Myths in stock trading

I have decided to list down some of the more common myths in stock trading. For purely entertainment purpose, you might wish to note it down and observe whether is it relevant.

• The market usually plunge when it is raining heavily on that day
• Stock price usually drop on Fri as trader do not want to hold over weekend position
• Stock price is at its highest during the 1st two hour of trading
• When stock price close high, the next day would most likely be bullish
• Sept is traditionally a bad month for stock trading
• Dec is usually a bullish mth
• When there is a holiday on fri, the market will usually rally on the holiday eve
• 5 days before company release their result, the stock price would usually be on an upward trend. However, once the result is out, it will usually drop. Classic case of buy on anticipation and sell on news
• Stock price would usually be appreciating before CUM dividend date due to buyers buying for the sake of dividend. However, price would usually drop after ex-dividend.

Hope the above might be of certain use to you. Again, do trade with care as the stock market is very dynamic. No one can be a master when it comes to trading stocks. We can only increase the probability of winning and certainty is always the definite myth. Good luck!!

How to read the price of a stock

I have just met a friend who told me that she is having problem understanding the basic of reading the price of a stock. Therefore, i decided to include an explaination on this topic in my blog today. There is three component which you look at when we talk about stock price.

1. Last done Price: This is the price which the stock was last transacted
2. Buy Price: The price which buyer are willing to buy from you
3. Sell Price: The price which seller are willing to sell to you

Example, last done price for XYZ Ltd is $1/ share. However buy price is $0.99 and sell price is $1. As a buyer, you would only be able to buy the stock if you are willing to pay $1 for it. For a seller, you would need to sell at $0.99 if yo u want to sell your shares. You are allowed to queue for the price that you want to sell/ buy provided that it is within ten bids from the last done price.

So what is this bids that i am referring to? For shares that are priced above $1, each bid will be $0.01, example $1.01, follow by $1.02. For shares that are priced $1 and below, each bid will be $0.005, example $0.9, follow by $0.905.

Hope the above is able to help you with the basic of reading stock price. Good luck and have fun trading.

More functionality added

Some of my friends have been asking me for stock picks lately. It seems to me that the best way to publish my picks is via tweeter. I shall be updating some of my perceived opportunities in my tweets which will be reflected in my blog from time to time. Since i am a trader, i trade stocks on a very short time frame, therefore my pick will expire on that day that i post it. Do visit my blog often for any potential good pick. Please take note that my stock picks are meant for your reference and are not a guarantee means to make money.

Is the Singapore Market heading for correction??

Due to recent market volatitility, I have received a couple of queries with regards to the direction of the market in the short term. Some have asked me about the support for the straitstimes index whereas some have asked me whether is this a good time to buy stocks. It seems to me that the best way to reply to these queries will be via my blog. I shall begin my analysis using the straitstimes index chart as per closing today.

First and foremost, you will notice that the STI has been dropping since 04th Aug 2009. It has been on a consistent downward trend until 11th Aug 2009 when there was a mini rally. However, the index closed down today again. If you refer to my previous posting on how to read a chart, you will notice that the circled areas are all pointing towards a downward movement in the near term. Share prices is closing below the short term moving average, MACD showing bearish forces in play and stochastic oscillator also pointing towards bearish market sentiment. In my point of view, the market is heading for a correction at this point of time due to sharp appreciation of share prices for the last couple of weeks.

There is two outcome that is possible from my study of the chart. The market can either be heading for a consolidation which will most likely last for a few weeks before it begin to rally again. During this period of time, the market will sideway trading for awhile before eventually setting on a primary trend. This trend can either be up trend or down trend. Will need more market signal before i can comment. The second outcome will be market panic selling which results in share prices falling dramatically to pre-march 2009 level. As per the chart above, the moving average is at a junction of changing trend. There is a high possibility that the trend might reverse in the near term to a downward trend should the moving averages crossover.

The support for STI according to fibonacci retracement at 38.2% should be about 2536. The key support to look at will be 2485, this is the level at 50%. Once this support is breach, it will usually mean a reversal in trend. In my point of view, this would not be a good time to buy any stocks for the moment. It will be better to wait for the potential down trend to end before you make any purchase.

Present market condition

The current market in Singapore appears to be overbought technically. This applies to stock market across the world as well. In the short term, we can expect market to consolidate and drop slightly. From my analysis, prices should not drop too much. The stock prices has supercede the fundamental of the company earning potential in the short term. Therefore, a correction in stock price is inevitable unless there's further good news (example, second stimulas package) to boast the stock price further.

Thus, be very careful when you attempt to buy any stocks for this week. Basic commodities and energy related should be falling soon. There should be good buying opportunities on these counters once it start falling but you must monitor the charting till there is a firm case of up trend momentum. Remember to use the techniques which i have shared in my previous posting to identify high probability trading opportunity.