal for a possible three inside down pattern:

• The first candlestick should be found at the peak of an uptrend, and is characterised by a long bullish candlestick
• The body of the second candlestick should be a red candlestick that is at least half the length of the first candlestick
• The third candlestick should close below the low of the first candlestick to confirm that selling pressure is stronger than buying pressure

Do take note of all these indicators and use it as a rough guide in your trading. Next lesson, I will post a complete summary sheet you can print out and use for your day to day trading in finding the candlestick patterns.

Forex Tutorials Part 8 - Advanced Candlestick Patterns (1 To 2) Candlesticks

This tutorial, we are going to touch on a series of high level and necessary candlestick patterns and trends. Once we get through this tutorial, you will have a complete idea of Japanese candlestick patterns and be able to identify the different candlesticks and what they stand for. Be prepared to take at least 30 minutes to comprehend this tutorial as this tutorial is going to consist of a very long lesson.

First off, we will have the hammer and hanging man pattern.

Hammer & Hanging Man

As shown in the figure above, both hammer and hanging man have an absence or extremely short upper shadows. You usually see them during reversal patterns. When the market price is falling, seeing hammer in your chart will indicate that the bottom line is near and the market will start moving up again. The long lower shadow indicates that sellers tried to push prices further down but buyers were able to overcome the pressure and close the market higher than its open. Though this is usually signs that the market will turn bullish, it is better to wait for the next candlestick to confirm the bullish trend.

On the other hand, when you see a hanging man in your chart, it means that buyers tried to push the market up but are gradually losing out to the sellers. This is a sign that the selling pressure is starting to override the buying pressure. As a result, the market closes below its open. This indicator works the same way as a hammer, just that you do completely different things when you see either sign. Check out the useful image below to see what to do.

As you can see from the diagram, when you see a hammer, the price will usually rise while a hanging man signals the market will reverse and falls. It is better to wait for the next candlestick to confirm the trend before buying or selling. These are mainly signals and indicators and is not representative of market movements as there are times the market will just move one way.

Inverted Hammer & Shooting Stars

Inverted hammer and shooting star are very similar to hammer and hanging man. The key difference lies in that hammer and hanging man have close to or zero upper shadow while inverted hammer and shooting star have close to or zero lower shadow.

What you do with an inverted hammer and shooting star is very similar to what you do with hammer and hanging man respectively. When you see an inverted hammer, it usually signals uptrend as its long upper shadow shows that buyers attempted to bid the price higher but were unable to do so as sellers tried to artificially keep the price down. Hence, the market closes above its open. On the other hand, a shooting star pattern shows that buyers attempted to bid the price up but sellers came in and bid the price lower, making the selling pressure higher than the buying pressure. As a result, the market closes below its open and this pattern shows a downtrend. An image would help in your understanding.

As for how this 2 patterns are found in the chart and what you should do, do refer to the image below:

 As seen from the figure above, inverted hammer, like hammer signals an uptrend while shooting star, like hanging man signals a downtrend. These are simple indicators that try to predict the trend of the market but it is rarely accurate if not used with appropriate trading strategies.

 

So far, we have seen single candlestick patterns (an indicator of either uptrend or downtrend based on one candlestick in a period). We will now touch on double candlestick patterns, in which 2 candlesticks aligned together actually signal uptrend or downtrend.

 

Engulfing Candles

 

Engulfing candles are usually in pairs. Notice the figure above, an engulfing pattern can be observed when the subsequent candlestick is larger than its preceding candlestick. Take note that both candlesticks have to be of different colours as they signify different movements of the market.

 

In a bullish engulfing, as with all words associated with bull, the market will move in an uptrend manner. A bullish engulfing usually comprises of a red candlestick followed by an even larger green candlestick. This means there could be a strong uptrend or a period of contesting between buyers and sellers. As you can see from the figure above, the market did not immediately move uptrend but rather buyers and sellers were competing with each other before the market moves uptrend. 

 

In a bearish engulfing, as with all words associated with bear, the market will move in a downtrend manner. A bearish engulfing usually comprises of a green candlestick followed by an even larger red candlestick. This means that sellers overpowered the buyers and the market could be heading for a straight spiral down.

 

Tweezer Bottoms And Tops

 

Tweezer bottoms and tops signal a possible reversal pattern. They are common after an extended period of uptrend or downtrend. Tweezer bottoms and tops are easy to identify as they look just like a pair of tweezers.

 

Look out for these two double candlestick patterns in order to benefit most from your trading. The most effective tweezer bottoms and tops usually share a few characteristics:

1. The first candlestick is representative of its previous trend, if the market previous movement was bearish, the first candlestick should be bearish and vice versa for a bullish market
2. The shadows of the 2 candlesticks in the tweezer bottoms or tops should be of the same length. This means that they must either share the same lower shadow or same upper shadow.

Next lesson, we will touch on how we interpret 3 candlesticks in the market. By now, you should be aware that the more indicators present in the market, the more accurate your prediction of the market movement is likely to be. We should never force the indicators onto the market, we want them to fit the markets perfectly.

Forex Tutorials Part 7 - Candlestick Patterns

Now that we know some basics of candlesticks, we will get on to deciphering candlestick patterns so that we will be able to trade profitably in the forex market. These candlestick patterns are universal and its good to know about them so that you actually know what is happening in the forex market.

Spinning Tops

Candlesticks with long shadows and a short body is called a spinning top. The colour of the real body is not so important. The small body of the spinning tops shows little movement from the opening to the closing, and the shadows indicate that buying and selling pressure were competing against one another and neither could dominate the other.

We usually see spinning tops when the buying pressure and selling pressure has began to slow down. If a spinning top forms during an uptrend, it means that sellers are preventing prices from rising too high and a possible reversal in the direction of the market could be possible. The reverse is true for a downtrend and the market might move up after several spinning tops form in a downtrend.

Marubozu

Next, we will touch on marubozu. If you observe the figure to the left carefully, you can see that there are no shadows. This means that the opening and closing price is the same as its respective highs and lows.

For instance, the green candlestick shows that the open price is the low of the period while the closing price is the high of the period. This is a bullish candlestick (market goes up) and shows strong buying pressure. It could indicate continued bullish behavior or bullish reversal. The reverse is true for the red candlestick (bearish candlestick) and it shows strong selling pressure and could indicate continued bearish behavior or reversal.

Doji

 

Doji candlesticks have almost the same open and close price. As a result, their bodies are extremely short such that it looked like a straight line. Doji shows a duel between buyers and sellers but neither is able to gain the upper hand, causing the market to close at or very near the open price. There are 4 different kinds of doji and for the purpose of this tutorial, you do not have to know the difference.

 

Doji is one of the few candlestick patterns that you can implement right away into your trading strategy. If a doji forms right after a white candlestick (green candlestick which signals uptrend), it shows that buying pressure is slowing down as there are insufficient buyers to move the market up anymore. Therefore, you could use the opportunity to sell the currency pair.

 

If a doji forms right after a black candlestick (red candlestick which signals downtrend), it shows that selling pressure is slowing down as there are insufficient sellers to move the market down anymore. Hence, it could be a good opportunity to buy the currency pair.

 

Do take note that all trading indicators are usually good in theory only. Learning to trade is like going to school in order to learn a skill. You learn different theories but when you go out to the real world, your education is only useful to a certain extent. You have to be extremely flexible with what you learnt in order to succeed. With that, this tutorial has come to an end. Next tutorial, we touch on specific candlestick patterns.

Forex Tutorials Part 6 - Japanese Candlesticks

This tutorial will touch on candlesticks. I personally adore candlesticks trading. Below is a sample on how Japanese candlesticks look like:

In your trading software, a candlestick can stand for various time frames, from minutes to days and even weeks and months. Candlesticks are formed by using the open, high, low, and close of the chosen time period. The shadow is the movement of the market during the entire time period. The colour is by default white and black but I have chosen to use green and red as that is how I view my chart. A white (green in the figure) candlestick usually means that the closing price of the time period is higher than the opening of the time period. So if you have a buy order at the opening price you see many white (green) candlesticks later, you will be making profits.

A black (red in the figure) candlestick usually means that the closing price of the time period is lower than the opening price of the time period. This candlestick is what you want to see when you have a sell order as you can buy back the currency pair at a much lower price.

The high is the highest price reached during that specific time period and the low is the lowest price reached. Anything that is not in the real body (fat rectangles shown by the green and red body) is known as shadows and depict the movements of the market.

Candlesticks have short and long body. The longer the body is, the higher the buying or selling pressure. Compare the 2 candlesticks at the figure below:

As you might observe, the long body on the right shows higher buying pressure whereas the shorter body on the left shows much lesser buying pressure. For this example, we see that the longer the body is, the further the close is to the opening price of the market. This means that market price increases considerably from the opening to the closing, showing strong buying pressure. The reverse is also true for a red candlestick. For a red candlestick, the longer the body, the more dominant the selling pressure is. Understanding how buying and selling pressure influences the shape of the candlestick is step 1 to effectively using the candlesticks to trade. Think about how you can decipher a short body candlestick versus a long body candlestick. Lets say that there is an uptrend, with numerous long green body candlesticks followed by a short body red candlestick, does it means that the uptrend is over? Personally, I would look at the next candlestick to determine the possible end in the uptrend. However, if what follows the uptrend is a long body red candlestick, the chances of the uptrend ending is more plausible.

 

Finally, I will be touching on shadows. Using the candlesticks' shadows with the body of the candlesticks can give you a better read on the market situation. Pay attention to the colour of the body, as well as the upper and lower shadows in the figure below:

As you can see from the figure above, the green candlestick on the left shows buyers attempted to bid the price up before seller came into the market and drive the price down. As a result, a shorter body is formed due to selling pressure. On the other hand, the red candlestick on the right shows sellers attempted to bid the price down but buyers came into the market and with their strong buying pressure, prevented the price from falling too far down. Hence, the market closes at a price that could be lower but did not due to additional buying pressure. Combining the body of the candlesticks and the length of the shadows can give one a deeper insight into the market. 



Trainee Trader Interview At Prop Trading Firm

Today, I went for an interview with a prop trading firm dealing in futures contract. To be precise, their main sources of revenue generation is split into 2 components: trading and investing. Their trading gains are used to invest in stocks and shares of companies. At the end of the day, I was offered a trainee trader position at their firm for less than $1,000 per month plus a certain percentage of the profits once I start raking in trading profits.

To begin with, I will run through the interview process with my readers and hopefully, you guys will be able to benefit from this post.

The main interview revolves whether with my limited schedule (as I am still a full time undergraduate student), will be able to cope with the rigour of the program. They are after all, looking for long term traders and not one who just stay with them for a few months, learn from them and walk off.

These are the few major questions that I remembered from the interview and they are listed in no order as I will just type whatever I remembered from the interview.

Managing Director: Do you know what our company deals with?

Me: (Attempted to persuade the MD that I knew even though I really have no idea)

MD: Do you know what makes a good trader? (went on to explain key characteristics of a trader)

MD: How do you know you want to be a trader?

MD: What do you know about trading?

MD: Do you know that trading can be a very boring job?

There were some more questions but some response made by me I think, struck a chord with the MD.

Me: I understand that there is many things I do not yet know about trading, but after trying out so many jobs, I know trading is for me. I mean, I can stay up until 2-3am day after day just looking at charts and seeing how all the dots connect and how the market moves.

Me: I am just amazed at how markets are completely random. Traders are constantly trying to predict movements of the market, but there are times when it just will not play out the way they want it to. And for me, I want to be a trader that wins most of the time.

MD: Are you sure you want to be a trader?

Me: Yes (without hesitation).

To be very clear here, there were close to zero technical questions that tested my knowledge of the financial markets. Rather, they were looking for someone with passion and I just exuded passion. I mean, before that, I was cold calling them for 3 times before they accepted to see me. Once there, I told them how badly I wanted to be a trader. I also told them how trading is my career aspiration and how I see myself doing it for the rest of my life. I meant every word I said, which should be evident right now as I started this blog for the exact same reasons. They set stringent requirements before giving you a life account to trade as well.

My only concerns with this job is that I might not be able to handle the schedule very well. I did not want to make empty promises and find myself in a hole and aggravating the MD and maybe forever sealing my path to financial greatness yet at the same time, it is simply too good an opportunity to pass up. The thing is, my university curriculum is not yet fixed and hence, as a hedge against this issue, I have actually set up an appointment with my school counsellor tomorrow. She is the one most knowledgeable about class schedules and all that.

I really hope that I will be able to commit to this job well. Watch me grow my readers.

Forex Tutorials Part 5 - Trading Using Support & Resistance, Trend Lines

It is time now to put what we have learnt about support and resistance, trend lines and channels to real trading strategies. One method in which we can use to trade the market is to place your entry order just above the support level and your stop loss below the resistance level. An example on how to do this would be shown right below:

As you can see from the figure to the right, it is recommended to place your entry order after the candlestick touches the support line. You should do this when buying a currency pair. We call this the bounce trade. Recall from your support and resistance tutorials that the market tends to not move below its support level (red line) and just in case it did, we have put a stop loss just after the red line. Now you see how important it is to plot the right support and resistance level. Also, some might ask why not just put your entry order on the support level. The thing is, you might miss a great profit opportunity if the market did not reached that price and bounced right up afterwards. Hence, even when the market is moving up, you have no positions. Therefore, putting your entry order before the market bounces up serves as a double confirmation that it is going to continue rising and you can sell at its peak. Of course, deciding when to exit your positions is also another high level skill one need to acquire in order to become profitable in trading.

 

The above shows when you should buy a currency pair. What happens when you want to sell a currency pair? How do you determine your entry order and stop loss levels? For that, take a look at the figure below:

 

Notice the white downtrend. When we want to sell a currency, we have to make sure we sell at a level that is just below the resistance level of the downtrend. We put in a stop loss above the resistance level of the downtrend just in case the market moves past the downtrend resistance levels. When you enter the market just below the resistance levels of the downtrend, you are verifying that the market is going to continue its downtrend which should not be hard to identify if you have plotted your trend lines correctly. Trading the bounce (so called because of the market's patterns) is one of the most basic trading strategy one should get acquainted with.

 

Trading the bounce is exciting and simple. However, in the reality, support and resistance levels do not always hold. There are 2 different ways to handle a break in the support and resistance levels. One way is to play the market aggressively and the other is to be more conservative.

 

Aggressive Method

 

You sell a currency pair whenever price goes below the support level. This is in hope that the market will just dive right down. You buy a currency pair whenever the market moves past the resistance level. This is in hope that the market will continue its uptrend right after. As you can see, there is huge risks involved in trading this way. There are times when the market just react to a series of uptrends and downtrends and if you trade using this way, you will incur immense losses when prices retract from the respective support or resistance level. That is why stop losses order are so important. You set a price level and if the market moves past this level, it will automatically close that order, minimizing your exposure and risks.

 

Conservative Method

 

Personally, I believe that traders who are starting out should use this method of trading. You are required to be more patient in order to use this method of trading. Basically, instead of buying or selling once the market moves past its support or resistance level. You wait for a pullback. An example would be shown on the figure below:

 

Basically, you confirm that that the market is indeed breaking its support before you enter into the market. You can see from the above figure that there is double confirmation for the market in breaking its support level. If you play the market the aggressive way, you will begin to sell the currency pair the minute the market breaks its support level. It is highly recommended to trade using the conservative method. However, this is not a frequent occurrence. There is time where the market will just bounce right back upwards after the pullback to its support level. That is why it is so important to set stop losses and stick to them instead of adjusting your stop losses in hope that the market will perform to the way you want it to. I learnt this the hard way by losing over $500 in one trade selling USD/JPY currency pair. I will be talking about this big mistake soon.

Do look forward to the next tutorial where we will touch on candlesticks analysis, my favourite way to view the market.

Forex Tutorials Part 4 - Trend Lines And Channels

Trend lines is one of the most useful tool to use to determine where the market is going. An upward sloping trend line is plotted along the valleys of the chart, and a downward sloping trend line is drawn along the peak of the chart. There are 3 different kinds of trend lines you can plot:

1. Uptrend (upward sloping trend line)
2. Downtrend (downward sloping trend line)
3. Sideway Trends (series of up and down along a certain support and resistance level)

A figure is always useful, so take a look at the figure below to see how a trend line can be drawn:

As you can see, a downtrend is drawn along the peak of the chart while an uptrend is drawn along the valley of the chart. Drawing trend lines is one of the most simple and useful tool yet one has to be aware of certain risks involved with determining the market trend:

• It is recommended for at least 3 valleys or peaks to be reached before drawing a trend line
• The steeper your trend line, the most likely the market is going to move in a direction contrary to your plotted trend line, consider the market as a marathon runner who cannot keep running at full speed
• Trend lines become stronger the more times you test it, just like how support and resistance levels are determined
• Most importantly, fit the trend line to the market. Do not fit the market to the trend line. If they aren't compatible, they are not  

Channels

A channel is an upgrade from the trend line in technical analysis. Both the tops and bottoms of channel can be used to represent potential areas of support or resistance. As usual, here is an illustration for your understanding:

 

There are 3 types of channel like the trend lines:

1. Ascending Channel
2. Descending Channel
3. Horizontal Channel

You create a channel by doing a parallel shift at the exact same angle for an up and down trend line. One way you can use a channel to trade is to buy when prices near the bottom channel and sell when prices near the top channel. Do take note in using the Same Channel to trade if you follow this trading method as it just does not makes sense to determine a buy sell point with 2 different channels. Remember, the golden rule applies: Fit the channels to the market, not the market to the channels.

 

Next lesson, we will touch on our first lesson on how to trade using trend lines and channels. This is something I am already unconsciously doing and you will learn how as well.

Mock Trading Journal - Entry 2

I have traded terribly the past few days. I made a loss of more than $2,200 in my account due to a few mistakes. This has led me to conclude that my previous trading gains were simply beginner's luck and I am not as good a trader that I thought I was. To be honest, I did not even use any strategies at all. I was buying and selling based on my own instincts. I will post my order list here before I analyse the various mistakes I have made and hopefully, you will be able to benefit from my mistakes.

I have started using stop losses and take profits for my trading activities now. The highlighted green area is my take profit price and the highlighted red area is my stop losses order. Lets look at the 2 sell order for USD/JPY order #5923203 and #5925394. With regards to this 2 trades, I was already making losses in order #5923203, but I went on to make another sell order #5925394. This was because I believed that the price will come down. The fact is, it did not. I was not moving with the market, I was praying for the market to move the way I wanted it to. In fact, I did not even know that there was a strong US data coming up and that was the real reason why the USD kept appreciating against the JPY.

In fact, just 1 day after this event, news came out that the USD has officially broke the 100 mark against the JPY. I got complacent, and traded the markets based on my feelings instead of using logic. This mistake if continued, could lead me to some significant losses and trauma if I was using real money. Therefore, before I do a single trade from now on, I am going to make sure I see a trend, or signs of the market breaking through support or resistance before placing an entry order.

My recklessness has also made me another loss when I attempted to buy the GPB/USD pair believing that the pound will appreciate against the USD. The US data also affects this currency pair and I made a reckless error by not giving much thought before buying this currency pair. In my mind, I was only thinking about recouping my losses from the USD/JPY bad sell order and this led me to another loss. Not surprisingly, all my trades against the USD lost. Only one trade was profitable and its betting on the rise of USD/CHF pair and it was a minor profit, just 0.1% while my losses piled up to 22% to 23%. From now on, I am also going to use percentage gains and losses instead of absolute figures. Absolute figures can misled me into thinking I am ahead when I am really not.

I am going to wait for the market to stabilise before placing my next trade and this time, I am definitely going to put much more thought into each trade, and not use my feelings to decide my trading decisions.

Forex Tutorials Part 3 - Technical Analysis - Support And Resistance

I will be touching on Technical analysis first since what most professional traders do is stare at charts all day and there must be a reason why the professionals are doing that. In fact, if you remembered, based on the Tutorial 2, many people believe that all available information in the market is reflected in the price. Hence, I will be touching on some simple technical analysis concepts now. I will not be touching on strategies yet, simply on the way to identify opportunities for profits.

Support And Resistance

Support and resistance is one of the most common way used by traders to profit from the market. From the figure below, we can see that Resistance is the highest point the market can moves before

being pulled back down again. On the other hand, think of support like a barricade preventing the market from spiralling downwards. One thing to note is that support and resistance are not exact numbers and each trader has subjective support and resistance levels to the same chart sometimes. Resistance and support are constantly forming as the market moves.

The figure below shows USD/JPY chart. I have started to plot support and resistance levels just 2 days after trading. It is a simple to understand concept and once you get it, you can start plotting your support and resistance levels as well. The red line at 99.866 is my resistance level. Each candlestick

actually shows a 4 hour period. I strongly believe that in the next one month, the market will not move past this level. The green dotted line was my buy in price and I plan to take profits at 98.850 vs my buy in price of 98.704. This will net me a gain of 14.6 pips should my speculation turns out to be correct. I have no idea if the market is going to move the way I want but viewing the historical charts, the USD has been appreciating against the JPY. Also, the market has been bouncing up and down for the past 2 months. I am using very amateurish technical analysis, but my net profits in the past 2 days has actually reached 1%.

Breaking Support And Resistance

Up till now, I have not seen the market moving past the support and resistance levels that I have plotted. Yet, if the market breaks the support and resistance level, it is something one has to take note of. Sometimes, we can see movements of the market breaking past the market for a short period of time like this:

The figure on the left actually shows the market testing the support level while the one on the right actually sees the market rising right back up afterwards. In the second figure on the right, if you have believed that the market was going down and sold your buy order, you could have made some real losses. In this case, its better to think of support and resistance as areas to take note of instead of actual numbers. If not, every time the market breaks the support level and you start selling, you will be making some serious losses. Support and resistance, in my opinion, is just a guideline to follow.

Some websites and tutorials actually recommend using line charts to plot support and resistance because one can be misled by the highs and lows of the candlesticks. However, I think it is really up to ones preferences. For me, after looking at the benefits of candlesticks (more easing on the eyes and very clear), prefers to plot using candlesticks. Someone else could prefer bar chart or line chart.

One thing we can note is that the more times the market tests a support or resistance level and does not moves past it, the support and resistance zones become stronger. This is really just logic in play and that is why great traders have superb logic. An example of what I am talking about can be found at the figure below:

The market has tested the resistance several times and has not moved past it. We can call that the major resistance. All the other movements are minor support and resistance levels. If the market moves past a major support or resistance level, we can usually see a wave of volatility before the market stabilises again. In my opinion, it is best to trade a stable market for beginners like me so that more stability is ensured. In fact, you can generate a small and steady profits if you just stick to the stable markets. Most people burn their accounts by betting big. As traders, we do not let fear and greed influence our decisions, only the movements of the market and the indicators can tell us what is going to happen.

Next lesson, we will touch on trend lines. A prelude to that would be the diagonal white line you see in the last figure on this tutorial.

Mock Trading Journal - Entry 1

In a bid to record all my trading activities and look back on them. I will be screen-shoting all my buy sell orders in the forex market and show it to you guys. I have learnt how to use support and resistance levels, as well as the take profits function from this broker. I will not be recommending any brokers yet, but I am getting really comfortable with this broker for their easy to use system. You will not see any S/L (stop loss) or T/P (take profits) order in this entry as I have just recently learnt how to trade and only my existing open positions have these orders. With no further ado, here is my entry no.1:

If you noticed, I was making losses the first 2 days as I have literally no idea what I was doing at that time. I was just pressing buy sell randomly. Yet, as time passes, I have gotten used to the way the market moves, and started to make some really profitable trades. The fact that it is just paper money is irrelevant. This is because I strongly believe that if I cannot profit while trading paper money, I will not be able to perform while using real money. All in all, I am quite pleased with my performance.

To be honest, the only mistakes that I think I made was not putting stop losses level and take profits level. This has resulted in me viewing the chart constantly, which was stupid. However, if I did put stop losses level. I would not have profited in order #5899683 and #5903126. This was because the losses went up to almost $300 before it bounced back to profitable levels. This has got me thinking on what would I have done if this was real money. Logically speaking, I felt like I did not enter at the right time. I was doing scalping at that time and changed to holding the currencies when my losses piled. This is really not recommended as I would definitely be much more impulsive when trading with real money.

Moving on, I believe I will be taking a more long term approach to trading currency. Right now, all the analysis I have done is pretty simple, I buy and sell based on market instincts, seeing the chart and thinking how it will move. I have not really used any indicators or strategies. I do wish to use some strategies and will be learning about them soon.

Forex Tutorials Part 2 - Introduction To Market Analysis

This will be the 2nd part of the Forex tutorials. If you noticed, I have deliberately left out information like opening times of various exchanges, how to calculate pips, history which you can easily find in other websites like Babypips.com. This is because I do not believe that this is important in mastering Forex. The most important thing is still market analysis, and all the other information is just for your pleasure. Of course, opening times do matter, but nothing can triumph market analysis in any form of trading, not just Forex.

There is 3 kinds of analysis that falls under Market Analysis like other forms of trading and includes:

• Technical Analysis
• Fundamentals Analysis
• Sentiments Analysis

Technical Analysis

Technical analysis involves tracking price movements. The theory behind technical analysis is that historical price movements determine current trading conditions and project future price movements. Some traders also believe that price reflect all the information that is out there and patterns can be drawn to profit from the price movements. Technical analysis is highly subjective and different people can draw different conclusions from the same chart.

 

You wil see a lot of chart like this once you start trading for real. There are also candlesticks and line chart.

Fundamentals Analysis

Fundamental analysis involves the research of the economic, social and political forces that influences prices of currencies. In short, it is the demand and supply of the country's currency that creates opportunities for profits. The basic idea is if the country is expected to perform strongly or has strong economic growth, you should go long (buy) the base currency which corresponds to the currency and if a country is expected to perform badly, you should go short (sell) the base currency which corresponds to the base currency.

Factors like natural disasters, famines, war can all influence how a country perform. For fundamental analysis, its all logic in play. For example, during the 2008 financial crisis, investors feel uncertain about the US economy, they prefer to invest in other economies. This will result in selling pressure of the USD and buying pressure of other currencies. As a result, USD fell from a high of 1.7 to 1.8 against the SGD to 1.2 today (I choose to use this example because I come from Singapore).

In short, a prosperous economy will signal the signs to buy and a declining economy signals the signs to sell.

Sentiment Analysis

In the end, there are times where neither technical nor fundamental analysis can explain why the market moves the way it did. This is because of mass psychology. If you think the market is going down while everyone else think it is going up, it only makes sense to buy instead of selling the currency. For a trader with limited capital, we have to learn to move with the markets, not against it. You can only influence the market when you are rich like a billionaire. And even then, you might not be able to influence the Forex market in which over $3 trillion is traded daily. A billionaire can maybe moves the stock exchanges.

In short, I would recommend a trader to trade using all 3 as you should never neglect one or the other. You can maybe focus on only fundamentals in stock exchanges and still become a billionaire like Warren Buffett, but the Forex market is too risky, and too volatile to use only one weapon when you can use all 3. Do look forward to the next tutorial.

Forex Tutorials Part 1 - Forex Market

This is the first of many tutorials to come. I am a key believer in the power of active learning. So I will be jotting down what I will be learning here, and you can learn from me the same time I learn from other sources. One good thing about my learning is I am going to start from the basics, and I will be condensing information so that you, my reader can learn at a much faster rate without all the advertising fluff and whats not. I have flushed out lots of unimportant materials that are not key to understanding Forex and will only add them in later like trading times etc.

With that said, the first tutorial of this site will be on the Forex market.

In short, Forex market is the the foreign exchange market. Over the world, over $3 to $5 trillion is traded everyday, making Forex one of the most exciting, profitable and risky business. For additional information, more than 95% of Forex retail traders blow their account in the first 6 months. This means that out of 100 people, only 5 will still have money (profit-making is another issue) in their acocunts after 6 months.

You are effectively betting on how well a country's economy is going to be doing in the Forex market. If you buy USD against JPY for example, you are betting that US is going to be doing better than Japan.

Major Currencies

The table listed below comprises of various currencies being traded most frequently:

Currencies are traded in pairs, and when you buy one currency against another, you are effectively selling the other currency. The exchange rate will fluctuate based one which country is faring better based on investors' speculation.

There are a couple of major currency pairs and they usually have a lower spread (the price you pay when you buy or sell currency).

Major currency pairs include:

• EUR/USD
• USD/JPY
• GPB/USD
• USD/CHF
• USD/CAD

Its not necessary to really trade these pairs in order to be profitable. In fact, I have read about traders who trade and generate consistent profits by trading less well known currency pairs. One key concept you have to remember is when you buy one currency against another, you are expecting the base currency to increase in value relative to the quote currency.

Here is how you read the quote for currency pairs:

 

The base currency is the basis for buying or selling. In short, when you buy this currency, you are expecting the USD to appreciate against the JPY and when you sell this currency pair, you are expecting the USD to depreicate agaisnt the JPY. That is also why you do not need currency pairs like JPY/USD.

 

One thing you also need to know is PIPS. Basically, the more pips one has, the more profits he is making. With the exception of the USD/JPY pair, most currency pairs count 1 pip to the fourth decimal place. This means that if a quoted currency pair increase by 0.0001, we say that the currency pair has gained 1 pip.

 

Listed below is a sample for buying USD/JPY currency pair. As you can see, there is a discrepancy

 

between the buy and sell price. This is known as the SPREAD. The spread is your payment for a broker's service in buying or selling the currency pair for you. This is also the reason why there is no commission fees involved for buying or selling forex. If you sell the currency pair, you are selling USD at 98.644, and to profit from this trade, you have to buy back at at a price lower than 98.644. Forex traders need to overcome the spread in order to be consistently profitable.

 

With that, I will end the first lesson. This is considered the basics for the Forex market and understanding this basic concept is key to being a Forex millionaire in the future next time.

A New Start

This is my first post. From now, I am going to be posting regularly at this blog. I am going to write down my whole journey as a story in the world of investing and speculation. I am going to educate myself, and my readers at the same time on what are some of the things I have learnt as I become older and older.

To begin with, I will just introduce myself. At the time this blog is created, i am a soon-to-be father with less than $6,000 of savings. I am still currently studying in university and is deeply entranced by the world where money talks. I am an aspiring hedge fund manager who knows nothing much about the different skills used to trade. I don't even know what beta is. I only know the glamorous side of banking and finance, the stories and yes, models and bottles. However, its irrelevant to me as I am already married with a great wife and a kid coming out soon.

To be honest, my financial situation is really bad as I will be leaving school with debts (3 more years to go), and my available time to work is handicapped by my university curriculum. One reason this blog was started is also to give me extra motivation and boost in achieving greater excellence in my life. I currently have $1,500 I plan to use as my investment capital and you will see real figures, real stories here. Nothing will be masked, if I make a loss, I will say it. If I have profited, you guys will know.

I will be upfront and say that please do not expect me to start trading right away and post my P&L (Profits & Losses) here as I have stated that I have absolutely no experience and I only know the stories of banking and finance. Expect to see real trading activities only after 3 months, as I am still in the midst of exams at the point I am writing this post.

My aim for this blog is to connect future retail investors and not be subjected to the whims of Wall Street. Pretty big dream for a guy who is in debt, still a student and married with a child coming? Yes, I cannot even begin to say how ridiculous I know I sound. But, if you are following me, I will assure you that this blog will now be my favourite past time. When other people are watching movies, television shows, I will be studying hard for my future goal. This is my first step, expect no miracle stories, only the possibility of a guy who is going to defy all odds to get into one of the most competitive industry in the world and come up on top.