Category: Featured

Stock trading is a game of probabilities.

You can’t judge a trading strategy just because of a single, profitable trade or because of the handful factors that aligned in your trading setup. There are lots of mix and match components which bring conviction that there’s no ‘perfect’ one and even if you have found your edge in the market, you still can’t be certain because there might be random occurrences that are nearly impossible to predict or what we simply call, the “Black Swan.”

Coined by Nassim Nicholas Taleb, a finance professor from NYU and Wall Street trader, black swan events are occurrences that are extremely difficult to almost impossible to predict as they aren’t your typical breakdown of support or gap up and downs. These events can have more terrible consequences on the stock that you’re holding.

There are three (3) attributes of a black swan event:

1. The event is unforeseen to the observer.
2. The event results in severe consequences.
3. After the manifestation of a black swan event, people will rationalize the event as foreseeable (hindsight bias).

For example, a government official declaring the ban on the export of goods made by a company can be considered a black swan event. A company declaring sudden destruction of their plants and factories due to acts of God is another instance of a black swan event.

Samples of black swan events that made a significant impact in the financial world

1. 9/11 Terrorist Attack

On September 11, 2001, the coordinated terrorist attacks in the USA forced their main bourses, NASDAQ and NYSE, to close trading on that same day. In the first trading week after the attack, stocks dropped significantly – incurring a loss of $1.4 trillion in stock market value.

2. 1997 Asian Financial Crisis

The crisis is said to have started when Thailand unpegged the baht to the US dollar. A series of currency devaluations subsequently followed across several Asian markets where currencies were seen to have dropped by 38% and international stocks by 60%.

3. “Dotcom” Crash

The said crash rubbed out around a trillion dollars worth of stock value because during the 1980’s and 1990’s, as internet companies sprout from almost everywhere, the value of some of the successful ones was tremendously overvalued. So from the year 2000 to 2002, lots of internet companies crashed, resulting in investors to incur huge losses. The NASDAQ composite in the USE lost 78% of its value during those times.

Black Swan Events in the PSE

1. 2GO Group, Inc.

On July 07, 2017, in the midst of a huge accounting scandal, 2GO announced that their CFO was resigning. The PSE implemented a two-day trading halt because of this misdeclaration of financial statements. Investors found themselves unable to do anything with their current position due to this. The stock opened -19.74% down on the first trading day after the trading halt, much to the dismay of investors that capitulated because the stock closed 21.93% up from the open.

2. Rizal Commercial Banking Corporation

During February 2017, a whopping $81 million was stolen by hackers from the Bangladesh Central Bank. The money was found to be wired in multiple RCBC accounts in a branch in Makati, Philippines. The BSP imposed a hefty one billion-peso fine over the laundering scam.

Conclusion

Black swan events do not only apply to adverse events, especially to markets that allow both long and short positions over security. A market catastrophically turning to the red can be useful for traders with short positions.

In the stock market, anything can really happen. This should serve as another reason why investors and traders are better off diversifying their positions.

The ultimate goal of any trader like you is to consistently make a profit in the market that you chose to trade. To do so, you need to identify your edge in the market — which means learning different trading strategies and set-ups and find the best one that makes the most sense to you. For some, they are able to find their ‘holy grail’ in a few months and sometimes, it will take years of getting to know how the market works and your personal limitations as a trader.

You will experience failures, but that’s part of the process.

In this article, we’re going to tackle how you can find your bread-and-butter setups in the market.

How do we start trading the market?

When starting, we try to read as much reading material as we can through blogs, web articles or from the top recommended books we often hear. We also look for trading videos online created by highly-regarded traders and even follow some of these well-known traders who regularly display their skills in the market with their “trophy trades” or bagger trades on social media. We often dissect the average price of their port snaps, backtest it, and apply it on our own portfolio’s trades but sometimes, we can’t even manage the trade like they would and it often leads us to disappointments. We lack the experience and conviction they have with the setup. We don’t know whether it’s the 10th or the 100th time the said trader executed that setup or more importantly the amount of backtesting, dissecting, journaling, he has done behind his bagger trades. We might not even know whether that particular setup fits our trading profile or not. This bitter losing experience leads most of us to try out another setup and when we do, we lose more than what we can win, and then we begin again to search for another setup from another trader or trading book. The cycle goes on and on and on until we are burned and lost all of our capital.

Steps in finding your trading setup

Finding your niche setup in the market is no walk in the park. The reason behind that is because you’ll need to have the utmost discipline and commitment in tweaking and adjusting your trading setup.

Here are the steps to find the right trading setup for you:

1. Know your trading profile. Ask yourself questions such as:
a. Which setups can you trade while working on your day job?
b. Are you more fitted to trade setups with trend-following objective?
c. Do you want to trade bounce play setups but can only enter EOD (end of day)?

2. Back test, back test, and back test
a. Know why and how the setup works
b. Should you add an indicator to confirm your buy and sell signals for your setup?

3. Paper Trade
a. Try out the setup in real-time without using real money and make use of Virtual Trading to test your skills. Try https://www.investagrams.com/vTrade

4. Trade the setup using real money
a. Risk small/Allocate a small portion of your portfolio

5. Journal your trades (the most important step)
a. Record your entries, exits, and emotions during the trade
b. Review your data and reflect from it
c. You may start your trading journal adventure here: https://www.investagrams.com/TradeJournal/

Take one setup at a time. It’s best not to be called as someone who’s the jack of all trades or like a soldier who’s manning a machine gun shooting at everything. Instead, be more like a sniper, calmly waiting for his target and shooting with high accuracy.

As Bruce Lee puts it, “I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.”

Good luck on your trading!

We are now living in a world where technology is essential, where every part of our daily lives is associated with the science of this craft in one way or another. Aside from technology, people are also obsessed with convenience and how to make our lives more comfortable, and this is where the use of credit cards comes in.

Let’s take a look at how we do shopping nowadays — instead of bringing lots of cash when we go to the malls, credit cards are often used to purchase items – you simply give it to the cashier, swipe it, and then voila! New purchased item is now yours without the need of taking cash from your wallet or withdraw cash from any atm machines.

To some, credit cards are more of a status symbol than a necessity. People love to flaunt their fancy cards because they believe that these cards symbolize their luxurious lives — the more cards they have, the richer they are. However, credit cards are not really a status symbol nor a sign of wealth. In fact, almost everyone (even those who are in the ordinary or middle-class level) now owns a credit card.

Credit cards are becoming an instrument of debts because of the “buy now, pay later” marketing schemes that are very appealing for some. For average people, they usually think that credit cards can help them on their financial struggles because they can use it to buy things that they cannot afford for the moment. In reality, if they don’t use it wisely, they will be suffering from more debts due to credit card charges and interest rates.

Although credit cards will help you in terms of convenience of fast payments, easy access, security purchases, rewards, and even build your credit history, there are still some instances that having a credit card is unhealthy and not recommended. Here’s why:

Disadvantages of Using a Credit card

Ease of Payment

Since you pay with a credit card, you might have the comfort of spending over time because there’s no actual cash involved whenever you pay and the reason why this is a disadvantage is that you might probably spend more of what you can afford. Credit card is a source of debt and its primary goal is to encourage people to spend the money that they don’t have. People tend to buy things that are really unnecessary. We’ve been there, done that right?

Interests

One of the most common disadvantages of using a credit card is the interest rate. If you do not pay in full, credit card companies can charge you a huge amount of interest on every balance that carries each month. This is how the credit card companies get money from you and also the reason why people suffer in debt. However, you can avoid this kind of scenario as long as you pay the debt in full amount listed on the credit card bill before the due date.

Card Theft

Credit card fraud and/or identity theft is on the rise as scammers can easily get your personal information physically (skimming or stolen) or from phony calls, emails, wi-fi hotspots, and websites as long as you are not careful enough of your credit card information. Credit cards are usually the target of scammers that’s why it is advisable for you to check your cards regularly to make sure all transactions are legally done from your side. If in case you discover any unauthorized charges, you should immediately contact your bank or the credit card company to report the misfortune and immediately change your online password and/or pins.

Impulsive Buying

Impulsive buying is when a person buys whatever she wants without planning it in advance. This act is driven by emotions and whenever we decide to do an impulse transaction, we justify our decisions with retroactive logical justifications (right after buying transaction has already taken place). For some, a ‘little credit card theraphy’ can seem like a harmless action but it can be more harmful than you think as you might be dependent on your credit card as your way to solve any financial problem or celebration reasons that may occur. If you have fallen into this habit, you’ll be soon spending beyond your means.

Late Fees

It is the amount paid by consumers when they failed to pay before the due date or when they pay less than the monthly minimum payments. It is advisable to pay in full to avoid late fees or if you cannot afford, you can at least pay for minimum amount for each month. These late fees can add up and can give more debt to a consumer if not taken care of as soon as possible.

Conclusion

Before engaging yourself with a credit card habit, make sure that you are capable of paying for it and you are smart enough on how you will use it. Credit cards are financial tools that give convenience to its owner, you can benefit from it when used responsibly; however, if cards aren’t used wisely, this can be a source of a problem and a huge financial burden.

Always remember what Uncle Ben always tell to Spiderman — “With great power, comes with great responsibility.” Instead of buying things, learn how to save for the future. After all, a good investment can lead to a good life. You can buy anything that you want if you learn how to save and invest now.

If you are working full time, becoming a trader is quite a challenge.

Do you consistently fail to sell at your set stop-loss because you were doing something outside the market? Have you missed on your reversal and bounce plays many times already? Are you always not able to catch up with the latest news and disclosures?

Most part-time stock traders in the country don’t have the luxury to monitor their positions while they are working on their day jobs. On the other hand, students who also trade stocks need most of their attention directed at their subjects and professors while the market is open. People on vacation also share the same difficulty as they can’t have their eyes glued on their phones or monitors during market hours. Because of these reasons, we might miss out rapid changes that take place during the opening hours of the market.

Every second counts for us traders and having an alert system for stocks will help us save time and money as this will allow us to respond to any price movements as they happen real-time. Given that almost all stockbrokers in the country do not feature stop-loss orders, this would be a godsend to those traders who are dealing with cutting prices or stop-losses. We need not to stare at the glaring screens of our electronic gadgets every minute just to be able to catch up with price movements.

That’s where the InvestaWatcher comes in.

Since 2016, the InvestaWatcher has helped countless of local retail traders with their trading executions. No longer is it an excuse to miss out on a breakout play that could’ve netted you 10% plus gains in one day because you were too busy with something.

Here are the advantages of having InvestaWatcher as part of your trading journey:

• Pick 30 stocks to add to your watchlist
• Set up your entry, target, and cut loss prices
• Add short notes to remind you of your trading decisions
• Remain updated with the important news of your stock picks such as corporate news, announcements (for example – mergers and acquisition, buyback, etc.), quarter and annual results
• Choose how you want to get your alerts — via Investa Platform, FB Messenger, SMS, or Email
• Get price and news alerts in real-time

Steps to add a stock to the InvestaWatcher

Option 1. If you’re using the InvestaChart and you want to add the current stock that you’re looking at:

1. Click the “Watcher” tab on the right-hand side of the chart under “Tools”.
2. Select the “eye-like” button or the “plus sign” beside the “Watcher Setup”.
3. A small tab like the one below will show up where you’ll input necessary data.
4. An alert will be sent to you as it hits your set prices (Target and Cut Loss) or when it releases a news/disclosure.

Option 2. If you’re anywhere in the Investagrams’ homepage:

1. Select the blue navigator below beside your account’s default picture then choose “Watcher”.

2. You’ll be taken to the InvestaWatcher’s main tab where you can add stocks and setup alerts.

3. A small tab will pop-up like the one below.

4. An alert will be sent to you as it hits your set prices or when it releases a disclosure.

The InvestaWatcher will alert us through email, sms, or even in our Facebook Messenger accounts. So, it basically covers all the channels needed to alert you.

As a trader, we know the amount of effort we put in our trading plans. But a well-baked trading plan won’t necessarily grant us the reward we’re looking for, execution serves as a bridge between our trading plan and the market. Actually getting in the swing and the huge moves of the stock we want to trade in the most precise way is tougher than creating a trade plan, given outside variables that might affect the way we execute our trades.

We might be patting ourselves in the back when the stock we made a trading plan for actually went upwards. But our goal in the market is to make money consistently. With the InvestaWatcher, our executions will be better, more efficient, and precise.

For more information about the InvestaWatcher, click here.

As a trader (or investor), your job is to sift through companies listed in the stock exchange and weed out all the companies that do not fit our strategy to create a watchlist of companies that do. That’s how we find stocks that give us the opportunity to generate income.

There are currently over 200 plus publicly-listed companies in the Philippine Stock Exchange (PSE). Now, whether you’re an investor or a trader, the mundane task of sorting through these companies (one by one!) can be a lot tiring, as you can imagine. Thankfully, we’ve already been lightyears away from the stone age-like activity of screening companies one by one. We can now use a screener that has virtually every parameter we need.

If you’re someone who has a day job or is still a student, then using a stock screener is just for you. Using a screener that can scan through various parameters from the PSE stocks, from blue chips to your favorite “basura” stocks (3rd liners/small caps), screening stocks won’t have to be too tedious nor time consuming.

A common question non-market participant asks investors/traders is how they can find stocks to buy. Both investors and traders have their own strategies in screening for their stocks. They’ll be explained as follows.

How to Use a Screener?

Investors who use fundamental analysis need their ratios. They need to invest in financially sound companies that will do well in the long run. They want to buy stocks that are undervalued and sell when it’s overvalued.

Here are the ratios available for fundamentalists:

• Earnings per Share % (EPS %)
• Return on Equity (ROE)
• P/E Ratio (Price to Earnings Ratio)
• P/BV (Price to Book Value Ratio)

They could also use descriptive parameters such as:

• Sector – Financial, Property, Mining, and Oil, etc.
• Price – Prices relative to stocks in the PSE
• Change Percentage – Price changes from its previous day’s close

The following examples highlight how a fundamental investor can utilize InvestaScreener:

Looking for undervalued companies? Here we’ve easily found 42 companies that are deemed undervalued using the P/E Ratio as a parameter.

Investors can also mix it with other fundamental parameters accordingly with their strategy.

They could also filter the screener to only display a specific sector given other fundamental parameter they have entered. In the below example, we used P/E <10 in the financial sector.

They could also filter stock picks with a technical filter. In the below example, we filtered stocks that are in their long-term uptrend while trading below 15 times their earnings.

For traders, screening stocks have never been easier. Here are some filters that you’ll probably need the most:

Trends – Short-term, Medium-Term, Long-term
Basic – 52 Week High (Low), Volume and Value Averages, Date % (Yearly, Monthly, Weekly)
Indicators – Moving Averages (simple and exponential), RSI, DMI, Bollinger Band, and many more

And arguably one of its coolest filters:

Candlestick Patterns – Shooting Star, Hanging Man, Inverted Hammer, etc.
Candle Types – Green, Red, or Doji closes
…and many others! (Once you are subscribed to InvestaScreener+)

Let’s say that you want to trade stocks that are on a short-term, medium-term, and long-term uptrend, you could easily find them using the screener. See sample below:

Let’s try screening stocks that closed with a doji (a candlestick pattern that opened and closed at the same price in a specific timeframe) candle.

Highlighted by the eclipse in the charts below are the doji candles. Using 4 multiple charts, we displayed the first four stocks based on the above results of  InvestaScreener. We can see how accurate and easy it is to screen through all stocks in the PSE with just a few clicks of a button.

Other things you could do with the InvestaScreener:

• Setup EOD Alerts – A text message or an email will be automatically sent to you
• Save your own filter setting – No need to enter your filters one by one. You could also set multiple screener settings if you trade multiple setups

If you find a hard time balancing your personal life with trading, then it’s highly suggested that you use a screener as it will save you a tremendous amount of time. Screening precedes buying and selling and all the other parts of a trader/investor’s system. With the usage of a screener, you’re more likely to ride stocks that fit your strategy.

Click here to access InvestaScreener