Introduction on how to be a good traders----Part 2

We are now continue the Part 1 in earlier posting......

TECHNICAL ANALYSIS & FUNDAMENTAL ANALYSIS

Technical analysis and fundamental analysis are the two main schools of thought in

the financial markets. As we've mentioned, technical analysis looks at the price

movement of a security and uses this data to predict its future price movements.

Fundamental analysis, on the other hand, looks at economic factors, known as

fundamentals. Let's get into the details of how these two approaches differ, the

criticisms against technical analysis and how technical and fundamental analysis can

be used together to analyze securities.

The Differences

Charts vs. Financial Statements

At the most basic level, a technical analyst approaches a security from the charts,

while a fundamental analyst starts with the financial statements

By looking at the balance sheet, cash flow statement and income statement, a

fundamental analyst tries to determine a company's value. In financial terms, an

analyst attempts to measure a company's intrinsic value. In this approach, investment

decisions are fairly easy to make - if the price of a stock trades below its intrinsic

value, it's a good investment. Although this is an oversimplification (fundamental

analysis goes beyond just the financial statements).

Technical traders, on the other hand, believe there is no reason to analyze a

company's fundamentals because these are all accounted for in the stock's price.

Technicians believe that all the information they need about a stock can be found in

its charts.

Time Horizon

Fundamental analysis takes a relatively long-term approach to analyzing the market

compared to technical analysis. While technical analysis can be used on a timeframe

of weeks, days or even minutes, fundamental analysis often looks at data over a

number of years.

The different timeframes that these two approaches use is a result of the nature of the

investing style to which they each adhere. It can take a long time for a company's

value to be reflected in the market, so when a fundamental analyst estimates intrinsic

value, a gain is not realized until the stock's market price rises to its "correct" value.

This type of investing is called value investing and assumes that the short-term

market is wrong, but that the price of a particular stock will correct itself over the

long run. This "long run" can represent a timeframe of as long as several years, in

some cases.

Furthermore, the numbers that a fundamentalist analyzes are only released over long

periods of time. Financial statements are filed quarterly and changes in earnings per

share don't emerge on a daily basis like price and volume information. Also

remember that fundamentals are the actual characteristics of a business. New

management can't implement sweeping changes overnight and it takes time to create

new products, marketing campaigns, supply chains, etc. Part of the reason that

fundamental analysts use a long-term timeframe, therefore, is because the data they

use to analyze a stock is generated much more slowly than the price and volume data

used by technical analysts.

Trading Versus Investing

Not only is technical analysis more short term in nature that fundamental analysis, but

the goals of a purchase (or sale) of a stock are usually different for each approach. In general, technical analysis is used for a trade, whereas fundamental analysis is used to make an investment. Investors buy assets they believe can increase in value, while traders buy assets they believe they can sell to somebody else at a greater price. The line between a trade and an investment can be blurry, but it does characterize a difference between the two schools. The Critics Some critics see technical analysis as a form of black magic. Don't be surprised to see them question the validity of the discipline to the point where they mock its supporters. In fact, technical analysis has only recently begun to enjoy some mainstream credibility. While most analysts on Wall Street focus on the fundamental side, just about any major brokerage now employs technical analysts as well. Much of the criticism of technical analysis has its roots in academic theory - specifically the efficient market hypothesis (EMH). This theory says that the market's price is always the correct one - any past trading information is already reflected in the price of the stock and, therefore, any analysis to find undervalued securities is useless. There are three versions of EMH. In the first, called weak form efficiency, all past price information is already included in the current price. According to weak form efficiency, technical analysis can't predict future movements because all past information has already been accounted for and, therefore, analyzing the stock’s past price movements will provide no insight into its future movements. In the second, semi-strong form efficiency, fundamental analysis is also claimed to be of little use in finding investment opportunities. The third is strong form efficiency, which states that all information in the market is accounted for in a stock's price and neither technical nor fundamental can provide investors with an edge. The vast majority of academics believe in at least the weak version of EMH, therefore, from their point of view, if technical analysis works, market efficiency will be called into question. Can They Co-Exist? Although technical analysis and fundamental analysis are seen by many as polar opposites - the oil and water of investing - many market participants have experienced great success by combining the two. For example, some fundamental analysts use technical analysis techniques to figure out the best time to enter into an undervalued security. Oftentimes, this situation occurs when the security is severely oversold. By timing entry into a security, the gains on the investment can be greatly improved. Alternatively, some technical traders might look at fundamentals to add strength to a technical signal. For example, if a sell signal is given through technical patterns and indicators, a technical trader might look to reaffirm his or her decision by looking at some key fundamental data. Oftentimes, having both the fundamentals and technicals on your side can provide the best-case scenario for a trade. While mixing some of the components of technical and fundamental analysis is not well received by the most devoted groups in each school, there are certainly benefits to at least understanding both schools of thought We shall continue next.......... Happy Trading

Introduction on how to be a good traders----Part 1

Many Of my visitors are asking me this interesting question -- HOW TO BE A SUCCESSFUL TRADER ?

I assume that most of you have seen these words ,TA(Technical Analysis),and FA(Fundamental Analysis), so right here I would try to explain in simple terms both of these two BIG words in Trading ( applicable to  Stocks, Forex, Commodity, Energy) in this PART 1 on Introduction to Trading

What Is Technical Analysis?

Technical analysis is a security analysis technique that claims the ability to forecast the

future direction of prices through the study of past market data, primarily price and

volume. In its purest form, technical analysis considers only the actual price and volume

behavior of the market or instrument. Technical analysts, sometimes called "chartists",

may employ models and trading rules based on price and volume transformations, such as

the relative strength index, moving averages, regressions, inter-market and intra-market

price correlations, cycles or, classically, through recognition of chart patterns.

Technical analysis stands in distinction to fundamental analysis. Technical analysis

"ignores" the actual nature of the company, market, currency or commodity and is based

solely on "the charts," that is to say price and volume information, whereas fundamental

analysis does look at the actual facts of the company, market, currency or commodity.

For example, any large brokerage, trading group, or financial institution will typically

have both a technical analysis and fundamental analysis team.

Just as there are many investment styles on the fundamental side, there are also many

different types of technical traders. Some rely on chart patterns; others use technical

indicators and oscillators, and most use some combination of the two. In any case,

technical analysts' exclusive use of historical price and volume data is what separates

them from their fundamental counterparts. Unlike fundamental analysts, technical

analysts don't care whether a stock is undervalued - the only thing that matters is a

security's past trading data and what information this data can provide about where the

security might move in the future. ASSUMPTIONS 1. The Market Discounts Everything A major criticism of technical analysis is that it only considers price movement, ignoring the fundamental factors of the company. However, technical analysis assumes that, at any given time, a stock's price reflects everything that has or could affect the company - including fundamental factors. Technical analysts believe that the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the analysis of price movement, which technical theory views as a product of the supply and demand for a particular stock in the market. 2. Price Moves in Trends In technical analysis, price movements are believed to follow trends. This means that after a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it. Most technical trading strategies are based on this assumption. 3. History Tends To Repeat Itself Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Technical analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves. Not Just for Stocks Technical analysis can be used on any security with historical trading data. This includes stocks, futures and commodities, fixed-income securities, forex, etc. In this write-up,, we'll usually analyze stocks in our examples, but keep in mind that these concepts can be applied to any type of security. In fact, technical analysis is more frequently associated with commodities and forex, where the participants are predominantly traders. Now that you understand the philosophy behind technical analysis, we'll get into explaining how it really works. One of the best ways to understand what technical analysis is (and is not) is to compare it to fundamental analysis. We would continue next......... Happy trading

How to make Million from just USD 5K as Starting Cap ?, Is it a Fairy Tale or Dream ?

Some one ask me this Question. "Are  you telling a Fairy tale to a kid on Making million with such a small capital?"

My Answer is : You may believe it or otherwise, it is all up to individual  judgement.., I would also like to list below one of my reply to a very enterprising  Bursa Stock trader recently:-

QUOTE

"Yes, I did make it around 2.5 years of my Trading Adventures that was almost five years ago !, Many ups and downs, Through many depressed and sad moments, Hardships and Mental torturing processes, then finally  aided with  self strong belief and discipline, I finally learn the secret of " HOW-TO".

 Even though I have  attended many seminars,. Trainings by Gurus ,  Talks and Videos  and reading numerous Books to equip myself better, I am right now still learning to be a better trader, it is a never ending learning process. .(Note: You may start your learning process by downloading some of my free-e-books via my Blog, more will be added regularly....)

I would like to share my living experience to be a Good and consistent Trader via my blog which is just set up hardly one month ago. .I am planning to launch a Live Trading Training course FREE via WEB CAM (Fully interactive, LIVE TRADING GUIDANCE) in near future for selected few who are interested.

Why do I do this ? Any Hidden Agenda ??....

My Objectives: To train and guide more Traders to be successful so that eventually, like What i am doing, I am contributing about 25% of my Profits to all deserved organisations and charity groups.in our society ,,... and the World will be much more beautiful thereafter........!And I believe that the more  you GIVE, and the more you will eventually GET!!

You see, the  Forex turn-over is in Trillions Monthly, so you can see the potential a Successful trader can be. Of course Forex Trading is a very Risky BUSINESS  if you are not properly equipped., I consider THE risk of trading Forex is very much lower than  trading the Malaysia Bursa Stock, Just Look at KENMARK , which is the latest Joke... It may be even worst  than trading Forex as there is no clue at all when it happens ..(From 0.75 hammered down to 0.04 in five trading days??, and I think  KENMARK may worth- 0.00 after the Bank's auctioning of its assets ??)..

I will update you accordingly"

 Unquote

HAPPY TRADING TO ALL

TECHNICAL ANALYSIS ON EURO/USD

Now at GMT 01:40, US Pacific 18:40 , Beijing/KL/Singapore 09:41, you may enter Now this Proposed Trade set up for EURO/USD: Now the pair is traded at 1.2240 (For a Short term trade)

Entry:                  BUY  @ 1.2305 (To open a Buy Order) (For short term trades)
Protective Stop:  @1.2245
Target:               @1.2450

RATIONAL:   Only a break above 1.2300 can be considered a temp Low which has been formed after the last Close bottom AT 1.2110
            
The level at 1.2330 is the current level of the Ichimoku cloud and previous resistance) .


THE ADDITIONAL Technicals from the Chart are as follows:--


Tenkan-Sen level               :1.2199
Kijun-Sen level                 :1.2218
Ichimoku cloud top              :1.2329
Ichimoku cloud bottom          :1.2329

.






(2.0) Further Technical Analysis on EURO/USD via ELLIOT WAVE principles(Longer Term View)

Despite falling to 1.2110 last closing,, as the single currency has recovered from there, suggesting further consolidation above recent low at 1.2110 would be seen and recovery to 1.2500 cannot be ruled out, however, only break of resistance at 1.2673 would signal the wave (v) has possibly ended and bring stronger rebound to 1.2800. Below support area at 1.2143-54 would signal the wave (v) of 1is still in progress and weakness to psychological support at 1.2000 would be seen, below would extend to 1.1913 (100% projection of 1.3692 to 1.2510 measuring from 1.3095) but reckon support at 1.1640 would hold.

My preferred count on the daily chart remains that a wave (B) from 1.2329 ended at 1.5145 with A-leg ended at 1.4720, followed by wave B at 1.2457, the wave C from there was also a 3 legged move and is labeled as (a): 1.3739, (b): 1.2885, the wave iii of the 5-waver (c) from 1.2885 has ended at 1.4339 and wave iv is a triangle ended at 1.3878 and wave v formed a top at 1.5145.

The decline from there is a 5-waver (C) with minor wave (i) of (C) ended at 1.4218 with wave (ii) ended at 1.4580, wave (iii) ended at 1.3267 and wave (iv) ended at 1.3692 and wave (v) may extend to 1.2000.

There is an alternate count that, wave (iii) itself is an extension with minor wave i ended at 1.3267 followed by wave ii at 1.3692).

On the upside, break of resistance at 1.2673 would bring retracement to 1.2735 (38.2% Fibonacci retracement of 1.3692 to 1.2143) and 1.2800 but reckon 1.2918 (50% Fibonacci retracement) would limit upside and resistance at 1.3095 would hold. Only a daily close above resistance at 1.3095/00 (also 61.8% Fibonacci retracement) would signal temporary low has been formed and risk retracement to 1.3300.

Recommendation: Sell at 1.2590 for 1.2200 with stop above 1.2680.  (For bigger picture and mid Terms Trades)

Cloud of Uncertainty spreading throughout the whole world.........

Fear, Fear , this word is hanging in the minds of all institutions, Fund managers, traders, All  NATIONS..

In recent days, markets have shown signs of life - but nascent rallies have been quickly smothered. I believe there are five fundamental reasons for this persistent uncertainty.

First, the world's second most held currency, the euro, is threatened with possible extinction. The massive $750 billion bailout package for Greece will not cure Greece's dependence on entitlements, and will likely only buy time until a debt restructuring.

The world is looking to major nations such as the United States, Germany, and even the United Kingdom to backstop the likely future funding obligations of bankrupt states such as Spain, Portugal, and Italy. However, these so-called 'major' nations have little or no money; they themselves have borrowed massively.

The only real savior available for the euro is China. So, you can imagine the feeling in Brussels when the Financial Times reported this week that the Chinese government is "reviewing" its euro holdings in light of the spreading debt crisis.

It is now dawning on investors that the euro may be down for the count. As a result, key support levels for the currency are giving way.

Second, there is deep concern among investors that a lurching socialism may change Western economies fundamentally. Just this week, it was announced that the percentage of US personal income coming from private sector earnings hit an all-time low... just 41%! As a corollary, the percentage of income coming from direct government payments has risen sharply in recent years and is now at an all-time high. To support the growing welfare state, taxes on society's dwindling producers must increase. This is no way to grow an economy - and investors know it.

Third, rates at which banks and finance houses lend to each other are rising. Although central banks continue to hold short term rates low, stoking ever more consumer borrowing and spending, businesses are increasingly starved for credit.

Fourth, it is increasingly clear that America's political class is targeting the financial industry. The machinations of the financial sector are almost universally blamed for the economic crisis, whether on CNN or C-SPAN.  The politicians 'investigating' the 'greed' of Wall Street appear to be motivated more by revenge than risk reduction. With unabashed distortion of the facts, politicians forget that it was Congress that repealed the Glass Steagall Act (a set of regulations made necessary by government deposit insurance), pushed mortgage lenders Freddie Mac and Fannie May to lower their loan requirements, and approved entitlement programs that have sapped productivity from the American economy.

They forget that it was the Federal Reserve that injected trillions of monopoly dollars into the world economy to rescue Washington from the last recession it created. These massive strategic errors were the direct fault of the US and other Western governments.

Facts aside, vengeful Congressional legislation could place Wall Street at a serious competitive disadvantage compared to other financial centers such as London, Switzerland, Dubai, Singapore, and Hong Kong. In addition, inefficiencies caused by over-regulation could do serious damage to Main Street.

The fifth factor spooking markets is Germany's reaction to the euro crisis. The government unexpectedly resorted to the same 'protective' regulations employed by the US in 2008, including banning naked short sales of the securities of select financial houses. In America, this type of measure fanned widespread suspicion that the government was worried about the prospects of the firms it selected for special protection. Many German banks have major exposure to Portugal, Italy, Greece and Spain (a.k.a. the PIGS). It is not surprising that the German government has tried to shield them from market punishment, but the measure is likely to backfire.

The combination of these factors leaves little wonder that investor confidence is falling and the volatility index is rising. Unfortunately, as the Western world comes apart at the seams, no government is making a serious effort to repair the damage.

Now the EURO/USD MAY HEAD BELOW TO 1.2000.. NEXT

The pair EURO/USD has just broken the May low 1.2145, and register a new LOW at 1.2111, {GMT 10:00)


Basing on Technicals, if no further IMMINENT INTERVENTION from ECB, coupling with the New Low on all Equity Markets (FTSE,DAX,CAC are all below 2%) in early Europe Opening, The EURO/USD may head below 1.2000, ..then 1.1500 next.


Traders please set up your trades accordingly....(NOTE : Please refer to my Technical Analysis on the EURO/USD  FROM MY  SUNDAY'S  POSTING ....)


Reminder: BE AWARE THE INTERVENTION FROM ECB ANYTIME NOW, IF YOU ARE IN THE TRADES, KEEP YOUR PROTECTIVE  STOP TIGHT AND IN PLACE, USE TRAILING STOPS TO MAXIMISE PROFITS,,,,,,,,,,...


HAPPY TRADING


The M5 Chart for EURO/USD is listed below :--

The M15 USD Index chart is as follow:-(Its multi years high at 87.60 !!)

NOTE: LATEST UPDATE


Some Unconfirmed ECB  INTERVENTION TO JACK UP THE EURO IS IN PROGRESS SLOWLY... Now at GMT 14:30, THE EURO/USD IS TRADED AT 1.2330, UP FROM A LOW AT 1.2111 ALMOST 4.5 HOURS AGO....
And Euro Equity markets have swung back to black again now, DAX, CAC , S & P 500,..ALL SHOWS POSITIVE),    FTSE WAS DOWN 0.5% due to BP (Share PRICE = ---14%) AFTER IT FAILED TO FIX THE OIL LEAK IN THE MEXICO GULF IN THEIR LATEST EFFORT.......


Now, at GMT 15:25, THE CHART  FOR EURO/USD LOOKS AS  BELOW:-