Everyone has those off days. Everyone has failures and doubts. What’s important is that we keep going even when it gets hard—especially when it gets hard. Because that’s when you know you’re getting close.
So if you’re feeling down, ere are a few tried and tested principles that will help motivate and inspire you.
1. Give yourself time.
Success takes time. Building an empire takes time. “Overnight successes” like PokemonGo or even the biggest breakouts you’ve seen took years before finally breaking through that glass ceiling.
Trying to achieve success as fast and as aggressively as possible is great, but you need to be in it for the long haul. Take time to recharge and take care of yourself. You’ll be happier and more productive for it. Not to mention you’ll be able to outlast any challenges that may come your way.
2. Be humble and take things one step at a time.
Just a little bit of success, a 5% gain for example, can make us feel invincible—like we can do anything and nothing can bring us down. Don’t fall into this trap.
Whatever amount of success you achieve, know that there is always room to improve. Don’t be impulsive, thinking that you’ll always be right. In other words, ‘wag mag-assume. Bad ‘yun.
Remember that success can fade as easily as it comes and know that it can all be taken away at any time. Work hard so you can stay successful.
3. Don’t be afraid to take risks—but don’t be impulsive either.
By now, you’ve probably already heard of the saying, “High risk, high reward.” Yes, you shouldn’t be afraid to take risks, because you won’t gain much by always playing it safe.
But while that is true, it seems that most people nowadays have the opposite problem—they impulsively take too much risk. Notice that we used the word “impulsively”. This is because the main problem is not that people are taking large amounts of risk. The problem is that people are taking large amounts of risk without knowing what they’re getting themselves into.
This is a common story in the stock market. Sabi nila high risk high reward e. Edi kinuha ko ‘yung biggest risk.Too many people bet all their savings on volatile stocks, only to lose all their money. Kahapon lang niya nakilala, in love na raw. What do we say to that? ‘Wag ganun, boss. Bad yun.
4. Don’t waste time.
You can always make more money later, but once time has passed then it’s gone forever. In trading and in life, focus on the most important things first. Grab opportunities while you can. Enjoy moments while you can. Spend time with people while you can. Because in both life and trading, you never know when you’re going to run out of time.
5. Help yourself before you help others.
This is a hard one, especially for us Filipinos who are always taught to be selfless and to put others first. But the fact is that you can’t really help others that much if you don’t help yourself first.
Master your craft. Become the best person you can be. Find what makes you happy. Keep yourself healthy. Live a balanced and fulfilling life. Then help others do the same.
6. Be sincere.
It sounds simple in theory, but it’s actually very hard to execute in real life—especially with so much noise from the media and society in general. It’s a harsh world we live in, and it can be tempting to just focus on your own survival. Sincerity is rare nowadays, but it doesn’t have to stay that way.
Remember that someone else’s gain does not need to be your loss. Be compassionate. Be kind. It can be something as small as saying a few heartfelt words to someone who’s having a hard time.
Be sincere in everything that you do and you will make your mark in people’s lives.
7. Know the rules, then break them.
Rules are important. They give order to our otherwise chaotic world. But not all rules make sense, some are outdated, and some are just plain stupid. A lot of rules are just the result of too many compromises and too many people saying, “Well that’s how other people do it” or “That’s what we’ve always done.”
Don’t be scared to challenge rules or the status quo, especially if you know it is for the better. You can still be respectful even if you speak up. And who knows? You might be the one to change the world someday.
8. Become comfortable with change.
Change is the only thing in life that is permanent. You won’t be able to anticipate everything that will happen, but you can learn to roll with the punches and turn unexpected challenges into even greater rewards. Take the hits that life throws at you. Learn from them, adapt, and improve.
9. Learn to welcome failure.
Even the most successful people in the world have failed—many times and at many things—sometimes even at the things they’ve become famous for today. Oprah Winfrey was fired from her first television job. Jack Ma applied to 30 jobs and was rejected 30 times. Walt Disney was once told by his boss that he had no imagination.
Failures are painful, but they are valuable. They teach us much more than success does, and they forge us into stronger, more resilient people. As odd as it may sound, some failures are very important.
10. Stop hiding behind your age.
Age is just a number. Young or old, don’t let age be the reason for you not following your dreams. Success doesn’t care when your birthday is as long as you work hard and commit. There’s no time like the present, and you don’t want to have regrets when you’ve used up your time in this world. Whatever it is that you’re passionate about. Do it now.
11. Become indifferent to money.
Don’t let money make you sad, but don’t let it make you happy either. Don’t let it control you. Money is just a tool, learn to become indifferent to it and you’ll be better off.
The real value lies in the ideas, the freedom, and the good that money can help bring to life. Focus on coming up with great ideas, giving yourself and your family the freedom to not worry, doing good for those around you. Do something worthwhile. Make an impact. Provide people with value and money will follow.
12. If you don’t want to be average stop acting average.
If you are not where you wanna be, then do something about it. It’s easy to just sit there and complain—and that’s why so many people do it! But that’s also why so many people never see the changes they want to see.
If you want something, stop spending so much time on TV shows and Facebook. Stop slacking and start getting to work. It’s going to be hard, but if you really want it bad enough then find a way to make it happen.
What about you? What are some of your tried and tested principles for success? Let us know in the comments below!
Support and resistance may be one of the most basic concepts in stock trading and technical analysis, but it is also one of the most useful. If you know how to use them well, you can already start building a profitable trading strategy. So here are 3 simple but powerful ways to use support and resistance in making profitable trades.
1. Find the best time to buy or sell your stocks.
This is a very basic use of support and resistance, but it is still one of the most effective.
The support and resistance levels often serve as an indicator of a coming shift or reversal of the current price movement. These levels serve as a guide for when we should start buying or selling a certain stock.
We buy stocks as the price nears the support level. Once it reaches the support, demand becomes stronger than supply and more people will want to buy that stock, making the price go up.
On the other hand, we sell stocks as the price gets closer to the resistance levels because this is when you can sell for the highest price. When the stock reaches the resistance level, more people will want to sell and the stock price will start going down again.
2. Identify stronger support and resistance by the length of time.
There are many support and resistance levels that can be found in a chart based on how long or short the time frame is. The longer the time frame, the stronger the support and resistance and the harder they are to break. In other words, a 10-year support or resistance is much stronger than a 1-month support or resistance.
Although the interpretation of a chart is subjective and different for everyone, seeing the bigger picture gives traders an idea of where the stock can go and how easy or difficult it will be for the stock to get there.
Next time you’re looking at support and resistance, try looking at the support and resistance across different time frames to see what the big picture really looks like.
3. Spot potential breakouts, which can lead to huge profits.
The resistance level, once broken, becomes the new support level. If sustained, it gives traders an idea that there is very strong demand for the stock. Breakouts like this usually signal the start of a major price trend, which can lead to huge profits.
This increased volatility during breakouts attract traders because it can offer great returns with a minimal amount of risk, especially if there is no existing resistance in place (i.e. when a stock breaks out to a new all time high).
Keep an eye out for breakouts and wait to see if they are sustained. If they are, it’s likely that you’ll be able to make a profit off of buying that stock.
Don’t forget, you can also combine these concepts to make your trading decisions.
For example, if you see that a stock has broken above its 10-year resistance, then you know from #2 and #3 above that it has the potential for huge profits and you should definitely consider buying that stock. If you want to buy a stock but it’s near its resistance level, then maybe wait a few days to get a better price.
Simple moves like this, applied consistently and with proper risk management will help you become a more profitable trader.
Do you have other tips and tricks for using support and resistance? Let us know in the comments below!
A lot of people ask us, “What is the best investment for beginners?” or “Saang investment ba yung ok?” There are so many options these days that it’s hard to figure out the difference between them all.
So how do you find the best investment for you? It all starts with getting to know yourself. Parang love lang yan. You can’t find your perfect match if you don’t know who you are and what you want. (What you really, really want.)
A lot of people would just say, “But I know what I want. I want to make as much money as possible!” Well, that’s the catch isn’t it? Do you know what’s possible given your current situation? Every person has different resources and abilities, so here are some questions you need to answer first before deciding where to invest:
1. How much money can you invest?
As the saying goes, you need money to make money. Each peso you invest is like a seed—the more seeds you have, the more trees you can grow, and the more fruits you can harvest. The more money you have to invest, the more money you can aim to make.
The amount of money you can invest will also determine which investment options are available to you. Investing is not only for the rich, but there are some investments that require a lot of capital.
A good rule of thumb to find out how much you can invest is to subtract 6 months worth of expenses from your savings. The remaining amount is what you can invest.
Total Savings – 6 Months of Expenses = Investment Fund
Every month, make sure you still have enough money to cover 6 months worth of living expenses before adding more money to your investment fund.
It’s important to keep your investment fund separate from your living expenses because investing is not a get-rich-quick scheme. It takes time. If you need to pull out your investment too soon, then you’ll likely end up losing money—and nobody wants that.
2. How long can you keep your money invested?
Aside from money, another very important resource when investing is time. The longer you’re willing to keep the money invested, the more investment options you’ll have and the more money you can potentially make.
Because of compounding interest, your money will grow exponentially faster every year you keep it invested. As the interest from your investment is added to the next year’s principal amount, the impact of compounding interest becomes so big that the amount of time eventually outweighs the amount money you invest.
Here’s an example showing two investors, Person A and Person B. Person A invested P25,000 when he was 21 while Person B invested P50,000 when he was 30. Assuming the interest rate is always 10% for both cases, you’ll see that Person A’s investment will actually be worth more when they’re both 40 years old—even though Person B put in twice as much money.
When investing, think long-term. You’ll get the best results if you can invest your money for 10 years or more.
3. How much effort can you put into managing your investment?
If you have the time and dedication to educate yourself and manage your own investment, then you can save a lot on fees that would normally be paid to fund managers and financial advisers. It may even open up some investment opportunities that you couldn’t consider otherwise.
For example, a lot of people nowadays are marketing small businesses as investments—food carts and farming are just two examples. People will automatically ask “Ok ba ito?” and someone who has done it before might say “Oo! Laki ng return ko diyan!”
While it’s true that businesses can be great investments, they will only succeed if you put in the time and effort to run it well. Otherwise, you’ll just be throwing your money down the drain.
If you don’t have the time and energy to manage a high-maintenance investment, don’t worry. There are a lot of other investment options out there, which we’ll discuss later.
4. How much risk are you willing to take?
By now you’re probably tired of hearing this over and over, but it’s true—if you want bigger rewards, you’ll need to take on bigger risks. It’s difficult is to figure out exactly how much risk is right for you, but one thing’s for sure: There is no risk-free investment.
If you’re putting your money somewhere that’s risk-free, the interest rate will be so low that you end up losing money due to inflation. And if you’re losing money, then that’s not really an investment anymore.
Take savings accounts for example: Banks guarantee to keep your money safe and you definitely won’t lose a single centavo. However, the interest rate for most savings accounts is only 0.25%. That’s around 2.75% less than the average inflation rate, meaning that the value of your money decreases by 2.75% every year!
On the other hand, investing all your money in a new company that may or may not exist next year could lead you to lose all your money. But you might also have invested in the next Facebook and end up making a bigger profit than you ever dreamed of.
It’s always a balancing act when we talk about risk and reward, and the perfect mix is different for everyone. You need to take some time and really think about what would be the right balance for you.
Main Investment Options in the Philippines
Here’s a table summarizing the main investments available in the Philippines, and what their characteristics are in relation to the four questions above.
If you find any of these interesting, then scroll down for more details.
VUL Insurance
VUL insurance plans are one of the most popular investment options in the Philippines. It’s a flexible and low-maintenance investment that hits three birds with one stone—life insurance, health insurance, and mutual funds. If you don’t have insurance yet, you should seriously consider getting VUL insurance.
Minimum Investment: VUL insurance plans are very flexible because they are personalized to your needs. You can have premiums that are as low as a couple thousand pesos per month. Just keep in mind that your benefits will be proportionate to the amount you invest.
Investment Period: Though there is some flexibility with VUL insurance, it’s best to aim for an investment period of at least 10 years. Most plans will deduct the largest fees in the first few years and let you invest for free by the 5th year or so.
Risk and Return: The risk profile and rate of return with VUL insurance is average overall, but can be adjusted based on your preference. Insurance companies usually have a few funds that cater to different risk profiles. Just make sure to get a good insurance agent so they can customize the best plan for you.
Recommended For: First-time investors who want an all-in-one package and don’t mind a long-term commitment
Mutual Funds
Mutual funds are another low-maintenance investment that is popular among Filipinos and especially working professionals. It has a lot of the same benefits as VUL insurance, but with two key differences: you won’t get any insurance (obviously) and you can think relatively more short-term. Put simply, mutual funds operate by pooling together money from many different investors and investing those in various assets and securities. That way it’s easier to diversify and manage risk.
Minimum Investment: Some mutual funds in the Philippines now have minimum investments as low as P5,000. The minimum investment will vary depending on which fund you’re looking at, but they’re all relatively low as far as investments go.
Investment Period: There is usually a lock-in period for mutual funds, though they can be as short as 90 days. You could even take out your investment earlier if you need to, but there will be a penalty. And of course as with any investment, you should think long-term if you want to see the biggest returns.
Risk and Return: Similar to VUL insurance, mutual funds have an average amount of risk and return. They can be higher or lower depending on the exact fund you choose, but professionally managed funds will be less risky than managing your own money.
Recommended For: Busy bees who just want to put their money somewhere where it can grow
Stocks
If you’re after bigger returns and don’t mind taking on a little more risk, then investing in stocks is a great way to go. It’s like the DIY counterpart to mutual funds. You’ll have to put more time and effort into managing your investment, but you’ll also have greater potential returns because you won’t have to pay any fund management fees.
Minimum Investment: Nowadays, you can open a stock trading account for as little as P2,500. Some brokerss won’t even require a minimum investment if you already have a savings account with their bank. Just keep in mind that, if you can afford it, we would still recommend start with at least P8,000. More on that here.
Investment Period: Stocks are very liquid investments, which means that it’s easy to sell, take your cash, and get out at any time. But keep in mind that even stocks require some time to earn substantial returns. There’s also a good chance that you will lose money if you need cash and have to sell your stocks at a loss. Always remember: Investments are not get-rich-quick schemes.
Risk and Return: Directly investing in stocks as an individual does carry more risk than VUL and mutual funds. Unlike professional fund managers, you won’t have a big corporation and fellow professionals helping you out. You’ll also have a smaller fund, which means you won’t be able to diversify your stock picks and manage risk as easily. Of course, the upside to all of this is that if you succeed, you’ll get to keep all the profits for yourself.
Recommended For: People who want bigger returns and are willing to dedicate time to managing their investment
Businesses
Minimum Investment: The initial investment for businesses varies a lot depending on the type of business you choose. It can be anywhere from a few thousand to a few million pesos. But whatever type of business you’re looking at, just remember that you’ll probably need enough cash to cover more than just the upfront cost. You’ll need to have enough money to cover costs for the first few months when your business may not be earning money yet. Not to mention, you’ll also need to invest a ton of time and effort if you want to give your business the chance to succeed.
Investment Period: It takes time for businesses to break even and earn a profit. While some only take a few months, others can take years. And either way, one thing’s for sure—there is no such thing as an overnight success. You’ll need to work hard and work consistently on building your business if you want any chance of seeing a return on your investment.
Risk and Return: A business is one of the riskiest investments you can make. It takes more work than any other investment, and even then a lot of businesses will fail within the first year of operations. But if you’re willing to take the risk, put in the work, and keep going despite the challenges, then your business could become a cash cow and the best investment you’ve ever made.
Recommended For: Strong-willed and self-motivated risk-takers who will do whatever it takes to succeed
Real Estate
There are two popular types of real estate investments in the Philippines—condos and land. There are some differences depending on which one you choose, but both don’t require that much maintenance and the potential return is quite high. If you can afford the high price tag, real estate might just be the right investment for you.
Minimum Investment: Depending on where the condo or piece of land is located, your cash out can be just a few hundred thousand pesos or a few million pesos. Compared to other options like stocks or mutual funds, you’ll definitely need to spend more money, but it could also pay off greatly.
Investment Period: With real estate, you can make money two ways: by renting out your property or through price appreciation. In both cases, it will take time for you to earn a profit. If you’re renting out a condo, you’ll likely have to hold on to your investment for at least 10 years before you recover your cost and start seeing returns. You could see returns faster if you’ve invested in land, but even this will depend heavily on the location of the land you’ve bought.
Risk and Return: Real estate is a high risk high reward type of investment. The initial cash out is very high compared to other investments, and it’s very difficult to sell if you suddenly need cash. Not to mention that even though the returns can be huge, they are not guaranteed. Investing in land is generally a bit safer than investing in a condo, but the demand for either can be unpredictable. Before investing in any property, make sure you do your research.
Recommended For: Seasoned investors looking to diversify their portfolio of assets and investments
Bonds
If you’re the conservative type of investor and don’t mind a lower rate of return, you can look into buying some bonds. When you buy bonds, you’ll know exactly how long you need to wait and you’ll also be guaranteed a certain rate of return. Just make sure that you can leave the money invested for the entire maturity period, because pulling out the investments early will mean losing money.
Minimum Investment: You can invest in retail treasury bonds (RTBs) for as low as P5,000, though many banks will require larger minimum investments. Because bonds have such low interest rates, then you may want to invest more if you can. That way, you’ll earn more actual pesos in profit.
Investment Period: Bonds will usually have longer investment periods that are a few years long, sometimes more. But the good thing is that you can find out the exact investment period upfront, even before you put out any money. Make sure you ask about the bond’s maturity date and that you won’t need the money before then.
Risk and Return: Both risk and return are very low for bonds, which is why they are recommended for conservative investors. Though your money won’t earn huge amounts of interest, at least you’re not likely to lose any money. At the very least, you’ll get an interest rate that’s higher than what you would get in a savings account.
Recommended For: Conservative and risk-averse investors whose main priority is not to lose money
Time Deposit
Time deposits are very similar to savings deposits, except that there is a specific date of maturity when you can take out your money. Because it’s such a low-risk investment, you can expect low returns as well. However, like bonds, this is another type of investment that will at least get you slightly more returns than a regular savings account.
Minimum Investment: The minimum investment for a time deposit can be as low as P1,000. But keep in mind that banks will usually give you a higher interest rate if you put in a larger investment.
Investment Period: The investment period for time deposits can also be very short—as short as 30 days. But again, keep in mind that banks will usually give you higher interest rates if you agree to a longer investment period.
Risk and Return: Time deposits usually have extremely low risk and extremely low returns. Some of them will have an interest rate that’s only 0.25% before tax—that’s the same as a regular savings account. But if you agree to a longer investment period or invest larger amounts of money then you can get a better interest rate. We recommend looking at other low-risk investment options too so you can decide if this is really the best option for you.
Recommended For: Extremely conservative investors who don’t have access to bonds or just prefer a more flexible low-risk investment
Conclusion
At the end of the day, anything that can make your money grow can be considered an investment. These definitely aren’t all the options, but we hope this helped you understand some of the most popular investments in the Philippines better. Only you can take this information and really look within yourself to find out what the best investment for you will be.
What are some of the best investments you’ve ever made? Let us know in the comments below!
If you hang out with a lot of traders, then you’ve probably heard about Elliott Waves at least once or twice. And if you’re a beginner in the stock market, then you’ve probably been confused by them at least once or twice too!
In this article, we’ll explain the basics of the Elliott Wave theory, give you a simple overview of how it works, and break down its pros and cons so you can decide if it has a place in your trading strategy.
Background
Price movements in the stock market can seem quite random, especially if you’re a beginner. But a quick intro on technical analysis will show you that the market actually moves in repeating patterns. The Elliott Wave theory is just one method under technical analysis that maps out how these patterns unfold.
Back in the 1930’s, an accountant named Ralph Nelson Elliott noticed that there was a specific pattern of waves that appeared again and again in the stock market. This pattern of waves are what we now call Elliott Waves.
How It Works
The basic Elliott Wave pattern includes two phases—an impulse phase and a corrective phase. The impulse phase has 5 waves and goes with the dominant trend while the corrective phase has 3 waves and goes against the dominant trend.
Here’s a simple illustration to show you what these waves look like when the overall trend is bullish (Fig. 1) and when the trend is bearish (Fig. 2).
Eventually, the shorter cycles of Elliott Waves can also combine to form bigger Elliott Waves spanning longer periods of time. Every completed cycle, no matter what degree, will still develop the same 5-3 wave pattern.
Elliott Waves can form over many different time frames. A cycle can be completed in just a few minutes or over centuries! Although there’s no exact rule on which degrees correspond to which time frame, there are 9 generally accepted levels and labels:
Grand supercycle: Forms over hundreds of years
Supercycle: Forms over many decades
Cycle: Forms over a few years (minimum of 1 year), but possibly also a decade or two
Primary: Forms over a few months to a couple of years
Intermediate: Forms in a few weeks to a few months
Minor: Forms in a week to a few weeks
Minute: Forms over a few days
Minuette: Forms in a few hours
Subminuette: Forms in just minutes
The Elliott Wave theory can easily become complicated, but at the end of the day it’s just a form of pattern recognition. Knowing the pattern allows you to predict price movements and make better trading decisions.
To use the Elliott Wave, you must first identify two things:
If the dominant trend is bullish or bearish
Which wave you’re currently on
To spot Elliott Waves correctly, make sure to follow the 3 basic and unbreakable rules:
Wave 2 should never go beyond the start of wave 1.
Wave 3 cannot be the shortest among waves 1, 3 and 5.
Wave 4 never overlaps with wave 1.
Conclusion
Recognizing the Elliott Wave pattern can involve a lot of subjectivity, so results will vary from trader to trader. In some ways, you might even say that executing it is more of an art than a science.
We can’t tell you if this method will work for you or not, but what we can say is that there are people who have used it and profited from it.
What about you? Are you going to try the Elliott Wave or is there another method that you swear by? Let us know in the comments below!
Technical analysis is a term that we hear a lot in the stock market. But what does it actually mean and how can it help you with stock trading? Today, we’ll cover the basics and tell you everything you need to know.
What is Technical Analysis?
Technical analysis (TA) is the use of past market data to analyze stocks and make better trading decisions. It’s based on the idea that supply and demand will determine a stock’s price more accurately than the company’s intrinsic or “true” value.
Technical analysts look at the price movement over time, trading volume, and other historical market data. Then, they find trends and patterns which can be used to predict future price movements.
It can seem complicated at first, but many traders actually find it easier than its counterpart, fundamental analysis. It’s less subjective, involves less research, and can be used even if you don’t know a lot about the industry or company.
**To read more about fundamental analysis vs. technical analysis, click here.
The 3 Assumptions of Technical Analysis
Technical analysis is very popular, especially for traders who like short-term investing. But it’s important for you to understand it well before risking your hard-earned money. Before you go all-in, here are the 3 main assumptions in TA that you should know:
1. The market discounts everything.
This is one of the strongest assumptions in TA. Here, we assume that all publicly available information is already “priced-in” or reflected in the stock price.
Our assumption is that when market players get information, they react to it by either buying or selling shares. Because of this, supply and demand will immediately adjust along with the stock’s price.
Any news, disclosures, or announcements won’t matter anymore because the market is always a step ahead. You can never have any “new” information that the market didn’t already account for,
2. Prices move in trends.
Technical analysts believe that price movements are not random. They will always move in some general direction, whether upward, downward, or sideways.
For example, if a certain stock’s price is increasing, then it is more likely that the price will continue to increase. If the price is going down, then it is more likely that the price will continue to go down.
The trend can be short-, medium-, or long-term, but prices always tend to move in one direction and are more likely to continue that trend rather than move randomly.
3. History repeats itself.
People behave in a predictable way. Because of this, similar events and information are usually met with similar reactions. Bad earnings will make people want to sell, expansion plans will make people want to buy, and so on.
This allows us to use past market data and chart patterns to predict future price movements and market behavior.
Basic Concepts in Technical Analysis
Now that you know a bit more about technical analysis and the assumptions behind it, let’s cover some of the basic concepts in TA. Each of these concepts can be a full article on its own, but for now we’ll just run through the most important facts to get you started.
1. Support and Resistance
Support and resistance are two of the most basic concepts in technical analysis. You can already use them to make trading decisions, but they also form the foundation of more complex strategies and trading systems.
Support is the price that, historically, a stock has had difficulty falling below. This is the point where the market considers the price to be “cheap”. Demand becomes so strong that it stops the price from going any lower. In other words, marami nang gustong bumili kaya ‘di na masyado bumababa yung presyo.
Resistance is simply the opposite of support. This is the point where the stock price usually starts going down because there is too much supply and not enough demand. Masyadong marami nang gusto magbenta kaya bumababa yung presyo.
Support and resistance levels are not always precise and they can be broken, but it’s a simple and proven concept that many find useful. The basic rule when trading using support and resistance is to buy on support and sell on resistance.
2. Trend Analysis
There are always going to be ups and downs in the stock market and in every stock, but these ups and downs will eventually form a trend that moves in some general direction—this is actually one of the key assumptions of TA that we discussed above.
There are 3 basic types of trends:
Uptrend
Identified by a series of higher highs and higher lows. The general movement over time is going upward.
Downtrend
Identified by a series of lower highs and lower lows. The general movement over time is going downward.
Sideways
There is no clear pattern going upward or downward. The general movement over time is horizontal or flat.
Similar to support and resistance, trends are not guaranteed to continue to hold. That’s why they can be further classified into short-, medium-, and long-term trends. Trends can and do change. But unless something happens to change the market behavior, then the trend is likely to continue.
The general rule of thumb? Buy stocks on an uptrend. Avoid stocks on a downtrend.
3. Volume
A lot of technical analysis involves looking at the stock price, but that’s not the only important statistic in TA. Another equally important, if not more important, number to look at is the trading volume.
The trading volume tells you the number of shares that were bought and sold in a particular time frame (usually a day). You can see the volume shown as a bar graph at the bottom of the stock chart.
Volume is important because it gives context to price movements. It tells you how strong or weak a trend or chart pattern is.
For example: If the price of a downtrending stock starts going up, does it mean the trend changed to an uptrend? Take a look at the volume and you’ll find out. If the volume is low, then the trend will probably continue going down. If the trading volume is high, it means that there is a strong demand for the stock and the trend will likely change to an uptrend.
The rule of thumb? Kung high volume, push mo na. Kung low volume, ingat muna.
4. CHART PATTERNS
There are many kinds of charts that traders can use to monitor the stock market, but the most popular is probably the candlestick chart.
A candlestick chart shows four key prices for the day—the opening price, closing price, highest price, and lowest price. These are based on that day’s completed transactions.
If the candle is green, it means that the closing price was higher than the opening price. If it is red, it means the opening price was higher than the closing price.
The colors might change depending on the chart you’re using, but one color will always show an increase in price over the day and another color will show a decrease in price.
Once you understand how to read charts, then you can also start seeing patterns forming. Because TA assumes that history repeats itself, we can use past patterns to predict future movements in the market.
Here are some basic chart patterns:
Head and Shoulders A “head and shoulders” means that there are 3 peaks in your chart pattern—the middle peak is the highest (head) with two relatively equal lower peaks beside it (shoulders). This pattern signals a trend reversal, with the line connecting the two “shoulders” as the key support level to watch. If you see the price break below that level, expect a trend reversal or breakdown of the stock. An inverse head and shoulders may also signal that a downtrending stock is about to change to an uptrend.
Cup and Handle A “cup and handle” forms when, after an uptrend, the chart forms a large U-shaped curve (the “cup”) followed by a smaller dip before continuing upward (the “handle”). This pattern signals that the the stock is bullish. If the pattern is completed, the price will likely resume its previous upward trend. If the right side of the handle breaks above the peak formed between the cup and the handle, it confirms that the pattern is complete and that the uptrend will resume.
Double Top or Double Bottom A “double top” or “double bottom” forms when a stock hits its existing support or resistance level two times without breaking through. After the second peak or valley, watch out to see if the chart breaks the key support or resistance level. If it does, you will likely see it continue all the way up or down, forming a trend reversal.
5. Moving Averages
There are many types of moving averages used in technical analysis, but they all have one intention—to remove day-to-day price fluctuations and make chart analysis easier. Moving averages allow us to plot smoother lines that show trends and patterns more clearly.
One of the most popular types of moving averages is the simple moving average (SMA). We’ll focus on this for now.
To find the simple moving average, just get the sum of all the prices in a certain period and divide it by the number of prices you added up. The most common periods used in TA are the last 20, 50, 100, or 200 trading days but you can really use any period you want.
You can use these moving averages to determine support and resistance levels and to identify trend reversals.
A long-term moving average, like the 200-day moving average, is often used as a basis for the stock’s support or resistance. It shows the general trend that the stock has been moving in.
A short-term moving average, like the 20-day moving average, shows how the stock is performing now . When compared to the long-term moving average, it shows to how the stock is performing compared to its past performance.
If the short-term SMA line rises above the long-term SMA line, you should buy stocks because it means the trend is going upward.
If the short-term SMA line falls below the long-term SMA line, you should sell your stocks because it means the trend is going downward.
Conclusion
We talked about a lot in this article, but we barely scratched the surface of technical analysis! As you practice trading, you will learn how to combine these concepts and turn them into practical and useful trading strategies.
Stay tuned as we dive deeper into each of the concepts in our next articles and subscribe to InvestaDaily for more investing tips and stock market advice!
In the meantime, try applying the concepts above in your trading! Leave your comments below and update us on how you’re doing. 🙂
There has been news going around lately that the Philippine Stock Exchange (PSE) might finally allow short selling in 2018, resurrecting a plan that has been in the works since 2009. Whether or not the plan will push through is another story, but if it does, you need to be ready.
In this article, we’ll explain the basics of short selling, our advice, and how you can prepare yourself for the shake-up that might be coming in a few months.
What is Short Selling?
Short selling, also known as taking a short position, is when a trader sells a stock at a higher price before buying it at lower price—sell high, buy low. It’s just the opposite of taking a long position, where you buy low and then sell high.
Now, we know what you’re thinking. How the heck can you sell a stock before buying it??
The answer to your question is simple: you borrow shares. In other words, umutang ka muna. Sell those borrowed shares first. After that, you just have to buy shares to replace the ones you borrowed.
What Short Selling Means for PSE Traders
Most traders in the PSE always take the long position simply because it’s the only option available. For years, we’ve meticulously researched and developed systems to find and profit from stocks that are expected to increase in price.
We’re used to ignoring stocks with prices that are about to go down. After all, you can’t make money with those, right? Well with short selling, you can!
If you know how to use both the long and short positions, you can make money from stocks that are going up and from stocks that are going down!You will essentially double your opportunities in the stock market. Of course there are also risks involved, but if you keep learning and stay disciplined then there’s no reason why you can’t succeed.
Our Advice
In the stock market, those that keep learning, trying new things, and improving themselves are the ones who succeed. None of us know for sure if short selling will really be allowed in 2018. But no matter what happens, you should still read about it and prepare yourself if you haven’t already.
Besides, you’re already doing the work anyway. The same research will tell you if a stock’s price will go up or down. Why not give yourself the opportunity to earn from both scenarios instead of ignoring half the opportunities?
We’re not saying you have to put 50% of your portfolio in the short position—not at all! After learning about short selling, you might even decide that it’s just not for you and that would be fine. But either way, you need to understand it first. Even if you don’t end up using it, you need to know what it is and how it affects other traders and the markets.
Try Before You Buy!
They say experience is the best teacher. So even before short selling is allowed in the PSE, you can already start practicing! See and feel what it’s like to trade from the short position using the Investagrams virtual trading platform. Just follow the 3 simple steps below to activate the feature:
Step 1: Go to your trade settings.
Click on your profile icon on the upper right of the homepage and select “Settings” from the drop down menu. When you’re on the Settings page, click “Trade” on the left navigation.
Step 2: Turn on the short selling feature.
Simply click on the toggle button to turn on the short selling feature. Your new settings will be saved automaticallly.
Step 3: Start trading!
When you go to your virtual trading account, you will now be able to choose if you want to trade from the long position or the short position.
Simple, right?
We hope this helped you understand what short selling is and how you can be prepared if the PSE allows it in 2018. If you have more questions, just leave them below!
For more investing tips and stock market advice, subscribe to InvestaDaily. You can also sign up for Investagrams to access free features to help you on your stock market journey.
At one point or another, we’ve all wondered “What is the minimum investment needed in the stock market?” or “How much should I save before investing in stocks?”
Ever since online stock brokers became popular, it seems like the minimum required investment keeps getting lower and lower. That’s good, right? Well, not always.
If you’ve tried stock trading or know someone who has, then you also know that it’s hard to make money in stocks.
There are over 200 listed stocks in the PSE, and literally thousands of factors that could affect their prices. It’s hard enough just keeping track of everything, let alone understanding each stock well enough to make money!
We don’t need to make life harder for ourselves—but that’s exactly what happens when you invest less than 8,000 pesos in the stock market.
A TYPICAL SCENARIO
Nowadays, some brokers won’t require a minimum investment. Others have been also lowering the minimum amount required so that more people can start investing.
While it’s great that this lets more Filipinos invest in the stock market, there’s a scenario that often gets first-time investors off guard.
The typical scenario goes like this:
Person A is interested in investing in the stock market. He finds out that the minimum investment is only 5,000 pesos. “Sulit na! Kikita naman ako dito,” he thinks to himself.
Person A invests the minimum amount and picks two stocks “para mas mababa ‘yung risk.” That’s around 2,500 pesos in each stock.
After successfully buying the stocks, Person A checks his portfolio and “HUH?? Bakit loss na kaagad? Di pa gumagalaw ang presyo ah!”
That’s what happens when people don’t realize that there are fees every time you buy or sell a stock.
BEWARE OF FEES
Below is a breakdown of all the fees and charges included in every transaction:
Most of the fees are based on the Gross Trade Amount (number of shares x price), so the cost is always proportionate to your investment. For example, the PSE Trans Fee will always be .005% and the SCCP Fee will always be .01%. However, notice that the broker’s commissionis 0.25% or 20 pesos—whichever is higher.
NUMBERS DON’T LIE
So what does this mean for retail traders? It means you need to avoid buying or selling anything with a Gross Trade Amount less than 8,000 pesos. Otherwise, you will be wasting money on higher commission fees and incurring unnecessary losses.
In the example earlier, Person A bought two stocks, each with a Gross Trade Amount of only 2,500 pesos. This means that Person A’s total commission fees would have been 20 pesos for each transaction, or 40 pesos total. That’s an automatic 0.8% loss on commission fees alone!
But what if Person A invested 8,000 pesos in just one stock? His total commission fee would only be 20 pesos (or 0.25% of 8,000). That means he was able to cut the commission fee in half and invest 3,000 pesos more!
CONCLUSION
We know that saving money can be very hard—especially if you have a family to support. 8,000 pesos is a lot of money after all!
But remember that investing less than 8,000 pesos, means you are losing more money even before there’s any price movement. You can definitely still make a profit, but it’s like stepping on the gas and break pedals at the same time. It will be harder to break even or make a profit.
Weigh the risks carefully before making your decision, and ask yourself: How confident am I that the (potential) profits will offset my (definite) losses?
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