For this week, we would like to congratulate our featured trader: Spidey a.k.a. @spidey!
This trader was able to spot a stock affiliated by Nickel, one of the tradeable metals in the commodities market, called $NIKL or Nickel Asia Corporation. Spidey a.k.a. @spidey, is an active member of the Investagrams community who endlessly spreads his knowledge on the local market using Technical Analysis.
He mentioned the implications of the said candlestick pattern last October 8, 2020, wherein the displayed name exhibited a shooting star candlestick pattern, indicating a beginning of a downtrend. However, it is worth noting that a breakout of its pivot high invalidates the said downtrend bias for a said stock or any asset class. Moreover, given that Nickel prices heavily influence $NIKL, traders must check Nickel prices for more conviction in trading this stock. The same is true with names that are affiliated with any commodity or whatnot.
Technical wise, the stock broke out of the channel line that gave a 25% return (based on the October 12, 2020 top) in 4 days. The channel line was supported with a below-average volume, and the said breakout was supported with massive volume, which are critical features for any asset to continue its advance. It is a low-risk, high-reward trade, as the stop loss levels for the said breakout point around the 3-peso area could be below 2.95 (-4.5%), and the take profit areas could be the structural resistance at 3.8 (25%).
In the bigger picture, the said name is displaying an inverse head and shoulders pattern. It is ideal for the said stock to rise in confluence with the Nickel Futures to solidify its state for a significant reversal.
It is best for $NIKL to consolidate and hold above the 3.4-peso area with dried-up volume to form a constructive base. A break above the 3.8-peso area confluence with massive volume is superlative for this stock to continue its dominance.
As stated by Spidey a.k.a spidey, basing one’s bias through a single candlestick pattern may catch you off-guard. It is still ideal to be more focused on the cluster of candlesticks than a single candlestick. Then again, it depends on the end-user.
Congratulations to those who were able to maximize the technical swing of $NIKL. Lastly, kudos again to Spidey a.k.a spidey for sharing his trade analysis. Your FREE 1-Month InvestaPRO is on its way!
It may seem really challenging and difficult, but it’s not only the job of the accountants or finance majors to check out and interpret the values in the financial statements. Difficult to absorb this? Well, yes. It will be difficult to take in. Number here, numbers there! But, understanding the balance sheet is both an art and science. It takes determination and a great skill in interpreting the numbers.
The balance sheet is one of the important financial statements that not only accountants must see, but even investors and traders. If you want to see the financial position of the company, check on the balance sheet! It reflects the growth of the assets and liabilities. At the same time, with the numbers on the balance sheet, you can see how the company handles the debt, “Malaya na ba sa utang?”. Now let’s understand the structure of the balance sheet. There are 3 main elements that makes up a balance sheet. We have the assets, liabilities, and owner’s equity. Now, let’s get to know more of each element.
The Assets
Assets are known to be the resources of the company, which is divided into 2: the current and non-current. The difference between the current and non-current is the liquidity. Current assets are the resources that can be easily converted into cash, on a time period of 1 year. You must check on this portion to know if the company relies more on assets than liabilities. The examples of current assets are cash, accounts receivables, and prepayments.
On the other hand, non-current assets are the resources that would take more than a year to be converted into cash. These types of assets do not necessarily need a during of 12 months to have the resources cashed. Some examples are long term investment, PPE (Plant, Property, and Equipment) and other intangible assets.
Checking the summary of the balance sheet or the graph of the assets can say a lot about the company’s growth on their resources. You may want to consider a company who can also easily liquidate its resources!
The Liabilities
Liabilities are obligations of a certain enterprise or a company. Just like the assets, liabilities are divided into a current and non-current liability. Current liabilities are expected to be settled within 12 months or 1 year. Examples of current liabilities include accounts payable, notes, loans, and interest payable. Meanwhile, non-current liabilities are expected to be settled after 1 year. Examples of this are mortgage, bonds, and long-term notes payable.
“Utang na naman!” Is this necessarily a bad thing? No! Liabilities can serve as another source of assets. However, if it turns out that you rely on too much liability, you can experience financial hardships! Remember, kahit si Aling Marites, mahihirapan kakasingil ng tatlong buwang utang mo!
The Equity
The equity illustrates the claimed resources of the business by the owner. These includes the capital investments, drawings, common stock, preferred stock, and the retained earnings. Take note that if the company has a negative equity, it illustrated that the quantity and value of its assets are not capable of covering the company’s liabilities, and this is a warning signal!
The balance sheet is more than just the assets, liabilities, and equity. This financial statement shows if the company is able to pay its obligations when times are rough, just like during this pandemic. With the help of the balance sheet, you can identify whether or not the company is a good investment through its value in assets, liabilities, and equity!
At the same time, mastering the skill in checking at the figures can help you know the company’s growth and sustainability. Continue to be wise and disciplined in studying your lessons and analysis! Sooner or later, you are able to choose your stocks wisely!
For most people, the moment they start learning strategies and demo trade here and there, they can’t wait to put their money in their brokers ASAP.
But another question arises…
“Should I trade with the extra money?”
“I don’t have any source of income, how should I get capital?”
“Should I go all-in with my savings to trade the stock markets?”
So, in this guide, I’ll be sharing with you different ways on how you can start (and grow) your trading business.
It doesn’t matter whether you are a student, an employee, or an already consistently profitable trader.
But first…
Let’s be clear
If you want to start a trading business because you need to pay your lifestyle, or immediately want to replace your full-time job…
Then I highly suggest you don’t, as the worst time to start a business is through desperate times.
Yes, having a business can give you exceptional rewards, but it does not guarantee you a fixed income all the time, or even a return of investment.
Which is why trading is a business that should not be approached with an employee mindset.
But if you will approach this trading business in such a way that you’re…
going to build a personal and financial empire, instead of trying to survive
acting from your vision instead of your fears
ready to learn the skills needed (and to pay the price) to become an exceptional trader
Then I can almost guarantee you that you will enjoy this amazing journey of a lifetime.
So let’s start…
#1: Your Most Supportive Investor
This may not sound like a grown-up move but they can be your #1 supporter and first investor even if you don’t have any track record.
But you have to let them be aware that trading in the financial markets is not a get rich quick scheme.
So never make promises or guaranteed returns to them. Another thing that you should do is to show them that you are going to trade the markets with a plan and not just enter and exit randomly.
Your trading plan may constantly change as a newbie, but let them know that you are not starting with “lack” as this is good for you and your “investor” Finally…
Make sure they won’t sacrifice important payments or be in debt to give you capital.
Because IF the worst happens, you don’t want your decision to trade the markets affect your whole family.
Next…
#2: Using Your Hard-Earned Cash Properly
As an employee, it’s easy to say that you should save money and invest extra funds.
But trading is not just a side hustle or a part-time job, it is a business that requires commitment and energy.
So one thing you must do first is to…
Build a safety net
You must have a 3-6 month emergency fund in case something happens, and eliminate consumer debts.
Because the last thing you ever want to do is to trade because you need to pay the hospital bills or pay your debts as it puts your mind in an environment where you will be forced to perform and expect guarantees in the market.
Have a budget plan Always remember that a budget plan is goal-oriented.
So there’s no such thing as a fixed rule or percentage on managing your money, it is up to you!
But having it will always set your priorities straight, fulfilling responsibilities and personal goals at the same time.
As an example, you can allocate your monthly income to the following • 25% = Needs/Expenses • 25% = Wants/Self-Investment • 15% = Passive investing • 35% = Trading capital Again, this is just an example.
So you want to ask yourself what you want and adjust the percentages accordingly.
Overall, I want you to know that what we are doing here is to put you in the right environment to trade.
Moving on…
#3: Taking Your Trading Into The Next Level
I highly suggest that you choose this step once you have found consistency in the markets, and not when you’re just starting, but here are some sources you can consider…
1. FTMO (Paid):https://ftmo.com/en/welcome/#objectives You must complete their challenge of profiting at least 1% and not lose more than 1% within 30 days You can get funded up to $100,000 but this will depend on the challenge FEE you will pay
If you are someone who trades the forex markets as a momentum or day trader, then this is for you, as the challenge and time required is quite short. 2. PSYQUATION (Free):https://psyquation.com/ To qualify, you must have a PQ score above 75 with a 6-month track record on their platform.
You can receive funding up to 150,000 AUD and 20% of profit is yours, all you need to do is to use your trading capital and build a track record.
Again, if you are someone who trades the forex markets, then this is for you. 3. FUNDSEEDER (Free): https://fundseeder.com/home It is a platform led by Jack Schwager, but conditions and funding amount is not disclosed.
You can also trade any financial markets in the world with their accredited brokers, so if you are someone who trades global markets, then this is for you.
Now…
The reason why I mentioned that you should only choose this step if you’ve already found consistency is because pursuing institutional funding or managing other people’s money with an inconsistent and self-destructing trading habit is like pouring fuel over a fire.
So if you haven’t found consistency within yourself yet, then the chances of you finding consistency with other’s money are unlikely.
Finally…
Bonus: Controlled “Tuition” Fee
If you want to start your trading journey with having “low risk” and “high reward,” then this method is for you. Let me give you an example…
If you are dedicating a ₱100,000 trading capital to trade the markets, only put ₱20,000 (20%) on your trading account as you start trading. Once you gain consistency in the markets and not lose everything for the first 3 months (depending on trading style)… Place another 20% of your initial budget capital into live trading. If you mess things up early but only put 20% of your budget into live trading, then you have experienced a learning opportunity (the reward) at a low cost
On the other hand, if you managed to allocate 100% of your capital budget, then you’ve reached the stage of consistency that’s above the majority! Remember, confidence comes from competence and something you must prove to yourself gradually.
So…Which Option Should You Pick?
Overall, every person is unique and has different circumstances.
So, you can choose an option on how you can raise capital, and then improve on it, or tweak it in a way that’s appropriate to your situation.
With that said…
What are the other ways on how you can raise trading capital (legally)?
Let me know in the comments below.
Contributor:Jet Toyco
Investagrams Username: @Jet_Toyco
About the Contributor:
Jet Toyco is a private executive trading coach and a systematic trading portfolio fund manager at TradingwithRayner.
He is also a public helper of the trading community that is always open to questions anytime to give the knowledge people deserve at no cost, and no hype.
Even though several market leaders have emerged in the local market, multiple of which have also appeared in the US stock market. As the said market contains approximately 7000 stocks and its status quo for being the so-called “giant” of all stock markets, there is inevitably a higher chance of spotting leaders in the global landscape.
For our featured trader for the week, we will be showing you how she was able to spot Nio, Inc. or $NYSE: NIO. CorruptedVodka a.k.a. @corruptedvodka, is an active member of the Investa Community who continuously spreads his knowledge, insights, and expertise in the global markets, including the US stock market and cryptocurrency.
She got the trade idea using Elliot Waves and classic indicators such as EMAs in AOTS condition, RSI (14), ADX. Her notable post highlighted the importance of analyzing a stock’s DNA. CorruptedVodka stated that, based on its historical data, the said stock is volatile and prone to shakeouts given the wicks embedded in several of its candles. Moreover, an all-time high stock would most likely present bearish divergences, although let us remind ourselves that in a trending price behavior, the RSI (14) tends to exhibit false readings.
The key to trading volatile stocks is to check volume behavior along with its price movement stringently. As you can see, there were several fakeouts in the said name, although it is observed that those fakeouts were accompanied with below-average volume.
A breakout of a pivot high with an enormous volume of an underlying base supported with dried up volume is imperative for any market leader. All-time high stocks are perfect for traders who are equipped in being a swing or position trader with a trend following approach.
It was a low-risk, high-reward trade, as a triangle pattern presented itself at around the $11-$15 areas. It allowed purchasing at the breakout of the said base around the $15.7 with a quick cut below its corresponding candle right below the $15 area (5-6%).
If the said market participant missed that, another opportunity represented itself as the said stock created another triangle pattern around the $16.5-$20. A market participant can choose to execute the trade at the breakout of the latest base at around $20.5 with a quick cut below $19.3 (-6%). Selling into strength (selling on the way up/while it is easy) and into weakness (the breakdown of a, for example, a pre-determined Moving Average) is fitting since this is an All-Time High stock.
It is ideal for $NYSE: NIO to continue hovering above the $20 structural and psychological support levels to further assert its dominance. Moreover, the company shows massive potential as it is allegedly the direct competitor of Tesla Motors Inc., which is owned by Elon Musk. Despite that, market participants should always adhere to their respective setups. Price is king, as they say.
It is challenging to trade all-time high setups in the US stock market as various market participants’ opinions may cloud an individual’s judgment. The bottom-up approach lets you spot resilient names without being discouraged by other traders’ views along with the US indices. Traders must rely on their analysis and bias while being openminded by acquiring things with a grain of salt concerning vital information regarding an asset class.
Congratulations to those who were able to maximize the technical swing of $NYSE: NIO. Lastly, kudos again to CorruptedVodka for sharing her execution. Your FREE 1-Month InvestaPRO access is on its way!
Have you ever experienced a losing streak which ultimately depleted your confidence in trading the markets? There is also a similar situation that is as dreadful. It is when you experience a winning streak that ultimately makes you overoptimistic.
The Superman Syndrome enables you to feel like an eternal being thinking that the trader possesses a tremendous control over their next trades. The trader starts to execute setups that are not in conjunction with their trading system. As if the market participant deems that their future trades would be mostly right. The trader feels that they can bear with the extra losses as they have gained a significant hedge through their previous gains. The Superman Syndrome enables impulsive decision making through overtrading rather than being in Zen through being selective in their stock selection.
It is also as bad as feeling lost and being diffident on your next trades. Thinking ahead that their next trades will be losers. An individual would find it difficult to execute a trade given the bias that is circling in their head. Being too defensive will hinder an individual from amassing the full potential embedded in the financial markets.
Having confidence in trading is a key aspect to achieve success in the financial markets. However, a market participant should not be reluctant nor conceited when it comes to their trading psychology.
It is best to take a breather whenever you score huge gains and winning streaks to reset your urges. This also applies when your money is on the drain after a losing streak. As they say, trading is 80% psychology and 20% methodical.
Being in Zen while being free from external negative energies that could disrupt your trading is a non-negotiable aspect of this endeavor. Being in this type of state enables the trader to stay in the flow. Traders who are at peace tend to make themselves available on the endless streams of opportunity that the market is offering at any given moment.
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Possessing the urge to revenge trade or to trade impulsively due to the Superman Syndrome must be treated instantly. The same goes with being hesitant due to losing streaks. It pains to be in an emotional rollercoaster while pursuing this type of endeavor. As they say, you attract what you are.
To learn more about trading psychology, I highly suggest reading the book called “Trading in the Zone” by Mark Douglas. It is a trading psychology book that will enable you to master the market with the proper discipline, confidence, and attitude.
Before entering the level 10 in a game, the player needs to start at level 1. Before even the famous Shakey’s or Mang Inasal have started, they have started small too! And just like any other investor or trader, everyone starts with the foundation of the basics in technical and fundamental analysis.
Winning in the stock market is a process. It is never just a one-step win or even a trade with 80,000 pesos gain. Everything starts with a good foundation of financial literacy, and this starts with the basics in technical and fundamental analysis.
Now, what’s in it for you to understand the basics? Understanding each concept of technical and fundamental analysis will help you assess the stock you are about to pick. It helps you gain more wisdom on how you should understand the stock market and the company on various perspective, just like how you would choose between wearing a casual or formal attire. Analysis provides information that will help you interpret the structure of the company or even understanding the figures on the financial statements.
As an investor, you must know the intrinsic and true value of a stock. You must be able to determine if the value reflects on the stock prices. Of course, who would like to buy a 500 pesos worth of ground coffee without knowing its history, background, and components! This is the reason that you should invest in knowledge on analyzing the stock market.
Fundamental Analysis
Fundamental analysis is not just defined to be any fundamental, basic, or elementary education. Understanding the component of fundamental analysis would help you asses the quality, profitability, sustainability, and growth of the company.
Start from a top-down approach, in which you would start analyzing information from general to specific. Now, how are you supposed to win the basics in fundamental analysis? Remember the acronym FLIGHT! And now we are boarding to our destination, the fundamental analysis
F stands for Financial as your Language
English and Tagalog are not enough in understanding the stock market. Make finance as your language.
Why? So that you can understand the financial characteristics and financial statements of the company you are about to invest into. Now, making finance as your language does not solely mean accounting or computing. It also helps you understand underlying factors and signals such the news and press releases of the company. Assess the valuation, earnings, and growth, of the company to know the financial health in terms of assets, obligation, ratios, and cash flows.
L stands for the Law of Demand and Supply
Math? Stock Market? And now Economics? Yes! You see, if there are sellers and buyers, there is a demand and supply in the market, and this makes the stock prices rise and fall. Take note that when the stock goes uptrend, there are many buyers. Otherwise, there are many sellers.
I stands for Intrinsic Value
Always keep it in mind that you would want to buy a stock which reflects its value on the stock price. To know this, you must check the Price-Earnings ratio of the company and compare it among its peers or company of the same industry.
G stands for Growth and Good Investment
The relationship of the price and value also leads to quality of growth and goodness of the investments. In order to know the quality of the company, you must check on the high-quality rate of the company’s value on the financial statements (balance sheet, income statement, cash flow) and financial ratios (liquidity, operating, valuation, common size, solvency).
Never just check on one part of the structure! You must check the signals and be able to determine if the company is under too much debt or is it well operating on its finances.
H stands for Historical Performance
It is a must to check on the historical performance of the company to check whether or not they are growing. Ask yourself if it is the company you are willing to place your money into for a certain period.
T stands for Think not Trend
Never invest on a stock just because it goes trending or your friends tells you so. Think wisely and analyze the company’s stability and development. Remember being famous or big does not necessarily mean it is good investment.
And now we are unto our next destination, technical analysis. Now, let’s READ!
Technical Analysis
R stands for Reading Charts, Lines, and Patterns: Market Structure
Understanding the different charts, trend lines, and candlestick patterns will help you understand the market structure. With these visual representations, you can slowly begin to determine if the stocks are going uptrend, downtrend, reversal, or sideways.
E stands for Evaluation with Indicators
Now, in technical analysis there are various indicators. However, you must begin with learning the concepts then applying each and checking which one would fit your strategy as a scalper, day trader, position, or swing trader.
You must first understand the concept of floor price and the floor ceiling, also know as the support and resistance. Why? Because this will help you understand the breakouts and breakdown with the candlesticks,
You can also use the RSI, to know if the stocks is overbought or oversold, or the moving average to know the buy signal. There are various purposes of indicators. But most importantly, this will help you enter and exit the market on a great time.
A stands for Assessing yourself
Assessing chart movements is useless if you do not have risk management and control over your emotions. As Alexander Elder quoted, “the markets are unforgiving, and emotional trading always results in losses”, and I guess you wouldn’t want that either!
D stands for Don’t forget to read and do a strategic application
After all these points to remember, always enjoy learning and re-learning over and over again.
Charlie Munger: The game of life is the game of everlasting learning. At least it is if you want to win.
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This trader was able to spot one of the market leaders of the local market – $CHP or CEMEX Holdings Philippines Inc. Potato a.k.a. @lazypotato is a new and active member of the Investagrams community, yet already ceaseless in providing his analysis and insights focusing on the local market.
Along with his analysis of his stock selections, he also highlighted that a trader must take things with a grain of salt. When it comes to grasping ideas of other market participants, he said that a trader must be careful in following or absorbing their ideas. We will never know if other’s analysis were made purely because of goodwill or because of hyping/bashing. Thus, it is always important to trade at your own risk (TAYOR) and with caveat.
As the said stock rose from its initial base, the stock consolidated for more than a month. The consolidation phase was also supported by below-average volume. Moreover, he also shared that the recent breakout of the said stock was in confluence with heavy volume, RSI (14) breakout of its trendline channel, MACD bullish crossover, and alignment of the stars (AOTS) in the form of moving averages.
Having multiple indicators confirm a buying signal indicates better chances that the move will continue its ascendancy. However, let us not forget that anything can happen in the markets. As traders, we should respect our stops if any unforeseen event occurs.
Moreover, there was a bullish divergence in the RSI (14) in its initial base prior to its rise. If you missed out on this trade during its rise last August 5, 2020, an opportunity reemerged when the stock was able to hover above the previous resistance which turned to the new support at the 1.4-peso levels.
The ideal buy point was the 1.4 (support) or the 1.5 (trendline breakout) peso levels. It is a low-risk, high-reward trade, as the stop loss levels for the said breakout point could be below 1.42 (-5.5%) if you bought it on its trendline channel pattern. On the other hand, the stop-loss levels for the said structural support levels could be below 1.34 (-4.4%). Take profit areas could be the structural resistance at 1.9-2-peso area (30%-40%).
In the bigger picture, the monthly chart also exhibits a bullish divergence along with a triangle breakout. $CHP must sustain and consolidate above the 2-peso levels to further assert its dominance.
Market participants should not feel lonely when they miss a trade. Given that the financial markets offer a multitude of names from various asset classes that are operating in different timeframes, the markets are bound to give an endless stream of trading opportunities to those individuals who make themselves available for whatever the market is offering at any given moment.
Congratulations to those who were able to maximize the reversal play of $CHP. Lastly, kudos again to Potato a.k.a. @lazypotato for sharing his trade analysis. Your FREE 1-Month InvestaPRO Access is on its way!
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