Short-term or Long-term Investing? Choose the One that Works for You!

Ein55 Newsletter No 071 - image - Long Term or Short Term (V2)

As much as I love investing, I believe that most of us invest with a similar goal in mind, i.e. to make money, to get our money to work for us, and to attain financial freedom. However, considering how different investors can be when it comes to styles and personalities, there is really no one rule that applies to all. Perhaps, that also explains why the stock market is so confusing and unpredictable in the first place.

There is no way to know what every single person thinks, but we can make our lives easier by knowing our own investing personalities and what floats our boats. Boiling down to the basics, you need to know whether you are a short-term trader or a long-term investor (though in real life, many of us are a mix of both).

 

Short-term Trading

You will like short-term trading if:

  • You are comfortable with keeping an investment for only a short period of a few weeks, or even days.
  • Your goal is to make quick bucks to reach a shorter-term goal, e.g. purchasing a car, funding a vacation, etc.
  • You are not a fan of doing extensive fundamental research on the businesses that you have invested in, but you are able/ willing to commit a significant amount of time to trading and checking stocks.
  • You are ok with taking risks and dealing with profits and losses due to short-term price fluctuations.
  • You can accept high transaction costs as a result of frequent trades, which reduces your income in a bigger proportion as compared to long-term investing.

 

Misperceptions of Short-term Trading

  1. Short-term trading does not require patience.

Truth: Even for a short-term trader, not every day is a trading day. We need to wait patiently for the best opportunity to long or short.

 

  1. Short-term trading is always about buying low then selling high.

Truth: Short-selling (profit from falling in share prices) is equally if not more important. Most people only know how to long the market, and therefore they lose money or end up doing nothing when the market is bearish.

Currently, there is still upside in the last phase of the bull market for short-term traders, possible to buy high sell higher but shorter term position should follow shorter term market signals.

In my free 4hr investment course, I will share with you high-probability trading techniques for short-term traders to profit from the rising and falling stock market.

 

  1. There is no need to read up on anything if I am trading short-term.

Truth: Short-term trading, being more speculative and volatile in nature, requires one to react quickly to market news and sentiments. In order to profit in both bearish and bullish markets, one would still need to read up to understand the impact of market-changing factors such as the US Federal Reserve interest rate hike, Donald Trump’s national policies, oil & gas crises, and global quantitative easing (QE), etc. It is important to know the impact of global economy on stock market.

 

Long Term Investing

On the other hand, you may like long-term investing if

  • You are okay with holding an investment for a long period of time, and buy or sell only once every few years.
  • You have a longer-term goal in mind, e.g. building resources for your retirement, and you are expecting your investment to increase in value over the long run, and/or also provide income in the form of dividends.
  • You prefer fundamental analysis to technical analysis.
  • You like value investing.

 

Misperceptions of Long-term Investing

  1. You do not have to hold a lot of cash if you are buying at a discount.

Truth: Even if you have met the “golden opportunity” where blue chips have more than a 50 percent discount in stock prices, you as an investor have to accumulate bullets (cash) to be able to make substantial profits when you buy low and sell high.

 

  1. If you are investing long-term, you can just sit on your stocks and not care about them for a long time.

Truth: While it may be true that you do not have to react to stock market changes immediately like short-term traders do, you still need to review and reevaluate your stock portfolio from time to time. Even in long-term investing, you would need to do spring cleaning regularly, classifying your stocks into different categories and treat them differently, for e.g. fundamentally-strong stocks for long-term holding, cyclical stocks to sell at a high, and junk stocks to sell at the right time, etc.

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Time flies, and before we realise it, half of 2017 has already passed. On a global level, stock markets have performed superbly for 1H2017, rewarding investors with attractive returns that have not been seen for quite a few years. How sustainable is the stock market rally then? Will there be a market correction?

The safest time to buy a stock is when everyone is afraid the sky will fall down while the business is still operating normally with consistent performance. This could be a rare opportunity to buy during a crisis, we should learn how to take this advantage to truly buy low sell high.

When Optimism Strategies are combined with Fundamental Analysis (value investing & growth investing), Technical Analysis (support / resistance / trends), and Personal Analysis (mind control of greed and fear), it is very powerful when one is able to take the right action (Buy, Hold, Sell, Wait or Short) at the right time aligning with own personality.

The unique Optimism Strategies developed by Dr Tee provides a special advantage to know which investment (stock, forex, property, commodity, bond, etc) to buy safely, when to buy, when to sell, including option of long term holding.  So far over 10,000 audience have benefited from Dr Tee high quality free courses to the public.  Take action now to invest in your financial knowledge, starting your journey towards financial freedom.

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Speaker - 20 years

Download Dr Tee Investment Toolbox

ein55-newsletter-no-045-image-ebook-2017

Are you worried about the global stock market in year 2017, especially with the controversial new US President, Donald Trump?  Political analysts thought Trump has slim chance of winning, will this surprise outcome become the next black swan event to correct the global stock market?

Dr Tee has written an eBook on “Global Market Outlook 2017” to provide solutions with comprehensive coverage of various investment topics in major global stock markets (US, Singapore, Hong Kong, China, Europe).  Readers have benefited from the past Market Outlook reports by Dr Tee. Let’s learn the current global investment market risks and opportunities.

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Table of Contents for Investment eBook

1. Mass Market Sentiment Survey

2. Review of Global Stock Markets

3. US Market Outlook

3.1  US President & Government

3.2  Effect of QE

3.3  US Interest Rate Hike

3.4  US Job Market

3.5  US Property Market

3.6  US Bond Market

3.7  US Dollar vs Commodity (Gold / Silver / Crude Oil)

4. Regional Market Outlook

4.1  Europe Market

4.2  China Market

4.3  Hong Kong Market

5. Singapore Market Outlook

5.1  Singapore Stock Market

5.2  Singapore Property Market

6. Conclusions and Recommendations

Appendix (附录)

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The unique Optimism Strategy developed by Dr Tee provides a special advantage to know which investment (stock, forex, property, commodity, bond, etc) to buy safely, when to buy, when to sell, including option of long term holding.  So far over 10,000 audience have benefited from Dr Tee high quality free courses to the public.  Take action now to invest in your financial knowledge, starting your journey towards financial freedom.

 

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  • Optimism/ Fundamental / Technical / Personal Analyses
  • Investment risks & opportunities
  • Dr Tee graduates events and activities updates

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 Speaker - 20 years

Summary of Seminar with Hu Liyang 胡立阳 in Singapore (14 Jan 2017)

 

Ein55 Newsletter No 049 - image - HLY Seminar Summary

I was invited as a co-speaker in this seminar (14 Jan 2017, Singapore) with Hu Liyang (胡立阳), a famous stock investing guru in Asia. As requested by a reader, I am giving a summary here to show the similarities and differences of my views with Hu Liyang (HLY) on Market Outlook for the next few years.

The last time I met HLY was probably 4-5 years ago. The first impression of him again is that both of us are getting much older. He has a few more “railway tracks” on forehead while I have many more white hairs.

Both of us have observed many economy cycles in the past few decades, although HLY is probably 10+ years more senior than me, that’s why we are mostly aligned in many understanding on market outlook. HLY hinted a retirement which I think he deserves it. For me, I don’t feel I am “working” on my interest of investment education, so I don’t feel tired yet. Perhaps one day I may also start a new phase in life, hoping investment is also part of lifelong learning for all the readers.

 

Ein55 Newsletter No 049 - image - Agree

Similarities in Market Outlook

===========================

1) Final Phase of Bull Market

Both agree that the market is entering the final phase of bull run. I am supported by high optimism of stock market at Level 3 (especially US) and Level 4 (world), while HLY is mainly based on interest rate cycle: “bull market starts when interest rate is cut, ends about 1-2 years after interest rate hike in US”

2) Danger Signals for Investment Market

Both agree that bond market is at high risk, bond yield has been at historical low, when bond yield hits 3% (now is 2+% for US 10 years bond yield), the fund is moving from bond to stock and property market, creating risky investment bubbles.

3) Market Cycle Investing

Both agree on market cycle theory. HLY uses “pendulum theory”, market will swing from high to low, low to high, sometimes may be even over-corrected, applying his 50% discount theory and other correction factor. I mainly use Optimism to declare the market risk (>75% Optimism) or opportunity (<25 Optimism). Despite the exact methods may be different, both are suggesting buy low sell high based on economy cycles.

 

Ein55 Newsletter No 049 - image - Disagree

Differences in Market Outlook

==========================

1) Timing of Global Financial Crisis

HLY has been trying to predict the timing of global financial crisis. I remember a few years ago, he predicted the great crisis may come around year 2013 or 2014. This time, the time bomb is extended to around year 2019. With political economy such as global QE and near zero interest rate for so many years, the current market cycle duration is much longer than last time. I could understand why HLY still tries to predict the future as there are too many audience really hope to have a crystal ball to see the future, especially HLY has an amazing record to predict the ending time of last global financial crisis in year 2008.

My view is that market cycle duration is unpredictable because it depends on the rate of optimism reaching danger zone of 75-100%. However, there is a predictability within the unpredictability. We just let Optimism shows us the risk level, no need to guess the future. If US takes 10+ years to reach high optimism, market cycle duration will be prolonged. If US behaves like China, stock index is doubled in 1 year, then market cycle will be shorter. This is one of my Ein 55 Investment Styles (of course, HLY also has his 100 Investment Styles in his famous book), Optimism is a market thermometer. We will never know when we will have the next fever (eg >38 deg.C), but we will know when we have a fever because we could feel overheated, temperature measured is too high. It is never too late to find a Panadol to cool down the body when we really have fever. Similarly, we will not know when the next crisis may come, but we could guess the probability with market temperature using optimism. When market is having a mild fever (38 deg.C or 75% Optimism) or high fever (40 deg.C or 100% Optimism), we will know as well.  The key challenge is whether a trader or investor is willing to take profit (as if taking Panadol), admitting the market is feverish. Based on my observations of past market cycles, more people work harder despite having high fevers, ending up losing what they have accumulated when the market bubble is burst.

 

2) Factors for Success in Stocks

HLY believes the stock market is a probability game of 3 possibilities: up, flat or down in share prices (more of a TA believer); fundamental or business are not as important. He mainly uses “money analysis” to analyze the money flow in economy cycles, combining with many TA methods to predict the mega stock market low and high, both in prices and timing.

I believe in an integration of 3 pillars to be successful in stocks:
2.1) Optimism + Fundamental Analysis (FA, buy giant stock with strong business fundamentals).

2.2) Optimism + Technical Analysis (TA, investment clock to wait for giant to fall down and recover),

2.3) Optimism + Personal Analysis (PA, emotional control) to take actions.

 

I also believe there is a need to match the strategy with our unique personality:

– short term trader (buy/sell every few weeks),

– mid term trader (buy/sell every few months),

– long term investor (buy/sell every few years),

– life time investor (buy and not need to sell for life).

Warren Buffett, Jim Rogers, Hu Liyang, Jesse Livermore, etc, each investing master or trading guru, could have their own styles of making money, but it may not be suitable for everyone, unless you share the same frequency in mindset. This is the reason I teach the complete Ein55 Styles with consideration of both short term trading and long term investing, FA, TA & PA with economic analysis, showing Ein55 graduates how to customize an unique trading or investing style for individual.

We should learn to find Top 10 global giant stocks as players of our dream team, buying good business at discounted price at low optimism, ahead of others who may be fearful.  Mastery of investment clock is very critical to profit consistently from stock market.

The safest time to buy a stock is when everyone is afraid the sky will fall down while the business is still operating normally with consistent performance. This could be a rare opportunity to buy during a crisis, we should learn how to take this advantage to truly buy low sell high.

When Optimism Strategies are combined with Fundamental Analysis (value investing & growth investing), Technical Analysis (support / resistance / trends), and Personal Analysis (mind control of greed and fear), it is very powerful when one is able to take the right action (Buy, Hold, Sell, Wait or Short) at the right time aligning with own personality.

The unique Optimism Strategy developed by Dr Tee provides a special advantage to know which investment (stock, forex, property, commodity, bond, etc) to buy safely, when to buy, when to sell, including option of long term holding.  So far over 10,000 audience have benefited from Dr Tee high quality free courses to the public.  Take action now to invest in your financial knowledge, starting your journey towards financial freedom.

Bonus #1 for Readers:  Choose 1 Free Investment Course by Dr Tee

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Banner 2017-02-23 - Market Outlook 2017 with Value Investing Strategies

Table (2017-02-23) - MO2017 Value Investing

 

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New Year 2017 – Bull or Bear Market? Learn 2 Winning Strategies for Stocks

ein55-newsletter-no-047-image-bull-or-bear-2017

New Year 2017 will be an exciting year for global stock market with Donald Trump as the new US president, recovery of emerging markets and crude oil market, rising interest rate and a bullish US economy. Let’s learn how to position in stock market with 2 winning strategies: 1) Buy Low Sell High, 2) Buy High Sell Higher.

US contributes to 40% of global stock value, therefore it should be a key focus to understand the stock market outlook in year 2017.  US economy has been consistently bullish, supporting the stock market.  US unemployment rate has declined by half from 10% to 4.7% in Dec 2016.  Based on the historical unemployment rates of US since year 1950 (see chart below), we could observe that US economy is entering the last phase of bull run as the unemployment rate is falling below 5%, moving towards the critical 4% value, reflecting the peak of US economy.

Lower unemployment rate implies more new jobs are created, therefore more spending power, which helps the business to grow with higher sales, eventually reflecting as higher stock prices due to stronger fundamental in financial statements.  US stock market has been bullish in the past few years, following the trend of US economy, likely will continue in the New Year 2017.

ein55-newsletter-no-047-image-us-unemployment-rate

US S&P500 stock index has achieved new historical high on 6 Jan 2017 with 2276 points.  Based on Dr Tee (Ein55) Optimism Strategy, US stock market is close to danger zone with 74% Optimism in long term (see chart below), implying the probability of bear market risk is 74% while the upside potential is limited, only 26%.

There have been mixed feelings in the stock market. Some people have stopped investing, worrying about the peak of US stock market but unknowingly the stock prices become higher and higher with time, they may regret of missing the train, hoping to have the last ride.

There are actually many mechanisms to make money in stocks.  Here are 2 winning strategies for the New Year 2017, to be aligned with one’s unique personality:

1) Buy Low Sell High

This strategy is suitable for long term investors who hope to invest safely, buying good fundamental stock at low price, selling high in future or holding for long term.  Since US and global stock market are approaching higher optimism level, the chances of global financial crisis is high, any unexpected global event in near future could trigger the bear market.

An investor will need to be very patient, ignoring the temptation of the bullish market, taking profit while others are greedy (Optimism >75%), standby enough capital to prepare to buy low when Optimism of global stock market is below 25% again.  Control of emotions is critical to buy low when others are fearful one day.

 

2) Buy High Sell Higher

Not everyone is an investor, having the patience to wait.  Some people are more suitable for short term trading, which they could follow momentum trading to buy high and sell higher in near future.  A stock price could be at high price but the trend is bullish, therefore the price is sustainable for short term, having the potential to go up even higher with time.

This strategy is more suitable for short term trading in the last phase of bull market, following the trends of stock prices, supported by news, speculations, business, economy, etc.  When the trend has stopped, the traders have to stop as well or applying reversed trend in trading.  Control of emotions are very critical as daily news could affect the traders’ psychology.  The ability to take profit or cut loss is important as the elements of probability are stronger here.

There are other variations of the strategies, eg. an investor could buy low for strong fundamental stocks, sell high for short to medium terms.  This way, an investor could also enjoy the last phase of the bull run in stock market with integration of trading strategies.

ein55-newsletter-no-047-image-sp500-optimism

 

 

Enter or Exit Stock Market with S&P500 at Historical High Now?

Ein55 Newsletter No 034 - image - S&P500

After breaking the triple top resistance of 2100, short term S&P500 becomes very bullish, setting new record high each day. Current US stock market is only suitable for short term trader to apply breakout strategy, buy high sell higher with trailing stop.

When S&P500 enters danger zone of >75% Optimism again, any future crisis could potentially become the next global financial crisis. Since global stock traders have not reached the euphoric stage yet, US stock market could remain bullish, sustainable if there are intermediate cooling measures, eg. news of US interest rate hike or another regional crisis, while the US economy is still growing.

Short term bullishness of S&P500 (another historical high at 2163), winning of Japan Prime Minister Abe (more QE is expected), lower fear factor (VIX is at low), have helped the global stock market to recover and achieve short term high. The trend is ideal for short to mid-term trading. Even Malaysia has lowered down the interest rate, this could be a gradual growing bull market.

For long term investors, it is important to learn to take profit at the right time, so that there is enough cash, which is king, to buy blue chip stocks at low price during the next global financial crisis.  For value investors, it is possible to hold the stocks without selling with condition that these are truly giant stocks, which the business can still be profitable even during economy recession.

 

 

Stock & ETF Investing Opportunity in BRICS – Emerging Countries

Ein55 Newsletter No 026 - image - BRICS

Due to global economy slowdown in the last few years, stock markets in the emerging countries have suffered significant corrections, resulting in Level-3 (country/region) crisis.  The leaders of emerging countries are BRICS (Brazil, Russia, India, China & South Africa), stock prices are now at very attractive prices.  When the global economy starts to recover and accelerate, these emerging stock markets will benefit as well.  One could use ETF to trade or invest global stock indices.

Due to economy and political instability, Brazil stock market now is at 18% Optimism, after 57% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - Brazil

Russia has suffered from falling in global oil price, economy is severely affected. Russia stock market now is at 16% Optimism, after 65% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - Russia

India is relatively stronger compared to other BRICS, stock market now is at 34% Optimism with only 13% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - India

China is world No 2 economy, although Optimism is similar to India at 34%, stock prices have heavily corrected by 43% after the last round of speculative bull run, falling down from peak of 5200 points (see chart below).

Ein55 Newsletter No 026 - image - China

South Africa is relatively smaller in economy size, Optimism now is at ideal 25% Optimism with only 20% correction in stock market (see chart below).

Ein55 Newsletter No 026 - image - South Africa

The level-3 crisis and opportunity mentioned above requires longer investing strategy because global economy recovery is a gradual and longer term. Political economy is also crucial for the recovery of stock markets.  BRICS have to compete with US which is now at moderate high Optimism of 68% (see chart below) with more bullish economy, challenging the next historical peak in stock prices.

Ein55 Newsletter No 026 - image - US

If there is still a last global rally in stocks, BRICS may recover strongly with US stock market may rise to new historical high.  Other smaller emerging countries stock markets (eg. Southeast Asia) and many individual stocks may follow BRICS as well. However, after the next bull run, there could be another perfect storm waiting ahead, level 4 global financial crisis may severely injured all the global stock markets, both US and emerging counties. The ability to know when to sell to take profit will be crucial.

 

 

Strategies for 3 Personalities of Traders and Investors to Profit in Bearish Stock Market

Ein55 Newsletter No 018 - image - success

Many traders and investors lose money in the past few months during global stock market correction.  With STI < 2600 points, there is a strong fear in the market. I have clearly pointed out in the past that greed and fear will continue to influence people to make wrong decisions.  We need to position our investment, choosing stocks with different characters, aligning with our personalities.

Here are suggestions of trading/investing strategies for 3 unique personalities (Short / Mid / Long Terms) to profit from the current bearish stock market with 4 decisions of Buy, Hold, Sell/Short, Wait.

1) Short-Term Trader (buy/sell every few weeks)

Strategy: Short / Wait.

Choose stocks with weak fundamental and bearish trend for the past few months (aligning with major stock indices), short with CFD for stocks at high optimism to profit from the falling market.  Most people only know how to long the market, therefore either lose money or doing nothing in the past few months of bearish market.  Trading could be 2 ways (long / short), as long as the trend is clear, either bullish or bearish markets could be opportunity to make money.

If shorting (requires training) is not a preferred style, those who want to buy low sell high, has to wait for a few more weeks for the global stock market to recover for short term, then long on stocks with positive trend. 

As a short term trader, not every day is a trading day, we need to wait patiently for the best opportunity of the weeks to long or short.  Short term trading is more speculative, reacting quickly to market news, therefore one has to apply Short-term Optimism + Technical Analysis (both price and volume) to have a high probability trading.

 

2) Mid-Term Trader (buy/sell every few months)

Strategy: Wait / Long.

The current market correction (20-30% for some stocks) is attractive for mid term traders who have higher risk tolerance level and looking for higher potential return than short term trading.  Since the short term trend is still bearish, one could wait patiently for the global stock recovery for the next few months, then buy those stock with strong fundamental stocks.

If your stocks are trapped in the stock market, likely now is at low optimism, too late to sell now.  Wait till the next rebound or rally above the support again, target to sell at intermediate high, either to minimize the losses (if bought too high last time) or making some profit.  Apply Mid-term Optimism analysis with integration of Technical and Fundamental Analyses as main strategies.

 

3) Long-Term Investor (buy/sell every few years)

Strategy:  Wait / Long.

Usually long term investors need to wait 5-10 years (typical economy cycle) for global financial crisis to buy strong fundamental stocks safely at amazing low price, future potential could be 50-200% higher.  Current global market correction is still not severe enough, there is room for further correction. Therefore, long term investors should wait patiently, could be next 6-12 months, partly depending on the political economy, ones could enjoy the best performance as the golden investing opportunity could be coming soon.

Apply long-term optimism with fundamental analysis to start prepare yourself for this gift from heaven in near future.  Blue chips will have more than 50% discount in stock prices, most people will get panic but you could profit from fears of others.  However, investor has to accumulate bullets (cash) to have chance to buy low and sell high.

 

Fresh from Oven – Download eBook by Dr Tee: Global Market Outlook 2016

Ebook Cover 2016

I have just finished writing the eBook on Global Market Outlook 2016.  You may download from this link:
http://www.ein55.com/free-public-education-on-investment-programs-by-dr-tee/

Please feel free to forward the latest eBook 2016 to friends. You and your friends are also invited to attend the workshop on Market Outlook 2016, next 2 dates will be on Nov 26 and Dec 20. See below for details of registration.

====================================
Table of Contents
1.  Mass Market Sentiment Survey
2.  Review of 2015 Global Markets
3.  US Market Outlook
3.1  US Government Debt Limit
3.2  Tapering of QE3
3.3  Fed Interest Rate Hike
3.4  US Job Market
3.5  US Property Market
3.6  US Bond Market
3.7  US Dollar vs Commodity (Gold / Silver / Crude Oil)
4.  Regional Market Outlook
4.1  Europe Market
4.2  China Market
4.3  Hong Kong Market
5.  Singapore Market Outlook
5.1  Singapore Stock Market
5.2  Singapore Property Market
6.  Conclusions and Recommendations

 

Profit in Stocks from Commodity Market Cycle (Oil & Gas, Palm Oil, Mining, etc)

Commodity

Every major investment market (eg. stock, property, commodity, forex, bond) has its own unique market cycle. A wise investor could combine 2 market cycles of 2 different markets to maximize the potential gains.

Currently, regional stock markets have diversified performance.  Major economy such as US, China and Germany are still at moderate to high optimism levels.  At the same time, countries with GDP depend heavily on commodity, eg. Malaysia, Indonesia, Australia, are suffering in slower economy due to declining commodity prices.  Their stock markets are at low optimism level now, risk seems to get higher with political uncertainty and weaker currency.

The recent free-fall in share price for Glencore, major global commodity stock is an alert to the whole world, both commodity and stock markets. At the same time, local commodity related stocks such as Oil & Gas (Keppel Corp, Sembcorp Marine, Ezion, etc), Palm Oil (Golden Agri, First Resources, Wilmar), as well as overseas commodity related sectors (eg. mining in Australia), are recording huge correction is prices over the years.  This could be a rare opportunity to buy during a crisis but many people do not know how to take this advantage.

The secret of making money in investment is simply Buy-Low Sell-High. However, most traders and investors are too normal, therefore their emotions will swing with the market news, ending Buy-High Sell-Low.  Commodity related stocks locally and globally are very attractive in prices but whoever dare to buy, could end up buy low and get lower, eventually may sell lower due to fearful outlook. The dilemma is how to measure low and high, how low is considered low? It has to be 20%, 50% or more discount in price?

In the past few years, STI component commodity stock, Noble Group, share price has been declining from over $2 to about 40 cents now, more than 80% correction in prices.  At which level, share price may be supported?  When is the right time to enter?  The decision requires good understanding of fundamentals of commodity and stock market cycles.  Commodity market cycle now is in winter season while stock is near to summer time.  A wise trader or investor would align these 2 unique market cycles in one’s trading plan or investing strategy.  There is a limit in falling in price, as long as the reason is not due to fundamental of company is getting worse, eg. declining business with little asset or cash to pay for excessive high debt.  Not everyone is master of fundamental, therefore a stock price could be over-corrected based on declining in business (eg. due to commodity market downturn).  For the case of Noble Group, the accusations by Iceberg Research and Muddy Waters, resulting in share price falling below $1, all the way to 40 cents, is mainly a reflection of traders’ fear.

The safest time to buy a stock is when everyone is afraid the sky will fall down while the business is still operating normally with consistent performance. Such opportunity requires patience.  Opportunity of fortune is for someone who is prepared.

 

Global Stock Market Crash?

Ein55 Newsletter No 017 - image - Market Crash

Global stock markets of 4 major economy: US, China, Japan and Germany have achieved 75% optimism. Therefore, it is not a surprise to see major correction in the past 1 month. We should follow Optimism from Level 1 (individual stock) to Level 2 (sector) to Level 3 (country/region) to Level 4 (world).

Although Singapore STI and Hong Kong HSI have been only 50+% optimism in the past few years, they are smaller market, we need to follow a bigger market to evaluate our probability of success with Optimism. High optimism = high risk, 75% World Optimism means the chances of falling down is 75% while there are only 25% chance to go up. Don’t over-trade or over-invest, keep at least 75% cash as world Optimism has reached 75% optimism. If we follow the rule of money management, taking profit with higher optimism, the risk could be minimized.

For those who want to grab on the opportunity of falling giants of global stock markets, adding Technical Analysis (TA) will be helpful because the falling knife could be severe, your personality may not be suitable to buy low with downtrend. Regardless it is a major correction (mid-term) or Level-4 (world) crisis at longer term, we should consistent to buy low (either long term, mid term or short term) and sell high later. If we could diversify over 10 different giants (through Fundamental Analysis, FA), even if the giants fall down, the chances of recovery is very high especially if the price correction is mainly due to the human greeds and fears (Personal Analysis, PA), not the FA (economy or company business performance).

TA = FA + PA

 (Share price is a reflection of business performance and traders emotions)

We shall continue to apply this FTP (FA + TA + PA) analysis around the Optimism Strategy to profit from the global stock market in a safe way. There is no need to guess the direction of the market, low enough, we could enter; high enough, we will exit. The low and high shall follow our personality for short term trading, mid term trading or long term investing. New Level-3 giants are falling down (eg. Malaysia, both stock and currency markets), grab on the opportunity to time yourself with consideration of Level 1-4 Optimism.