Friday, 24 June 2016
5 Annoying Questions Newbies Often Ask in Stock Trading Forum/FB Groups
08:33:00
Because of social networking sites (facebook, twitter, instagram), the stock market is being introduced to more Filipinos here and abroad. And since one can join the market with a minimum investment of 5000 Pesos only, more and more people are jumping in, hoping that they can easily grow their money using this financial vehicle.
After opening a stock trading account, the tendency is to look for training resources, which include forums and facebook groups. However, once people see how easy it is to get stock trading tips from these groups, they become prone to just rely on the tips/recommendations of other members. In fact, it's easy to spot newbie traders based on the questions they post.
Below are some of the irritating/annoying questions you'll often see in stock trading groups. Given the nature of questions, expect to see replies that are just aimed to hype a particular stock or just bash/embarrass the poster. So read on newbies and hopefully, you won't ask the same questions next time. :)
1. I'm a newbie in the stock market. Ano ok bilhin?
Given the number of stocks in the PSE, expect each trader to have a favorite stock. The stock can either be for long term, short term holding or daytrading only. Recos (short for recommendations) can range from blue chips to penny stocks. Before buying a stock, know first how long you plan to hold on to the stock, as well as the fluctuation levels you can tolerate. Determine if your decision will be based on fundamentals or just based on daily charts. What works for others may not work for you due to different trading constraints (e.g., slow internet connection, busy with work).
2. Ok pa ba pumasok sa [insert 3 penny stocks that hit ceiling price here]?
Example: Ok pa ba pumasok sa ION, PA, NOW?
Penny stocks easily attract newbies because of ceiling plays. Who doesn't want quick profit, right? Oftentimes, once a stock goes ceiling for 2 or 3 straight days, newbies get convinced to join in the party. Unfortunately, once they start buying, big players start selling, and "ceiling play" suddenly turn to "selling play". Newbies then become stuck holders, now hoping for their "superstock" to bounce back and hopefully go green again. Once they get impatient, the blame game starts. But really, the person who should be blamed is the one who pressed the "Buy" button. They wouldn't be in that position if not for impatience, envy and greed.
3. Pwede na kaya pumasok sa [insert penny stock that hit ceiling but is now crashing here]?
Example: Pwede na kaya pumasok sa SUN?
When a penny stock goes ceiling or has closed significantly higher for several days, newbies treat pullbacks as opportunity to buy. But sometimes, these opportunities just mean that the play is over. Newbies end up catching falling knives, which again, make them stuck holders. The "hoping" phase then begins, wherein newbies are uncertain when the penny stock will bounce back. This "hoping stage" may last for several months to years. The anxiety and sleepness nights can be ended though by selling at a loss (or what other refers to as cut loss).
4. (After a penny stock's price goes crashing) Bumili ako kanina ng [insert penny stock here], benta ko na ba?
Example: Bumili ako kanina ng FNI, lugi agad, benta ko na ba?
The question simply shows that the trader has no plans when he/she placed the order. This is rather risky (especially if it's now a losing position) since you don't have a cut loss point. You won't be able to determine when you should cut your losses, which can be a reason why you might lose more money.
5. Red today, buy na ba?
Like what was mentioned in #1, there are a lot of stocks to choose from in the PSE. Beware of people who might just recommend a particular stock (which they recently bought) so you can help them in pushing the stock price higher. Preparation is the key. Prepare a watchlist of stocks that you'll be observing in the upcoming days, including the good entry points and target prices (as well as the potential upside for each stock). With this approach, you don't have to go through the "buy now, ask later" scheme.
Newbies, if you find yourself always asking these questions, I'm sorry to say, but you're still not ready for the stock market. Entering a trade is very easy, exiting is the difficult part. If you'll simply follow recos being thrown at you (unfortunately, some of them are just hyped ones), get ready to lose money or get stuck on that stock. If there's such a thing as recipe for disaster for your stock portfolio, the questions above will definitely be included.
As a general rule, study first before you invest, moreso if you plan to trade stocks. You can start learning the basics by attending free seminars to learn more about fundamental analysis (know which stocks are ok based on financial figures) and technical analysis (to give you an idea on the entry and exit levels). After that, research more on what you want to learn. Missing an opportunity is preferable than losing money because you entered a trade unprepared. Always remember that you entered the market to gain money, not lose it.
After opening a stock trading account, the tendency is to look for training resources, which include forums and facebook groups. However, once people see how easy it is to get stock trading tips from these groups, they become prone to just rely on the tips/recommendations of other members. In fact, it's easy to spot newbie traders based on the questions they post.
Below are some of the irritating/annoying questions you'll often see in stock trading groups. Given the nature of questions, expect to see replies that are just aimed to hype a particular stock or just bash/embarrass the poster. So read on newbies and hopefully, you won't ask the same questions next time. :)
1. I'm a newbie in the stock market. Ano ok bilhin?
Given the number of stocks in the PSE, expect each trader to have a favorite stock. The stock can either be for long term, short term holding or daytrading only. Recos (short for recommendations) can range from blue chips to penny stocks. Before buying a stock, know first how long you plan to hold on to the stock, as well as the fluctuation levels you can tolerate. Determine if your decision will be based on fundamentals or just based on daily charts. What works for others may not work for you due to different trading constraints (e.g., slow internet connection, busy with work).
2. Ok pa ba pumasok sa [insert 3 penny stocks that hit ceiling price here]?
Example: Ok pa ba pumasok sa ION, PA, NOW?
Penny stocks easily attract newbies because of ceiling plays. Who doesn't want quick profit, right? Oftentimes, once a stock goes ceiling for 2 or 3 straight days, newbies get convinced to join in the party. Unfortunately, once they start buying, big players start selling, and "ceiling play" suddenly turn to "selling play". Newbies then become stuck holders, now hoping for their "superstock" to bounce back and hopefully go green again. Once they get impatient, the blame game starts. But really, the person who should be blamed is the one who pressed the "Buy" button. They wouldn't be in that position if not for impatience, envy and greed.
3. Pwede na kaya pumasok sa [insert penny stock that hit ceiling but is now crashing here]?
Example: Pwede na kaya pumasok sa SUN?
When a penny stock goes ceiling or has closed significantly higher for several days, newbies treat pullbacks as opportunity to buy. But sometimes, these opportunities just mean that the play is over. Newbies end up catching falling knives, which again, make them stuck holders. The "hoping" phase then begins, wherein newbies are uncertain when the penny stock will bounce back. This "hoping stage" may last for several months to years. The anxiety and sleepness nights can be ended though by selling at a loss (or what other refers to as cut loss).
4. (After a penny stock's price goes crashing) Bumili ako kanina ng [insert penny stock here], benta ko na ba?
Example: Bumili ako kanina ng FNI, lugi agad, benta ko na ba?
The question simply shows that the trader has no plans when he/she placed the order. This is rather risky (especially if it's now a losing position) since you don't have a cut loss point. You won't be able to determine when you should cut your losses, which can be a reason why you might lose more money.
5. Red today, buy na ba?
Like what was mentioned in #1, there are a lot of stocks to choose from in the PSE. Beware of people who might just recommend a particular stock (which they recently bought) so you can help them in pushing the stock price higher. Preparation is the key. Prepare a watchlist of stocks that you'll be observing in the upcoming days, including the good entry points and target prices (as well as the potential upside for each stock). With this approach, you don't have to go through the "buy now, ask later" scheme.
Newbies, if you find yourself always asking these questions, I'm sorry to say, but you're still not ready for the stock market. Entering a trade is very easy, exiting is the difficult part. If you'll simply follow recos being thrown at you (unfortunately, some of them are just hyped ones), get ready to lose money or get stuck on that stock. If there's such a thing as recipe for disaster for your stock portfolio, the questions above will definitely be included.
As a general rule, study first before you invest, moreso if you plan to trade stocks. You can start learning the basics by attending free seminars to learn more about fundamental analysis (know which stocks are ok based on financial figures) and technical analysis (to give you an idea on the entry and exit levels). After that, research more on what you want to learn. Missing an opportunity is preferable than losing money because you entered a trade unprepared. Always remember that you entered the market to gain money, not lose it.
MYPG's Top 5 Saving and Spending Tips
08:32:00
Several weeks ago, a fellow blogger messaged me, asking if I can share my top 5 frugal practices that help me save money. I thought of posting my reply here as well, plus some additional notes, so I can also share those tips to my blog readers.
As you can see in the title, I didn't simply focus on saving. Sometimes, spending is inevitable. In case you really need to spend, at least you've considered the less expensive approach. :P So here it is, my Top 5 Saving and Spending Tips. :)
1. Wants vs. Needs
Determine if the thing you want to buy is a want or a need. Wants can be deferred. Needs are the things that you need in order to survive (life or work).
2. Save first before spending instead of spending first before saving.
After getting your salary, set aside an amount for your savings (ideally, at least 20%). The rest will be used for monthly expenses. Track where you spend your money and identify which expenses can be reduced. Increase the savings part if still possible.
3. Know when to pay in cash, know when to take advantage of your credit card
When buying expensive stuff like gadgets and appliances, don't be shy to ask for the "cash price" or the "best price". You'll be surprised that some reputable stores can give you generous discounts. Just to give you an example, I bought an LG front load washer and drier in 2012, which has an SRP of 62,000 Pesos. Can you guess how much I got it because I was willing to pay in cash? 41,000 Pesos. Yes, 21,000 Pesos less, just because I mentioned the "secret words". Even on Apple products, you can actually get a 10% discount, if you can pay in cash. ;)
In case a merchant tell you that the credit card price is the same as the cash price, just use your credit card (if you have one) to earn rebates (provided you pay your credit card balance in full every month). Credit cards can also be used to avail special promos.
4. 3-in-1 coffee over Starbucks, home-cooked meals over fastfood
If you're already working, you'll save a lot of money if you make your own coffee (3-in-1 or coffee from the pantry) instead of buying from coffee shops.
I drink coffee twice a day. Assuming I spend 130 Pesos for a Grande sized Macchiato, that's 260 Pesos per day, 1300 Pesos a week, 5200 Pesos a month and 62400 Pesos a year!
With regards to home-cooked meals, you'll realize that buying budget meals from fastfood chains is still pretty expensive once you see the prices of chicken, fish, beef and pork in the supermarket. If you can cook, or someone else can cook for you, home-cooked meals is a way for you to stretch your monthly budget.
5. Wait for "Sale" events
In case your purchase of clothes, furniture and other stuff can be deferred, wait for your favorite mall or shops to go on sale. You'll definitely be able to save some money on your purchase. Aside from the usual discounts to items, some malls even give additional discounts during the first 3 hours.
I hope these simple and practical tips can help you save more money. Got other tips? Feel free to share it in the comments section. :)
As you can see in the title, I didn't simply focus on saving. Sometimes, spending is inevitable. In case you really need to spend, at least you've considered the less expensive approach. :P So here it is, my Top 5 Saving and Spending Tips. :)
1. Wants vs. Needs
Determine if the thing you want to buy is a want or a need. Wants can be deferred. Needs are the things that you need in order to survive (life or work).
2. Save first before spending instead of spending first before saving.
After getting your salary, set aside an amount for your savings (ideally, at least 20%). The rest will be used for monthly expenses. Track where you spend your money and identify which expenses can be reduced. Increase the savings part if still possible.
3. Know when to pay in cash, know when to take advantage of your credit card
When buying expensive stuff like gadgets and appliances, don't be shy to ask for the "cash price" or the "best price". You'll be surprised that some reputable stores can give you generous discounts. Just to give you an example, I bought an LG front load washer and drier in 2012, which has an SRP of 62,000 Pesos. Can you guess how much I got it because I was willing to pay in cash? 41,000 Pesos. Yes, 21,000 Pesos less, just because I mentioned the "secret words". Even on Apple products, you can actually get a 10% discount, if you can pay in cash. ;)
In case a merchant tell you that the credit card price is the same as the cash price, just use your credit card (if you have one) to earn rebates (provided you pay your credit card balance in full every month). Credit cards can also be used to avail special promos.
4. 3-in-1 coffee over Starbucks, home-cooked meals over fastfood
If you're already working, you'll save a lot of money if you make your own coffee (3-in-1 or coffee from the pantry) instead of buying from coffee shops.
I drink coffee twice a day. Assuming I spend 130 Pesos for a Grande sized Macchiato, that's 260 Pesos per day, 1300 Pesos a week, 5200 Pesos a month and 62400 Pesos a year!
With regards to home-cooked meals, you'll realize that buying budget meals from fastfood chains is still pretty expensive once you see the prices of chicken, fish, beef and pork in the supermarket. If you can cook, or someone else can cook for you, home-cooked meals is a way for you to stretch your monthly budget.
5. Wait for "Sale" events
In case your purchase of clothes, furniture and other stuff can be deferred, wait for your favorite mall or shops to go on sale. You'll definitely be able to save some money on your purchase. Aside from the usual discounts to items, some malls even give additional discounts during the first 3 hours.
I hope these simple and practical tips can help you save more money. Got other tips? Feel free to share it in the comments section. :)
Why would people sell their shares for a lower price?
08:31:00
A college freshman who is planning to invest in mutual fund asked me:
Why would people sell their shares for a lower price? Wouldn't a share increase its price once it has decreased? Why not just simply wait for the price to increase from the day you bought it?
Below is my reply to him. Please note that the concept not only applies to mutual fund, but also to stocks and UITF.
Here's the thing, there are investors who believe that "time" is essential in growing their wealth, while some think that "timing the market" can grow their wealth faster. For the former, it means that the investor is committed to hold on to the investment for a long time, ignoring the up and down movement of the market, believing that after several years, the share price has increased already (historically speaking, for stocks and equity funds, prices have increased, especially if invested for at least 5 years). For the latter, investors prefer to redeem their investment to save whatever profit is remaining, preserve their capital, then just subscribe again once the market has stabilized. Others choose to sell, even at a loss, hoping that prices will fall down further, then once the price rebounds, they will enter again. For those trying to "time the market", the idea is to be able to buy more shares at a lower price given the cash you have (it also gives you the opportunity to start gaining as soon as the market goes up again, unlike those who held on to their shares and waiting for the price to breakeven). Another reason why an investor will sell at a loss is because he/she desperately needs the money.
Ideally, timing the market puts you in a better position to gain more using the money you have. HOWEVER, not everyone can time the market perfectly. This leads to some investors missing the big rebound and eventually re-entering at a higher price. Some of them who have seen that prices are higher now (compared to their selling price last time) hesitate to re-enter, thinking that the price is too high already (therefore, higher risk for their money). If the market goes on a big rally again, there's a high chance that they'll be left behind and regret the decision.
I've experienced being in both positions. I tried to time the market several times, and regretted the decision in some instances. Honestly, my Sunlife MF which I got in 2006 (and still holding) is giving me better profit percentage, compared to my "timed" investments. That's why I agreed with a financial speaker when he said that "It's time, not timing, that determines your personal wealth". Right now, I'm building an elementary, high school and college fund for my 1 year old son, and I'll honestly say that I'll bet on "time" this time (i'm subscribing to two BPI Equity UITFs every month).
Why would people sell their shares for a lower price? Wouldn't a share increase its price once it has decreased? Why not just simply wait for the price to increase from the day you bought it?
Below is my reply to him. Please note that the concept not only applies to mutual fund, but also to stocks and UITF.
Here's the thing, there are investors who believe that "time" is essential in growing their wealth, while some think that "timing the market" can grow their wealth faster. For the former, it means that the investor is committed to hold on to the investment for a long time, ignoring the up and down movement of the market, believing that after several years, the share price has increased already (historically speaking, for stocks and equity funds, prices have increased, especially if invested for at least 5 years). For the latter, investors prefer to redeem their investment to save whatever profit is remaining, preserve their capital, then just subscribe again once the market has stabilized. Others choose to sell, even at a loss, hoping that prices will fall down further, then once the price rebounds, they will enter again. For those trying to "time the market", the idea is to be able to buy more shares at a lower price given the cash you have (it also gives you the opportunity to start gaining as soon as the market goes up again, unlike those who held on to their shares and waiting for the price to breakeven). Another reason why an investor will sell at a loss is because he/she desperately needs the money.
Ideally, timing the market puts you in a better position to gain more using the money you have. HOWEVER, not everyone can time the market perfectly. This leads to some investors missing the big rebound and eventually re-entering at a higher price. Some of them who have seen that prices are higher now (compared to their selling price last time) hesitate to re-enter, thinking that the price is too high already (therefore, higher risk for their money). If the market goes on a big rally again, there's a high chance that they'll be left behind and regret the decision.
I've experienced being in both positions. I tried to time the market several times, and regretted the decision in some instances. Honestly, my Sunlife MF which I got in 2006 (and still holding) is giving me better profit percentage, compared to my "timed" investments. That's why I agreed with a financial speaker when he said that "It's time, not timing, that determines your personal wealth". Right now, I'm building an elementary, high school and college fund for my 1 year old son, and I'll honestly say that I'll bet on "time" this time (i'm subscribing to two BPI Equity UITFs every month).
Philippine Retail Investment Conference 2015 - FREE for COL Clients!
08:29:00
Good news for COL Financial clients! Last night, while I was going through my FB feed, I noticed April Lee Tan's post regarding the Philippine Retail Investment Conference 2015 (btw, Ms. April Tan is the Head of Research Department at COL Financial since 2003 and serves as its Vice President). According to her, a complimentary ticket for the conference will be given to COL account holders. All that's needed is to register here. Regular ticket price is 2500 Pesos but COL is offering it to its clients for free, so don't waste this opportunity to learn from the guest speakers.
I was actually contemplating on attending this conference before, but due to the price of the ticket, I decided to pass. But now that it's offered for free, it's a no-brainer. I'll definitely come to this event! See you there! :)
10 Truths Every Newbie Stock Trader Should Know
08:29:00
In my 8 years of trading in the Philippine stock market, I've learned a lot from online resources (articles, books, market reports from brokers, etc.) and stock trading forums. I also had a lot of realizations when it comes to stock trading. In this article, I will be listing some of those lessons and realizations for newbie traders, as well as for those planning to enter the stock market.
1. Stock trading is simple, but it's not easy
It may appear that stock trading is simple: buy low, sell high, right?
The truth is, earning from the stock market is not easy. You can study all you want before plunging into the market and still find yourself in a string of losing trades. Even buying a fundamentally good stock doesn't guarantee a gain.
There are just so many factors that affect the market. Aside from political and economic issues in and out of the country, you also have to look at personal issues that can make you lose money: fear, greed, hope, ignorance, dependence on others, and dependence on luck.
You need time and experience to be a consistently profitable trader. Sometimes, you can be lucky. But if you want to stay long in the market, you must not rely on luck alone.
Study, plan your trading strategy, check the results, then re-assess your strategy. These are the things that you need to do in order to improve your trading skills and know which strategy works for you.
2. Manage your expectations
Many traders enter the market thinking that they can easily earn 200% - 300% in a short span of time (i.e., less than a year).
The truth is, their target is very difficult to achieve. Even experienced professional traders will have a hard time achieving that. Just look at the performance of pooled funds, which are managed by supposedly very good traders.
I won't say that the target is not achievable. But in order to meet that, you really need to be an excellent trader (unfortunately, many of us are not).
3. Your trading strategy should depend on how much you can monitor the market
When you join stock trading forums, most likely that you'll be able to read some traders disclosing several buy and sell trades within the day involving the same stock.
A newbie's tendency is to buy the same stock and hope that he/she can also profit from that stock. But sometimes, if you have a day job, you won't be able to monitor the price action. And when this happens, disasters usually strike. You suddenly find yourself "ipit much" in that stock.
The truth is, intra-day trading is not for everyone. If you can't really monitor the price action, especially for highly volatile stocks, don't do it. It would be much better to stick to blue chips while you're still learning the ropes.
4. Stock analysts are not always right
While stock analysts from your broker can help you in planning your trades, don't simply bet your house or go all in on their recommendations.
Truth is, they are people too. They can make mistakes in their research, assumptions, computations, and targets. The uncertainty of what's going to happen in the next couple of days, weeks or months can also make or break their stock recommendation. You win some, you lose some. That's just how it goes.
5. Be careful in believing online forum posts
Joining a stock trading forum has its benefits. You'll be informed of news, as well as rumors, on different stocks. You'll also get to see different analysis based on the company's fundamentals and charts.
Truth is, some people use stock trading forums to spread fabricated information and rumors, which they use to hype a particular stock. Some of them even send private messages to newbies to further gather support for the particular stock. Usually, when newbies decide to bet on the "tip", they end up holding the bag while veterans take profit.
With regards to the analysis being shared, be careful also on the recommendations being given. Some of them come from fellow newbies who are practicing their TA skills, and just like to share the patterns they see (valid or invalid), which may lead you to losing trades. Instead of always asking what stock to buy or simply accepting the recommendation of others, take the time to study (attending seminars is encouraged) so you can make your own analysis.
6. There will always be retracements/corrections
It's always nice to trade in a bullish market. Anyone, including newbies, can feel like a genius because almost all of the trades he/she get into bring in big profits. It often gives traders the wrong perception that they are already doing a fine job.
Truth is, you can't expect the market to be always up. There will always be minor corrections and there will be major corrections as well, that will make you doubt your skills, or even make you regret that you entered the market. So before entering a trade, determine whether you'll go short term or long term on the stock you want to buy. Plan you entry price, target price and cut loss price. If your target entry price is still far from the current price, just be patient, or better yet, look for other stocks to buy.
7. Buy on rumors, sell on news
Rumors are part of the stock trading game. They can come from stock trading forums, text from a trader friend/broker, or private message from a forum friend with a "reliable source". Sometimes it can be true, oftentimes, it's just a trap. Rumors can make penny stocks hit the ceiling multiple times, which make it difficult for newbies to ignore.
Truth is, while rumors still persist, more traders get in and speculate on the stock. But once an announcement confirming the rumor has been made, more often than not, the stock price will start to drop. So if you enter a trade based on the newspaper article you read today, you're probably too late to the party.
8. Not all IPOs are profitable
If you just entered the stock market in 2015, you probably have heard the news on the IPO of Crown Chemicals and SBS hitting the ceiling price on the first day, and then gaining some more on the second day. Many of those who subscribed should have been able to earn at least 100% in the first two days of listing. Right now, I can say that there's an IPO craze in the PSE. I've witnessed (and even became part of) the long line of traders who want to buy IPO shares through the LSIP (Local Small Investor Program). IPOs are so hot that even PSE security guards line up to buy shares!
But newbies, beware. Truth is, not all IPOs are profitable. I have my share of experience in IPO flops wherein I ended up selling my shares at a loss (some stocks immediately fell below the IPO price on the first trading day). Actually, I don't have to go through old listings to look for an example. Just look at the case of PSPC, which got listed in 2014. Fundamentally, it's good, but it never really got the support from traders (and even from its underwriter), reason for it to go down below the IPO price on its second day of listing. As of writing, PSPC is still trading below its IPO price.
9. 5K initial investment is too small for a stock trading capital
In the stock market, capital matters. Yes, you can start investing with a 5 Thousand Peso capital, but don't expect to earn 5K, 10K or 20K with it alone.
Truth is, you need money to earn big money in the stock market. It's fine to start with a 5K capital, but if you want to earn more, you need to add funds to your portfolio. Adding funds regularly, depending on your financial capacity, is encouraged.
10. It's inevitable to have losing trades
In case you lose money in a trade, cry if you want to, but don't forget to move on. Losing is part of the game, so try to minimize your losses as much as possible. Ending with a net gain on your portfolio is what truly matters.
Truth is, regardless of a person's trading skills, he/she is bound to experience a losing trade at some point since we are all just speculating on the price movement. There's always a 50-50 chance on winning and losing, whether you're a newbie, intermediate or expert trader. What separates an expert trader from a newbie trader is that the former has a higher winning percentage. In case you always find yourself at the losing end of the trade, improve your skills by reading books and/or attending stock trading seminars.
It may appear that stock trading is simple: buy low, sell high, right?
The truth is, earning from the stock market is not easy. You can study all you want before plunging into the market and still find yourself in a string of losing trades. Even buying a fundamentally good stock doesn't guarantee a gain.
There are just so many factors that affect the market. Aside from political and economic issues in and out of the country, you also have to look at personal issues that can make you lose money: fear, greed, hope, ignorance, dependence on others, and dependence on luck.
You need time and experience to be a consistently profitable trader. Sometimes, you can be lucky. But if you want to stay long in the market, you must not rely on luck alone.
Study, plan your trading strategy, check the results, then re-assess your strategy. These are the things that you need to do in order to improve your trading skills and know which strategy works for you.
2. Manage your expectations
Many traders enter the market thinking that they can easily earn 200% - 300% in a short span of time (i.e., less than a year).
The truth is, their target is very difficult to achieve. Even experienced professional traders will have a hard time achieving that. Just look at the performance of pooled funds, which are managed by supposedly very good traders.
I won't say that the target is not achievable. But in order to meet that, you really need to be an excellent trader (unfortunately, many of us are not).
3. Your trading strategy should depend on how much you can monitor the market
When you join stock trading forums, most likely that you'll be able to read some traders disclosing several buy and sell trades within the day involving the same stock.
A newbie's tendency is to buy the same stock and hope that he/she can also profit from that stock. But sometimes, if you have a day job, you won't be able to monitor the price action. And when this happens, disasters usually strike. You suddenly find yourself "ipit much" in that stock.
The truth is, intra-day trading is not for everyone. If you can't really monitor the price action, especially for highly volatile stocks, don't do it. It would be much better to stick to blue chips while you're still learning the ropes.
4. Stock analysts are not always right
While stock analysts from your broker can help you in planning your trades, don't simply bet your house or go all in on their recommendations.
Truth is, they are people too. They can make mistakes in their research, assumptions, computations, and targets. The uncertainty of what's going to happen in the next couple of days, weeks or months can also make or break their stock recommendation. You win some, you lose some. That's just how it goes.
5. Be careful in believing online forum posts
Joining a stock trading forum has its benefits. You'll be informed of news, as well as rumors, on different stocks. You'll also get to see different analysis based on the company's fundamentals and charts.
Truth is, some people use stock trading forums to spread fabricated information and rumors, which they use to hype a particular stock. Some of them even send private messages to newbies to further gather support for the particular stock. Usually, when newbies decide to bet on the "tip", they end up holding the bag while veterans take profit.
With regards to the analysis being shared, be careful also on the recommendations being given. Some of them come from fellow newbies who are practicing their TA skills, and just like to share the patterns they see (valid or invalid), which may lead you to losing trades. Instead of always asking what stock to buy or simply accepting the recommendation of others, take the time to study (attending seminars is encouraged) so you can make your own analysis.
6. There will always be retracements/corrections
It's always nice to trade in a bullish market. Anyone, including newbies, can feel like a genius because almost all of the trades he/she get into bring in big profits. It often gives traders the wrong perception that they are already doing a fine job.
Truth is, you can't expect the market to be always up. There will always be minor corrections and there will be major corrections as well, that will make you doubt your skills, or even make you regret that you entered the market. So before entering a trade, determine whether you'll go short term or long term on the stock you want to buy. Plan you entry price, target price and cut loss price. If your target entry price is still far from the current price, just be patient, or better yet, look for other stocks to buy.
7. Buy on rumors, sell on news
Rumors are part of the stock trading game. They can come from stock trading forums, text from a trader friend/broker, or private message from a forum friend with a "reliable source". Sometimes it can be true, oftentimes, it's just a trap. Rumors can make penny stocks hit the ceiling multiple times, which make it difficult for newbies to ignore.
Truth is, while rumors still persist, more traders get in and speculate on the stock. But once an announcement confirming the rumor has been made, more often than not, the stock price will start to drop. So if you enter a trade based on the newspaper article you read today, you're probably too late to the party.
8. Not all IPOs are profitable
If you just entered the stock market in 2015, you probably have heard the news on the IPO of Crown Chemicals and SBS hitting the ceiling price on the first day, and then gaining some more on the second day. Many of those who subscribed should have been able to earn at least 100% in the first two days of listing. Right now, I can say that there's an IPO craze in the PSE. I've witnessed (and even became part of) the long line of traders who want to buy IPO shares through the LSIP (Local Small Investor Program). IPOs are so hot that even PSE security guards line up to buy shares!
But newbies, beware. Truth is, not all IPOs are profitable. I have my share of experience in IPO flops wherein I ended up selling my shares at a loss (some stocks immediately fell below the IPO price on the first trading day). Actually, I don't have to go through old listings to look for an example. Just look at the case of PSPC, which got listed in 2014. Fundamentally, it's good, but it never really got the support from traders (and even from its underwriter), reason for it to go down below the IPO price on its second day of listing. As of writing, PSPC is still trading below its IPO price.
9. 5K initial investment is too small for a stock trading capital
In the stock market, capital matters. Yes, you can start investing with a 5 Thousand Peso capital, but don't expect to earn 5K, 10K or 20K with it alone.
Truth is, you need money to earn big money in the stock market. It's fine to start with a 5K capital, but if you want to earn more, you need to add funds to your portfolio. Adding funds regularly, depending on your financial capacity, is encouraged.
10. It's inevitable to have losing trades
In case you lose money in a trade, cry if you want to, but don't forget to move on. Losing is part of the game, so try to minimize your losses as much as possible. Ending with a net gain on your portfolio is what truly matters.
Truth is, regardless of a person's trading skills, he/she is bound to experience a losing trade at some point since we are all just speculating on the price movement. There's always a 50-50 chance on winning and losing, whether you're a newbie, intermediate or expert trader. What separates an expert trader from a newbie trader is that the former has a higher winning percentage. In case you always find yourself at the losing end of the trade, improve your skills by reading books and/or attending stock trading seminars.
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