Sunday 13 November 2011

More news on FCPO

According to Dorab Mistry, director of Godrej International, Palm Oil price may climb to RM4,000 by the end of the first half, the highest since 2008, amid slow output and high demand in Indonesia and Malaysia. Mistry, who in September correctly predicted the tropical oil would drop to 2,800 ringgit last month, also added that Futures in Malaysia may advance to 3,300 ringgit a metric ton in January and “gradually” increase to 4,000 ringgit.

Source : Bloomberg

Currently, FCPO is at 3180, with opening price at 3172.

Thursday 10 November 2011

FCPO Update

Yesterday, FCPO shot up to 3119, its highest closing value since August 2011, despite opening lower during the morning session at 3003. That's more that 100 points, ie RM5,000 difference. By around 4.00pm, the price kept on rising. It was like when the Gold price kept going up, except with FCPO, it all happened within one day. Today, the FCPO market is still expected to remain positive. So, maybe still more opportunities in the CPO Futures market today. Happy Trading !!;)

Friday 4 November 2011

More Indicators

Apart from the Indicators that I have mentioned, there are many other types of indicators you can use to help you anticipate future price movements.

Patterns
There are many patterns that can emerge from the graphics of the market information provided in the
chart. The following are the most common patterns :-

1. Trendlines
     Trendlines indicate whether the prices are in an upward or downward trend.
     - If the latest Support and Resistance level is higher than the previous succession of Support and
       Resistance, this is an uptrend. The graphics look a bit like a staircase going up.
     - If the latest Support and Resistance level is lower than the previous succession of Support and
       Resistance, this is a downtrend and looks a bit like a staircase going down.

2. Reversal Pattern. An uptrend is said to have run its course when the new Support and Resistance
    level fails to exceed the previous ones. Similarly, a downtrend is likely to end when the new Support
    and Resistance level is higher than the previous ones. A pattern indicating that the downtrend will
    reverse into an uptrend or vice versa is known as a Reversal Pattern. The most common Reversal
    Patterns are the Head and Shoulder Top or Bottom, the Double Top or Bottom and Island Reversals.

3. Continuation Patterns
    Continuation Patterns indicate that the market will continue with its existing pattern, whether uptrend
    or downtrend. Some common Continuation Patterns are Triangles, the Flags and Pennants and Gaps.

Candlesticks
The Patterns mentioned earlier actually consists of small candlesticks which are usually either red or green in colour. The Green candlestick is an UP candle, which means the closing price is higher than the opening price. The Red candlestick is a DOWN candle which means the closing price is lower than the opening price. There are many different types of candlesticks as Indicator to price movement. Some of the common types of candlesticks are :-

1. Marubozu - which indicates a continuing pattern ;
2. Doji - which indicates a reversal pattern.

I will not elaborate further on the Candlesticks as these are only useful indicators for experienced or position traders ( to be discussed later). If you are a beginner, using too many Indicators may only confuse you and will not help much in your Buy/Sell decisions. As such, it is advisable to stick to the Moving Averages and Support-Resistance as Indicators.
   

Thursday 27 October 2011

Technical Analysis

There are many indicators you can use in Technical Analysis to help you anticipate future price movements. Just like Fundamental Analysis, it makes it easier for you to decide whether you should buy or sell by studying the chart itself. Technical Analysis is the study of historical price data in an attempt to forecast future price movements and price trends. It involves a study of the market itself rather than news, datas or rumours (Fundamental Analysis) that affect the market.

You will need to have the charting software in order to study the chart and be able to identify the indicators. You can easily have access to the charting software by opening a trading account with a licensed Broker. The chart will record the market info in graphic form, usually taken at regular intervals - daily, weekly or monthly.

If you are new to the market, you may find it very confusing to figure out which indicators to use, as there are so many different types of indicators. As such, it is advisable to start with the simplest indicators first and see how it works instead of using all the different indicators at once.

One of the most versatile and widely used of all technical indicators is the Moving Average.

Example :-
If the market closed @ 90 sen, 100 sen and 110 sen on 3 successive days, you can construct a 3 day MA by plotting the average closing price of the above 3 prices. As such, the first plotted point would be @ 100 sen.

If the closing price on the 4th day is 120 sen, then the second plotted point would be @ 110 sen, which  is the average closing price of the 2nd day (100 sen) , 3rd day (110 sen) and 4th day (120 sen), and so on.

The most commonly used MAs are the 5 day MA and the 20 day MA which you will be able to identify easily from the chart. You will be able to indicate the price movement everytime the 2 MA crosses each other.

The following examples can serve as a useful guide on how the MA is used as a technical indicator :-
Example 1 : 22/9
                   Fundamental
                   - FCPO ended sharply lower on Thursday at 3009 amid a broad selloff as investors reacted
                      to an increasingly gloomy outlook on global growth after US Federal Reserve initiated a
                      new program of monetary easing. Spillover selling from declines in CBOT [soyoil]
                      added pressure to FCPO. An improving outlook on production in Malaysia and price
                      outlooks for vegetable oil markets from an upcoming industry conference in Mumbai
                      this weekend that market participants expect to be bearish weighed further on prices.
                   Technical
                   - FCPO started on its downward trend as MA5 line moved downward to cross the
                      MA20 line.
                   FCPO opened at 3040, closed at 3016. Down 24 points (RM600).

Thursday 20 October 2011

Indicators

When deciding whether to buy or sell, there are many indicators you can look at. Generally, these indicators can be divided into Fundamental Analysis and Technical Analysis.

Fundamental Analysis is the news, datas and information relating to the market. If you are a serious investor or a veteran professional, you will probably require more extensive or detailed information and datas to support your views or decisions. But if you are a beginner, it is sufficient to look at the current news and what's happening in the local and foreign markets.

Dow Jones - This is the best way to start your fundamental analysis in the morning. The reason is US market has just closed when we wake up in the morning here in Malaysia. Therefore, the Malaysian market is likely to react to the Dow Jones first thing in the morning. If the Dow Jones drops, FKLI and FCPO is more likely to drop too. Otherwise, there may be other factors to consider too.

As such, you can proceed to market news on Europe, China, Asia and the local news. You may also look at the US soybean market as this may affect the FCPO price. If the FKLI/FCPO price is not following the global market, there is possibly something happening in the local market that is affecting the FKLI/FCPO price.

The following examples can serve as a useful guide :-

Example 1 :  19/9/2011
                     Stocks on Bursa Malaysia ended broadly lower on foreign selling following rumours
                     that Greece might default on its sovereign debt and Italy's credit rating was lowered
                     Standard & Poor's from A+ to A.
                     FKLI opened at 1430, closed at 1405.5. Down 24.5 points (RM1225).
Example 2 :  21/9/2011
                     FKLI closed higher on Wednesday after economic indicators signaled growth in China
                     is withstanding Europe's debt crisis and faltering US economy.
                     FKLI opened at 1405 , closed at 1417.5. Up 12.5 points (RM625).


                 

Wednesday 19 October 2011

Support and Resistance

The first thing you need to understand about the market is this :-
1) The price cannot go up forever ; and
2) The price cannot go down forever ;

The reason to this is because there will always be buyers and there will always be sellers. As a result, the market will move in a series of highs (peaks) and lows (troughs). The peaks and troughs are known as Resistance and Support.

When the market is on a downtrend, it will reach its lowest point (support). This is where the buying interest is strong enough to support the selling pressure to halt further decline in prices, at least temporarily. When the market reaches its Support level, the price will go up again until it reaches its highest peak (Resistance) again.

When the market is on an uptrend, it will reach its highest point (resistance). This is where the selling pressure is strong enough to resist the buying interests and therefore halt the upward movement in price for the time being. When the market reaches its Resistance level, the price will go down again until it reaches its lowest level (Support) again.

Due to the volatility of the market, you can have more than one Support and Resistance in a day.

The Support level reverses the downward movement in price to an upward movement and is a good time to buy.
The Resistance level reverses the uptrend to a downtrend and is a good time to sell.

To understand how this works, you can look at the following market update :-

On 19th October 2011, FKLI price opened at 1444 and closed at 1446.5 points. Support is at 1440 and Resistance is at 1449. If you short (sell) at 1449 and long (buy) at 1440, you would have gained 9 points which is RM450 (50 x 9 = 450). However, if you expected the price to go up and opened a long position at 1449, you would have made a loss of RM450.

For this week, the Support level is at around 1430 and the Resistance level is at around 1470. The difference is about RM2000 ie, 40pts x RM50.

Sunday 16 October 2011

Short Selling

Futures Trading is similar to trading in the stock market except the profit or loss you make is likely to be higher and faster. As such, in order to succeed in Futures Trading, you must first understand how the price moves and keep up with its pace. Another advantage of trading in futures is that you are allowed to short-sell.

When you trade in the stockmarket, there are only 2 scenarios :-
1. You buy stocks - Price goes up - You sell back stocks for a PROFIT.
2. You buy stocks - Price goes down - You sell back stocks for a LOSS.

When you  trade in the Futures market, there are 4 scenarios :-
1. You buy Futures contract - Price goes up - You sell back contract for a PROFIT.
2. You buy Futures contract - Price goes down - You sell back contract for a LOSS.
3. You sell Futures contract - Price goes down - You buy back contract for a PROFIT.
4. You sell Futures contract - Price goes up - You buy back contract for a LOSS.

As such, there are more opportunities in the Futures market whether prices are on an uptrend or a downtrend. You just need to understand how the market moves in order to take advantage of the price fluctuations by going long (buy) or short (sell) at the right time.

If you are interested to start trading Futures and learn how to trade at the same time, please contact me to find out how you can open a trading account together with free  training (online trading, technical analysis and trading strategies). Find out how you can gain new knowledge and skills, enhance your ability to generate income as well as open up a new career option as a full-time trader just by investing in the futures market.

Sunday 9 October 2011

How Much Money Will I Stand to Lose ?

If you invest a minimum amount of RM5000 for FKLI, this does not mean you are risking the entire RM5000 that you invest. You only risk the amount that you actually trade.

Today, FKLI October contract price opened at RM1396. This means that with RM5000 in your trading account, you can afford to trade 1 contract only. If you have RM15,000 in your trading account, you can trade up to 3 contracts. However, trading 3 contracts is extremely risky as the risk is 3 times higher than trading one contract.

For example,

1.Assuming you buy 3 FKLI contracts at RM1400 and the price falls 10 points. If you cut your loss by selling at RM1390, this means that you have made a loss of RM500 for one contract (10 x 50 = 500). But, if you have bought 3 contracts, your loss is RM1500 ( 500 x 3). If you have RM5,000 in your account, this means you only have RM3,500 left to trade. Whether you can continue to trade or not depends on the Company. Some Companies allow you to trade up to 50% of your margin.

2.The Margin for FKLI/FCPO may change from time to time depending on Bursa requirements. Assuming that the current margin is RM4000. If the Company allows you to trade up to 50%, then, you can continue trading with RM3500. But if you lose another RM1500, you can no longer trade as you will have left only RM2000 in your account.

3. However, if you had traded only one contract, you would have only lost RM500 and will still be able to continue trading without any interruptions and therefore stand a better chance of recovering your losses, since you still have a balance left in your account of RM4500 ( 5000-500 = 4500) instead of RM3500 only.

4. On the other hand, if the price had gone up 10 points and you sell at RM1410, you would have made a profit of RM1,500 by trading 3 contracts and only RM500 profit if you bought only one contract.

As such, in order to lose the entire RM5000 that you have invested, you will need to lose 100 points, which is quite a lot. Therefore, it is up to you decide how much money you are willing to lose by trading futures. If you do not want to lose more than RM500, you must make sure you do not lose more than 10 points (50 x 10 = 500) by trading within a limited range of price fluctuation.

So, as you can see, in Futures Trading, you can become very rich in a matter minutes or very poor depending on how much risk you take. It is up to you to decide how much risk you are willing to take with your money.

Wednesday 5 October 2011

Change In Margin Rates

The Margin Rates for FCPO contract has been reduced to RM6,000 effective October 5, 2011.

Monday 3 October 2011

Leverage

The Futures Market is considered a high-risk investment due to the Leverage factor. But with high risk also comes high rewards. In other words, with a small outlay of capital, you have the ability to make huge profits but there is an equal chance of making huge losses too.

However, it is possible to become a successful trader by adopting the right trading strategies that will help you maximise your profits and minimise your losses. Let's look at  the following logical process :-

without a trading strategy,
-the probability of profit is EQUAL to the probability of loss,

with a trading strategy (maximise profit and minimise loss)
- the probability of profit is MORE than the probability of loss

As such, there are many trading strategies you can adopt that will help you become a successful trader.

Thursday 29 September 2011

FCPO & FKLI

Trading Futures is like starting a business. There is always a risk that your business venture might lose money. But if you dont try it, you will never know. As such, you have to save enough money first as a start-up capital and once you see a steady and positive result, you can slowly increase your capital...

The minimum amount you need to start trading FKLI is RM4000. Some of the attractions of FKLI are :-

1. If you are not experience in the stockmarket, its not easy to decide what shares to buy since there
    are   so many Companies out there and you have to do a lot of reading to find out about each
    company. Not everyone has the time to do this. So trading in FKLI saves a lot of time as you only
    need to know about the general outlook of the global and local market since FKLI is based on
    KLCI. This is a good start to learning about the stockmarket.
2. The Leverage for FKLI (1 point = RM50) is higher compared to FCPO. That means, if you gain 20
     points   trading   FKLI,  you   make   a   profit   of   RM1,000,  but   the  reverse  is  also  true
     ( ie, huge profit, huge loss).


The minimum amount you need to start trading FCPO is RM6000. Some of the attractions of FCPO are :-

1. Its a consumer product and our biggest buyers are China and India, both with very big population.
    So, the demand will always be there.
2. The market for bio-diesel is growing due to environmental concerns and rising price of oil. So, more
    demand for CPO in the future.
3. High volatility. In the futures market, its easier to take advantage of price fluctuations if the market
    is volatile since you can buy or short-sell.
4. Risk is lower compared to FKLI since 1 point = RM25. So, if you lose 10 points trading FCPO, your
    loss is RM250, compared to RM500 for FKLI.
5. Malaysia Boleh ! 100% Made in Malaysia! Support Malaysian goods ! ;p

Wednesday 28 September 2011

Is this for you ?

If you are looking to make huge profits in one day, then I am probably not the right person to guide you.

If you have no money and you hope to make money from Futures, then this is probably not the right way to go about it either.

My trading idea is basically short term trading with a long term outlook. In other words, making small gains every day is better than risking more than you can afford to lose in one day.

So before you start trading, please make sure you are aware of these two things :

1)   Understand the risk involved - when you trade futures, stocks or even Unit Trust, there is always a risk of losing money. So,
       the question you should be asking is not whether
       -     will I make Profit/ Loss ? ; but
       -     will my Profit be higher than my Loss ?

2)   Minimum Risk Capital - you must have additional income which is used for investment purposes
       only and which you can afford to lose. As such, before you start trading, make sure you have saved 
       up enough Minimum Risk Capital in excess of your daily expenses, emergency cash and savings.

Why Trade Futures ?

With the current gloomy economic outlook, shares and commodity prices are on a downtrend and this includes Gold prices.

By investing in Futures, you are able to adopt trading strategies which will allow you to take advantage of price fluctuations despite the current economic slowdown. Below are some of the attractive features of Futures compared to other investment tools :-

1. Short selling - Traders are allowed to short-sell to take advantage of a bearish market and thus are able to profit from an uptrend or a downtrend.

2. Leverage - Higher returns with a small outlay of capital. See also my posting on Leverage and FKLI/FCPO.

3. Low Transaction cost - the cost for trading Futures is much less compared to investing in shares or property market.

4. Trading Strategies - Due to the flexibility of Futures trading, there are many trading strategies that can be adopted to maximise profit and minimize loss, such as scalping, spread trading, etc.