For our featured forecaster of the week, we are showcasing a trader who was spot on with his trading last week. Sorbeterong Trader a.k.a. @gan21, an active member of the community who constantly shares his own views of the market, was able to forecast the upswing of Italpinas Development Corporation or $IDC. Let’s take a look at how he did it.
Although $IDC wasn’t in an uptrend like many of the other stocks that stole the spotlight, it’s range was big enough to provide a profit opportunity for those who did their homework. As a small-cap stock, the corrections of the blue chips and other bigger mid-cap stocks were signals that money could rotate here. There could be a variety of ways to trade this, but the one Sorbeterong Trader used and shared with the community is a momentum pause play in the intraday chart.
Trends exist within every timeframe. Thus, within bigger sideway trends, a smaller uptrend can be found within lower timeframes. In this $IDC trade, a momentary pause or consolidation could be the continuation pattern that one can use to trade the range. Despite having moved away from support, the upside was still good at 15% given that the range was wide. In addition, the use of intraday levels gave better control over the downside as a tighter stop could be used than simply using the support at the bottom of the range.
Kudos to Sorbeterong Trader for a good trade. As our featured forecaster of the week, you will receive FREE one-month InvestaPRO access!
Life is a series of small decisions that compound and magnify over time.
When you choose to be disciplined even on the amount of food you intake even when it’s just lessening the consumption of rice or soft drinks, a day won’t matter but a hundred days of that would take a faster effect of notice coupled with exercise and a better selection of food. So it is with weight management that we can see this translating to most every facet of our lives. Indeed Naval Ravikant said that “All returns in life are compound interest whether money, relationships or habits”. She doesn’t love you at first sight. It just grows over time. Play the long term game.
A friend told me to listen to his podcast so I’m linking it here if you wish to know more about the entirety of the episode:
You have to be a rational optimist. You have to know the downside but be action biased nonetheless. Cynics and Pessimists unfortunately have given up and so the world to them is where nobody can do anything. This is why they’d rather you fail than succeed to make them look less bad.
It reminds me of an entrepreneur who asked the audience if they’ve eaten and if they could raise their hands if they owned a smartphone — everyone raised their hands and so he said his TAM (total addressable market) was so huge. The CEO I’m pertaining to was Tim Steiner who headed Ocado, the leader of online groceries in the U.K.
He built his business 20 years ago in 2000 even when there was just the start of the internet wireless infrastructure and when smartphones were too bulky and too expensive, he decided to believe that e-commerce was a future for mankind and built a traditional retail company with a technology component.
OCDO got listed 2009 and 11 years later is 22X from the lows and 11X your money from the IPO price. What astonished me about Ocado is that the founder built his company even when nobody was truly a strong believer in e-commerce. Of course, today these are no brainer the safest companies and the most valuable ones. The top ten market caps of the world all belong to the e-commerce space with all the platforms accelerating growth by an excess of 30-300% whether small or large bases. In fact from a secular trend, not only is this space the fastest-growing secular trend – but it also is the default and what people today expect.
Historical Timeline of Select Ecommerce Giants:
Amazon 1-2700 ; 23 years
Ocado 100-2200: 11 years
Shopify 18-900: 6 years
Mercado Libre 7-1000; 11 years
JD 19-60; 7 years
Pinduoduo 16-90: 3 years
Sea Limited 10-110: 3 years
Alibaba 68-240: 6 years
Etsy 7-95: 5 years
Investing in online commerce was and truly has been a rewarding trend even in the year of the pandemic especially since the already strong secular trend got even more accelerated and had a higher penetration rate throughout the world as the physical retail shops and stores had to close down. Not only did they recover the first during the March 23 global low, but they also had as a sector been the first to go all-time highs and continue to lead the market higher. While their valuations may prompt excessive price to sales ratios, some may argue that these are warranted considering their huge potential especially as some of them have barely scratched the surface versus their country’s counterparts.
A few months ago, Facebook invested $5.7B for a 9.9% stake in India’s largest conglomerate Reliance Industries to further help India’s JIO Mart which effectively serves as India’s aspirations to be an e-commerce giant powered by WhatsApp payments. It, of course, sent both stocks surging more than 10% the next day and consequently more than 30-40% the next few months but it ultimately shows to you that while it may seem that Amazon’s been growing forever, the point is that Amazon’s 26% growth in e-commerce this 1Q2020 is still the highest quarterly revenue it made over the last 23 years as we are talking about growing 26% when you’ve been growing from less than 1Million revenues to ultimately 75billion or 1 to 75,000 million.
Bill Gates famously said that we overestimate changes in 2 years but underestimate long term changes in 10 Years.
Source: TheQuotes
How many people are underestimating the online education trend? The remote work collaboration trend? The financial digital payment trend? Some of these trends have been underpinned and underway for over 10 years. While many people may have appreciated these services more so during the pandemic, the crisis only was a catalyst to accelerate previously strong existing trends that sent most of them from 100-300-500% increases in over 3 months from the March low to the present June highs. If you don’t believe me, check the charts Square 37-100, Fastly 11-60, Zoom video 80-240, Chegg 30-70.
Notwithstanding all the secular winners, we do note that historical corrections on even the secular winners can happen and actually has a high probability of giving entries to others who think “they’ve missed the ride.”
While I’m pleased to tell you I’ve made 70-200% gains on some of the names I’ve mentioned above, it was mostly brought about by being aware that these sectors stand to benefit the most from the pandemic but also have the understanding that my upside was irrationally higher than my downside. This was especially true with our conviction plays on Sea Limited and Pinduoduo. (We first covered these names as buys inside our Awesome10x inner circle group at 30 and 19 respectively.) I also had featured it in my classes and spoke a lot about it even on my social pages publicly.
Please check them out and follow me for great Awesome10x returns.
See you and may you have Awesome10x returns too! ⁃ Nikki Yu, CMT
Nikki Yu holds a Chartered Market Technician (CMT) designation, is Philippine Chapter Chair and has been working in the financial industry for over a decade. Prior jobs include equity research assistant, private bank marketing assistant, equity trader and broker. She is currently a financial advisor to clients in Wealth Securities Inc. and lives in Manila Philippines. She enjoys teaching about the markets and holds workshops teaching individuals how to create their long term nest eggs. Her medium profile www.medium.com/@nikkiyu. Her Spotify channel is Faceless Trader. Twitter is @facelesstrader. She teaches people how to globally invest in 10X trends via www.awesome10X.com. Subscribe to her free daily and weekly videos through Youtube: Awesome10X.
Although our index (the $PSEi) has been consolidating in a tight range for the past couple of trading days, the prior surge has caused money to rotate the smaller strong issues in our market. Although outshined by the hype from $DITO and $MM, $PXP has been silent even though it has given traders a good profit opportunity.
Just like the previous technician that we featured, JollanReplan used a simple, yet powerful indicator to help time his trade: Support and Resistance.
Using simple S&R principles, it’s clear that $PXP was in a short-term uptrend as the stock was forming higher lows and higher highs. For newer traders who are still learning how to use support and resistance, it is often a sign of strength when prior resistance acts as new support. It signifies that there are people on the sidelines eagerly waiting for the stock to come back at either the price they sold if they were prior sellers or at a price that they might have missed if they were waiting for the breakout.
By using prior resistance as new support, entry could be found in this stock before it surged further. The profit target was simple as well. The main TP was set at the height of the channel. As of today, this level was actually easily taken out as $PXP broke out of the channel. An overall solid trade by our featured trader!
A common notion among many newer traders is that being a pro trader means having advanced systems and complicated charts. Although they can be a source of edge, a trader’s performance doesn’t rely entirely on how much he knows, but how well he uses the tools and knowledge available.
Simple but effective. Congrats, JollanReplan, for being our featured trader of the week and for a good $PXP trade. Your FREE one-month InvestaPRO access is on its way!
Theory and Experience are two different things. Although backtesting may give us expectation, the market will not always give us copycat results. The road to be a consistently profitable trader doesn’t end in theory but we must also adapt in the randomness of the market. Therefore, it is highly suggested that we must put your theory to test or at least check the charts on a daily basis even without participation.
What is Forwardtesting?
Forwardtesting is the testing of strategy in the actual market condition. Unlike Backtesting, this is where our biases are restricted since we can’t see the right side of the chart. The part of the chart which is the unknown and unidentifiable.
The void where only man from the future can predict 100%. All are probable.
Why is Forwardtesting important?
This will shorten our data gathering. We may combine the given data on our backtesting in analyzing if our strategy has an edge or not. Take note that like backtesting, forwardtesting alone may not give us an edge if done alone. We must forwardtest a minimum of 5 years of data to test our strategy in almost all market conditions if we want to use this testing method alone.
How to Forwardtest?
There are 3 methods I used in my forwardtesting method.
1. PAPER TRADING.
This is a similar process done on backtesting. Personally, after market hours, I will check the charts and see if there is a tradeable set-up within my rules or strategy that I am testing in the historical data. I will encode this to my excel file and check the next day if the entry-level was hit. Once the entry-level is hit, this will automatically be part of my data pool and will check in the following days if the desired exit level, whether cut loss or take profit level were hit. This is the best way to hasten your data gathering and analysis since both will be in theory level and you will know if your strategy works in the current market condition.
2. VIRTUAL TRADING.
There are tools that will give us the feel of the actual trading while not spending an amount of money. Some of the brokers (esp. in foreign markets) and Investagrams offer these services.
Before I stepped into the foreign market, I traded 6 months on the virtual platform to see if my strategies from the local market worked on the foreign market. This will give you familiarity with the market structure, market conditions, spreads, and the broker’s platform.
3. SMALL BETS.
This is where you put your money on the line for a strategy/trading plan that is already backtested but needs additional conviction in trading it on the actual market condition. Since money is on the line, emotions will be a factor in the decision of your execution. In this part, you will know if the tested data is tradeable based on your personality, emotional capability, and market’s actual volatility. Data gathering will be useless if you can’t execute the plan that you are testing. Start betting a small amount that is ok for you to lose. Treat it as if you are paying for a toll fee for the expressway so that you can go to your destination faster.
Personally, I am using a VAR (value at risk) at around 0.25% – 0.50% whenever I trade newly backtested strategies. However, strategies under Forwardtesting phase are my least priorities since it is best to prioritize your Triple A set-ups whenever that opportunity comes.
Tips: For local market to minimize the impact of your fees, your trades must be above Php 8,000.00
Always remember that theory was made to be executed. An idea without execution is just a dream. An execution without an idea is a disaster. It is important that theory and execution are hand in hand in your trading career. A good plan based on gathered data is your aftermath from your newbie days. The only thing you should worry about is executing it consistently with controlled emotions.
Trading is a continuous process of gathering data, testing your strategies, familiarizing your advantages, controlling your emotions and mastering your craft.
About the Contributor:
A passionate trader who aims to share the reality, the HOWs and the WHYs in trading. My goal is to help traders and investors like me to continuously improve and refine our skills to the path of mastery.
When you start out in the markets, especially if you began during a sideways or bear market, the first type of selling you get accustomed to is selling at a small loss or cutting your losses.
However, once the market environment finally becomes friendlier to a long-only market like the Philippines, you start to see some gains in your portfolio. Not just a few 5% to 10% winners, but you start to see your positions go up 20% to 30%.
You get hyped! Your hard work of studying the markets day in and day out and continuous cutting of losses finally paid off. You believe all your stocks are going to the moon and you’re about to experience your first bagger. All until the stocks you hold hit their resistance levels, make a climax top, or close below a key moving average and start to reverse. You give up the majority of your profits, or even end up at a loss.
What happened? You may be wondering. You had all these spectacular gains in a short period of time, but you lost it almost as fast as you made it. What happened was you didn’t know how to sell at a PROFIT. You got used to cutting your losses small and once the tide finally turned in the market you made some money, but only on paper. Selling at a profit is a totally different ball game from selling at a loss.
Our goal in this article is to show you three different ways on how you can take profits on your winning trades. Here they are:
Using a target profit
Selling into strength
Selling into weakness
USING A TARGET PROFIT
A target profit, or commonly referred to as TP levels, is a place in the chart where you sell your position at a profit. Your TP will usually be placed in areas of resistance; whether it’s an intraday high or a multi-year resistance level. Instead of further discussing what a TP is, let’s show you some examples.
SELLING INTO STRENGTH
Another style you can incorporate into your selling strategy is the concept of selling into strength. Famous growth stock investors and market wizards Mark Minervini and David Ryan usually sell into strength when they’re taking profits. Selling into strength means you’re selling your position (or a portion of your position) while the getting is good. You sell on the way up as prices continue to rise.
What’s the logic behind this? The reason you want to sell into strength is that you want to lock in gains before the stock starts to reverse. Selling into strength also ensures that your equity curve continues to go up in an uptrending fashion. This style is especially important for those handling big funds since you will need to sell your position not when you want, but when the market gives you an opportunity to do so. What better time to find a ton of buyers other than when the price is going up?
When you sell into strength, however, note that you’re most likely going to sell too early. BUT THAT’S OKAY! The goal is not to sell at the top, but it’s to sell at a price higher than your cost on a consistent basis. There are now hard and fast rules when selling into strength, but generally, you can begin lightening up on your positions when a stock is up huge in one day or makes a climax top (up 15%, 20%, or more) when everyone believes it’s going to the moon (climax top) or when the trade has made 2x your average gain.
If you were able to get this below 10, the best area to sell into strength was at 15 pesos. The stock was in the process of putting in a climax top by going up 50% in one day after already going up 250% in a few weeks. People were also getting extremely euphoric, a dangerous sign. We all know what happened the next day.
Here’s another reason why selling into strength is a viable option, especially in stocks that get extended. If you planned to trail your profits on $IDC using EMA20, you would’ve given up 40% profits on the trade. Who wants to give up that much room? That’s why it’s important to sell portions of your position on the way up to lock in some gains especially when the stock gets extended, everyone gets euphoric, or the trade is 2x or 3x your average gain.
SELLING INTO WEAKNESS
Selling into weakness is basically trend following. This is the opposite of selling into strength where you tend to sell too early on the way up. When you sell into weakness, you wait for a confirmed reversal of an uptrend (by using trail stops of your choice) and sell on the way down. So if your tendency is to sell too early by selling into strength, when you sell into weakness you will usually sell too late.
HOWEVER, by focusing on selling into weakness during BULL MARKETS you may latch on to a market leader for a big move, possibly even a triple-digit return type of move. When you use trails stops, you’re basically going to be stuck with the trade until the trend reverses and the price closes below your chosen trail stop, if prices continue to go higher with minor pullbacks, then you may be in for a long profitable ride.
This is probably the best example to showcase the potential gain if you sell into weakness in a strong stock in a bull market. If you bought $MAC during the breakout at around June 2017 and trailed your position simply using EMA50, you would’ve been stopped out at around 19.70 pesos, a near 500% gain. This is the power of trend following.
IN CONCLUSION
There are no hard and fast rules for selling at a profit, what matters most is choosing the right approach that best suits your personality. No one style mentioned above is better than the other, there is only what works best for you. The most important thing to remember is that you must EXECUTE on your chosen approach. You’re also not just limited to choosing one of the three discussed, you can use all three depending on the situation.
You can also do a COMBINATION of the three approaches. You can sell 50% of your position into strength to lock in some gains, then trail the remaining half using EMA50 to take advantage of a potential big move. It’s up to you on what combination you want to use.
Most importantly, when selling at a profit DON’T KICK YOURSELF FOR NOT SELLING THE TOP! Here’s a quote by Baron Rothschild, a great trade from the 1900, “I never buy at the bottom and I always sell too soon.”
Cryptocurrency has brought excitement to some but confusion to many.
Given its relatively new status in the finance world, there are many questions surrounding it – How do I use it? Is it safe?
Many do not have a good grasp of what it is, and for good reason.
It definitely is a concept that is hard to wrap your head around, but look no further for answers; below, we try to break it down for you in the simplest way possible. Read on to find out more!
What is it?
In essence, cryptocurrency is a system utilised to make secure payments online. A key element that distinguishes it is that it does not utilise third parties: you can directly make payments from person-to-person, without having to pass by a governing body to verify the transaction. Cryptocurrency is safeguarded by encryption algorithms done by computers, and these same computers are the ones verifying each transaction done. Cryptocurrency as we know it first emerged in 2009 with the creation of Bitcoin. This form of digital currency was set apart because of its use of blockchain technologyThe use of this technology is a key element of cryptocurrency, as it ensures secure transactions whilst not having to pass by any third party.
To further understand blockchain, the word can be broken down into two parts: block, meaning “digital information”, and chain, meaning “stored in a public database”. When a transaction is made, it is stored into a block. That block contains three types of information: first, general information about the transaction such as the date it was conducted and the amount; second, who is participating in the transaction; and third, a unique code called a “hash” that is used to distinguish it from other blocks (like a barcode). A block is made up of thousands of transactions coming from many individuals. Each transaction made in a block is first verified by a network of computers. These computers solve complex mathematical problems, called “Proof of Work” to prove they have done the task. They are then rewarded with cryptocurrency – this process is called “mining”. An alternative way of validating transactions is “Proof of Stake” wherein miners can validate a block based on how much cryptocurrency he/she currently holds – the more money, the more mining power you have. This way is sometimes more preferred as Proof of Work requires huge amounts of power and energy to solve the problem.
Once transactions and blocks have been verified, they get added to the chain of previous blocks (hence the name “blockchain”), and the transaction information becomes publicly available. Individuals are secure, however, and remain semi-anonymous as information regarding who is participating is summed up to a digital signature. Users of cryptocurrency can connect their computers to this network of blockchain, which allows them to receive copies of the blockchain every time it is updated, working somewhat like a Facebook News Feed. With thousands of computers connected to the blockchain, hacking and manipulating information becomes nearly impossible – to do so, you would have to hack into every computer that has a copy of the chain. In the same way, this chain is built on trust: with no identifiable information on anyone adding to the chain or receiving copies of it, it raises the question of whether you can continually trust the information being added and the network of computers upholding it.
Pros and Cons of Cryptocurrency
On one hand, a cryptocurrency is a viable option for many because there is no central authority, be it a bank or government, that has control over the network. This means that no single body has access to your funds and personal information, protecting you from the risk of exploitation. It also makes fund transfer easier between parties as there is no third/external party involved. You transact with another individual directly without a body to double-check the transaction – this responsibility falls on computers. Without a third party, fund transfers also have more minimal processing fees, leading to lower costs overall.
However, it has also faced criticism due to the anonymity of its users, making it a breeding ground for illegal activities such as money laundering. Additionally, there is wariness with the system that upholds cryptocurrency. Because everything is digital and not stored on a central database, cryptocurrency balances can be wiped out in seconds due to the destruction of a hard drive, loss of access to your digital wallet, and more, with no way to retrieve that money. Backup copies do not exist in the world of cryptocurrency.
Types of Cryptocurrency
Below are the two most common cryptocurrencies used. There are many more emerging types, as this is a relatively new and exciting industry. The total value of all cryptocurrencies in existence is around $214B.
1. Bitcoin
The most popular and valuable cryptocurrency, Bitcoin was the first of its kind. Launched in 2009, it was described as a peer-to-peer electronic cash system. Bitcoin represents more than 68% of the total value of all cryptocurrencies.
2. Litecoin
Created with the intention of being the silver to Bitcoin’s gold, it operates very similarly to Bitcoin. However, it is able to generate blocks four times faster than Bitcoin, speeding up the transaction activity by an incredible amount.
3. Other known cryptocurrencies are Namecoin, Ethereum, and EOS.
Conclusion
Cryptocurrency is definitely an interesting commodity, and one to look into if you are into riskier investments. It is considered high-risk high-reward because its market value fluctuates wildly. Its value is based on supply-and-demand, and with it being relatively new, individuals get into a frenzy over it, but also more than always drop it just as quickly. As an example, in December of 2017 it was traded at $20,000; exactly a year later, its value dropped to $3,200 – a huge change in just a year. If you do plan on going into this currency, tread the waters lightly: do you research well, track market fluctuations, and keep a rational, level-headed attitude at all times.
For this week, we would like to congratulate our Featured Trader:@bassitalakay!
Recently, our markets have been strong as many issues have started to bottom out and regain footing. Even more, it seems that everyone has become very optimistic that the businesses will bounce back very soon. This begs the question: how are the fundamentals doing?
While many on the Investagrams platform focus on charts and technical analysis, Apo Lakay Cassandra is one of those people that focuses on sharing fundamental insights. Let’s take a look at what he has been sharing.
Diving into @bassitalakay’s trade
In his post about Jollibee Foods Corporation or $JFC, he gives a deeper look at what the numbers could be telling us. Due to the pandemic, it’s easy to blame bad numbers on the hazardous environment. However, this featured trader looked deeper if there are problems in the company and shared his insights with us.
Last year, $JFC made headlines when it further expanded its global portfolio and acquired CBTL. As they have to work towards rebuilding the business in order to turn it around, the endeavor has become harder due to the disruption in businesses globally. Although possible, Apo Lakay Cassandra shares how doubtful he is that this is a problem that will be dealt with quickly due to the bad numbers and continuously harsh global business environment.
Even though community quarantine protocols are being loosened, we are only transitioning to a new normal that will most likely be different from how things used to be prior to the pandemic.
As people’s lifestyles are disrupted, new economic trends are bound to happen. Apo Lakay Cassandra states that his own insights are possibly based from his own experience. Some possible trends are easy to spot, such as the digitization of businesses and the importance of internet services in all households.
Our featured trader has shared four of his own insights, but just as he says, there will surely be more business trends that could present opportunities to both investors and entrepreneurs.
To show our gratitude for Apo Lakay Cassandra’s efforts to add value to our community, we are giving him FREE one month’s access to InvestaPRO! Happy trading to all!
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