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 27 October 2011
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).
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.
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.
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.
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.
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.
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