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Why I am Planning to Liquidate my Full Portfolio of Singapore Stocks

Announcement: I will be taking a long break to focus on my trading and coaching of existing students (as well as several new exciting projects), but before that I will be conducting one last session of the “Trading Foundation workshop” on 18 May 2017 and the last run this quarter of the “Trading Mastery Program” on 27 & 28 May 2017.


It has been a while since my last update on the Singapore markets (as well as my SG portfolio holdings), largely because the market doesn’t move much, so I only check on them once in a while.

Interestingly, I noticed that the STI has had an impressive run, coming off a low of 25xx to break past the 3000 level in the past few months. However, is this move sustainable?

Taking a closer look at this weekly chart which shows the historical prices over the last 20 years or so, one thing which stands out is that the market has been in a 7 YEAR sideways stagnation.

If we look back at the whole history of the index, this is somewhat unprecedented.

Which could explain why popularity in this market (as well as trading volumes) has been waning. In short, it does seem like a dying market.

Not to mention that during this same time period, the US stock markets have been steadily creeping up.

If we look at the most recent red shaded circle, that is where the current price is, and it seems to be running into massive headwinds. This means that the potential upside could be quite limited.

If we observe the large sideways range that prices have been moving in, the price is now at the top of the range. And we know that the best strategy in a range is to “buy low, sell high”, which means that the odds do not favour much more upside, unless there is some new strong positive price catalyst.

However, a cursory glance at recent news headlines seems to be painting a rather gloomy picture, with muted growth forecasts and ominous employment statistics. This tell me that downside catalysts are more likely that upside ones. In other words, there is more chance of a negative shock rather than a positive shock for prices.

In light of all these factors, I am planning to cash out most or all of my profits, and wait for more favourable odds to redeploy my capital. As a trader and investor, timing is always key.

Good luck, and trade wisely! 😀

P.S. I will be taking a long break to focus on my trading and coaching of existing students (as well as several new exciting projects), but before that I will be conducting one last session of the “Trading Foundation workshop” on 18 May 2017 and the last run this quarter of the “Trading Mastery Program” on 27 & 28 May 2017.

3 Dangerous Myths About Trading that Could be Affecting Your Profitability

The world of finance and investing is filled with opinions, news, jargon, and sometimes pure nonsense. It is only the people who actually make trades, who will be able to tell the truth from the lies.

After all, an opinion has no consequence. People can quip about what they think is true, if there is no money on the table. However, when you’re trading with your own money, you’re forced to confront the reality of things. I, for one, am no stranger to taking risks, but I only take calculated risks with a high payoff. That is what trading is all about.

Without further ado, here are 3 dangerous myths that could be wrecking havoc on your trading account:

 

MYTH #1: TRADING WITH LEVERAGE INCREASES YOUR RISK
(Reality: Trading with leverage reduces capital required, but risk can be kept the same.)

Let’s tackle the myth first; the media handles the idea of leverage very poorly, because it often sensationalizes the trader who over-leverages and blows everything.

The idea is simple: I have $100, and I leverage so that I can trade $500 or $1000 of stock/forex. I make one bad trade, and I’m wiped out.

This is true for the person without proper risk-management. After all, the temptation of leverage is to dump all your money into one trade, max out the leverage, and hopefully you make 500% on one trade and can call it a day. The truth is, these lucky trades do happen in reality. Eventually, the trader with his newfound wealth (and greed), piles his money into another trade, and loses everything.

Leverage kills the person who abuses it. It’s like fire; it can cook food for people, or it can kill people.

 

Leverage, in practice, actually keeps you disciplined. In forex trading, maximizing leverage is actually a wise way to start trading. When you leverage, you are actually committing less margin to a trade, and you can get comfortable with trading by committing as little margin as possible. Here’s what I mean:

For example, suppose you have a stop loss of -$10 and a target profit of +$30, and you make a trade of unknown size X.

1:100 leverage – Margin committed for X lots = $102.50 (I’m making this up)

1:500 leverage – Margin committed for X lots = $20.50 (five times smaller)

In the case of higher leverage, you stay comfortable because even though the stop loss is -$10, you see that the margin committed on your account is only $20.50. This allows you to not have to see the wild fluctuations in margin requirement, and keep you trading small and trading often.

There are several benefits to leverage that most people don’t know about.

Also, trading with higher leverage allows you to take multiple positions with little capital. This is great for beginning traders who want to experiment and take multiple trades with a small account. With as little as $500, you can take 3-5 forex positions with leverage, risking anywhere from $5 to $20 or so for each trade. This is a great way to start for aspiring forex traders.

 

MYTH #2: BROKERS ARE OUT TO HIT YOUR STOP LOSSES
(Reality: You get stopped out because of the market, not because of the broker.)

Many people who have been trading for some time get convinced that the broker wants them to be stopped out of their positions. I’ve heard of this and seen it happen; the trade hits your stop loss, then immediately goes in your favour and flies in the direction you want, and then you beat yourself up and say “I was supposed to make $XYZ on this trade but I got stopped out because of the stupid broker!”

The truth is, the broker has better things to do than to keep hunting the stoploss on your account.

At least, this is for brokers who want to remain in business over the long-term. How do brokers make money? They make money if you keep trading. Why would any broker want you to stop trading? They would actually want you to be profitable, because for every trade you make, they get a small cut from the spread (also known as the bid-ask spread). Essentially, they want you to love trading and trade so much and so often that they get large revenues from spreads.

Why in the world would the broker want to stop you out? The reason why we get stopped out, is because we are bad traders.

Professionals are buying or selling exactly where your stop loss is placed, because they know that the average investor would place their stop loss there.

The solution to not getting stopped out, is to first acknowledge that trading involves some positions getting stopped out. Being right 40-50% of the time is already sufficient for you to be profitable, so don’t be surprised if half your positions get stopped out.

One example is a sideways market. Beginners love to enter on sideways markets because it presents many signals in both directions. However, professionals are buying and selling at the extremes of the sideways markets, causing beginners to get stopped out repeatedly, while professionals make money repeatedly. Remember that there is another trader on the other side who is filling your order; if you are losing money, it is because someone else is taking money from your account, and putting it in their account.

MYTH #3: FOREX IS MORE RISKY THAN STOCKS
(Reality: Risk is independent on the product, and forex actually requires less capital.)

In a previous blog post, I mentioned this: If you have $500 to invest, it actually makes more sense to trade forex.

In the Forex market, you can ‘get a feel of the game’ by risking a few dollars per trade. By trading the smallest lot size (0.01 lots), you can learn to make a few dollars here, lose a few dollars there, and rack up trading experience and learn to trade ‘live’ without incurring hefty losses. By learning to make many decisions and experiencing all the different conditions of the market, you would become seasoned enough to trade a bigger size, and fine-tune your own trading strategy to become profitable in the long-run.

Many traders discover they have certain characteristics about themselves that hinder success. In trading a ‘live’ account with a small sum of money, they are putting in some skin in the game, and getting used to the ups and downs of their account. The best part about forex is that there are no commission charges, making the ‘tuition’ fees a lot less than trading in stocks.

I’ve spoken about this at length in my previous blog posts. Besides the lower cost of trading forex, you actually lower your risk by getting better at trading. After all, the biggest risk is yourself. If you’ve got skin in the game, made a few hundred trades with real money, and got yourself a strategy that you can rely on, you are actually a lot less a risk to yourself.

24/7 market; choose when you want to trade.

The great thing about Forex is that you can decide when to trade based on your schedule. That helps people who have punishing schedules: trading in the middle of the night, or during lunch, on a daily basis, works out to a trading schedule that accommodates your lifestyle needs.

Stocks have bigger gaps between bars than Forex does.

Furthermore, with regards to stocks, stocks tend to see bigger gaps between days. Here’s what I mean:

forexForex pairs/currency futures tend to have less gaps between bars; bars close and open at roughly the same price. Here, the chart of NZDUSD (daily).

stockMost stocks have gaps between the candlesticks/bars. Notice how there are many ‘holes’ between bars for First Majestic Silver Corp (NYSE).

Gaps make the analysis a little more complex, because you have to take into account the size of the gap along with the actual candlestick printed on the chart. Forex allows you to employ technical analysis more simply, and learn how to read price action without the distraction of having to figure out what the gap means. Of course, this isn’t a problem among more liquid stocks like the SPY, C, MCD, FB and other “famous” counters.

WHAT’S THE REAL RISK?

The real risk in trading lies with the trader. The moment you stop improving, stop learning, stop growing, or stop challenging yourself, you’ll start to see your profits suffer. I encourage all of you aspiring traders to seek the truth, and rely less on opinions in your trading journey. After all, you can only find out the truth when you’ve got some money on the table, and actually start to make trades.

WANT TO GET STARTED IN TRADING?

Check workshop availability: http://wp.me/P1riws-6gw

Synapse Weekly Market Highlights (8 Jan 2017) – 1st Week of 2017, How Did it Go?

 

If you’ve been following my blog posts and Instagram account, you would know that I just got back from my trip in South Africa last week. Still a little jet lagged (even though I’ve traveled so many times), and missing the awesome sights and sounds of that beautiful continent.

The Southern-most tip of the continent of Africa! 🇿🇦🌎 #southafrica #capeagulhas #africa

A post shared by Spencer Li 🇸🇬 Synapse Trading (@iamrecneps) on

 

3 OF LAST WEEK’S PREDICTIONS – S&P500 and Forex

Prediction #1: S&P500 – Look to buy on bullish bars near the EMA (Triggered!)

spS&P500 as at 31 Dec 2016.
Source: MetaTrader 4

I mentioned the following last week:

  • Bulls will be hesitant given the uncertainty surrounding the first week of the new year.
  • Bears would try to exert their influence repeatedly, so don’t be alarmed if your long positions get stopped out easily.
  • I would wait for 2-3 bullish signals before being confident of a nice up-move.

On Monday, we saw a gap up from the open + a bullish bar with a substantial body. This was sufficient to enter a long position.

You would have bought once you saw a white bar printed on the EMA. (Monday)
Source: MetaTrader 4

Prediction #2: Short AUDUSD, but wait for pullback to EMA + bearish bars for a  higher probability trade.

The AUDUSD looks bearish and 3 bullish bars have occurred last week.
Source: MetaTrader 4

Last week I said: “Possible price levels to observe at 0.73000, 0.74000, and 0.75000 (all these present good shorting opportunities).”

Even though a short entry is possible given the bearish bar we now see on the AUDUSD, I advise against it because the 3 bullish bars before it present a lot of bullish commitment. Stay away.  

 

Prediction #3: Short on NZDUSD on every opportunity! (but read the cautionary notes below before you trade)

Last week, I said it was a “good time to short on NZDUSD, but caution is advised”. Now, shorting seems like a reasonable thing to do.
Source: MetaTrader 4

This is what I said last week:

  • The year has just started so a sideways market is more probably in the first few days.
  • If you are going short once the market opens on Tuesday, take a small position, use a wide stop, and don’t be afraid to sit through pullbacks and open losses.
  • Add on for every short opportunity you can find (if you are more aggressive).
  • I’ll be more confident if I see 2-3 confirmation bearish bars.

Now, we see a nice bearish bar near the EMA. If you got stopped out intra-day last week, that’s ok. Now, this presents a good opportunity on the daily chart. 

 

UPCOMING MARKET OPPORTUNITIES: SINGAPORE MARKET

As summarized in the picture above, the STI is still in a sideways market and caution is advised against a bull run. I’m aware that other experts might argue that a bull run is in place, but technically and professionally speaking, a bull run only occurs after it has clearly emerged out of the sideways consolidation phase. 

At this point, my stock screener has printed a buy signal, but I’ll only look to enter if it pulls back a little, bounces off the EMA, prints a nice bullish trend bar, and I see the EMA turning upwards. Otherwise, it is still in a sideways situation right now.

Markets tend to move from bear market > sideways market > bull market. I believe this to be the case for the STI. Watch and wait.

 

UPCOMING MARKET OPPORTUNITIES: GOLD

Source: MetaTrader 4

The gold chart is VERY bearish, but the recent bullishness makes me want to stay away. I’ll wait for 2-3 more bearish confirmations before deciding to go short. 

I might also take a bullish trade if I see multiple pullbacks to the EMA, and if gold starts rising gradually without any huge bearish bars.

LASTLY: UPCOMING NEWS


The only thing worth noting this week.
Source: myfxbook.com/forex-economic-calendar 

The second week of January will see no important market-moving news, except Yellen’s speech on 13 Jan, 08:00 hours. Watch out for USD pairs, just in case they get affected, and as usual, reduce your open positions or take some profits before this time.

Happy trading, and all the best in your trading journey!

Cheers!

Recent Travel Highlights: Ireland, Iceland, UK – Photos Are Finally Out!

In October, I embarked on a 2-week trip with my sister to Ireland, Iceland and the UK, and it was an amazing trip! 😀

In 2 days, I will be going for another 2-week trip, this time covering Dubai, South Africa and Lesotho. (Yes, this is a country!)

Of course, I will continue trading as I travel, and continue supporting my students and traders. Stay tuned for my next “weekly market highlights” video which will be shot in South Africa!

For those who love adventure and real-time updates, do follow me on Instagram as well: https://www.instagram.com/iamrecneps/ 

ig-profile

 

Here are some photos from my last trip:

fb-album-ireland-iceland-uk

Here is the full photo album for this trip: https://www.facebook.com/iamrecneps/media_set?set=a.10154654785598430.1073741842.530303429&type=3

Good luck, and see you soon in 2017 when we commence our new training workshops! 😀

Monthly Portfolio Update for October 2016 – Acquired New REIT ETF

In time of uncertainty, it pays to be like the tortoise – Slow but Steady. Especially if you are serious about building passive income for the long run instead of short-term gains.

For October, the biggest change in my portfolio was the purchase of this new REIT ETF:
http://synapsetrading.com/2016/10/singapores-first-reit-etf-should-i-add-some-to-my-portfolio/

I also removed the real estate component of my portfolio, as I felt that a residential property (of which the owner resides) is technically not a cash-generating asset, and it distorts the portfolio. You will notice that the portfolio looks a lot neater now.

Baby Hermann's Tortoise (Testudo hermanni), 18 months old

I was overseas much of October, travelling to Iceland, Ireland, and UK for a 2.5 week holiday, while letting my money work hard instead. You can check out my travelling photos here: https://www.instagram.com/iamrecneps/

monthly-portfolio-updates-october-2016-1

For my current allocation, my cash, my trading accounts and my fixed income investments remain the bulk of my portfolio, at 25%, 22% and 25% respectively. This is in line with my defensive strategy, since I only have 11% in Stocks and REITs, which allows me more room to increase the holdings when the market has a significant correction.

For October, we had pretty decent trading gains for stocks and for forex, which we withdrew and added to our warchest of cash reserves. This is in line with our strategy to keep a fixed trading capital base, since we only need a fixed capital base to consistently generate monthly returns.

REVEALED: FULL PORTFOLIO HOLDINGS!

Here are my current holdings as at the end of October 2016:
(Click on any of these buttons below to unlock; for mobile device users, please click twice)

For more insights into my portfolio construction, and how you can create your own customized portfolio, I will be touching more on it during my “Trading Foundation Workshop”, where I will cover all the essentials to kickstart your trading & investing journey. Check availability: http://synapsetrading.com/trading-foundation-workshop/

Good luck! 😀