Something that all traders go thru

Many traders usually go through different phases in their trading in this particular order.

1. Methodology. The first phase is that all-too-familiar quest for the Holy Grail – a trading system that never fails. After spending thousands of dollars on books, seminars and trading systems, the aspiring trader eventually realizes that no such system exists.

2. Money Management. So, after getting frustrated with wasting time and money, the up-and-coming trader begins to understand the need for money management, risking only a small percentage of a portfolio on a given trade versus too large a bet.

3. Psychology. The third phase is realizing how important psychology is – not only personal psychology but also the psychology of crowds.

But Jeffrey Kennedy of Elliott Wave International thinks it is the other way around. I definitely went through the phases exactly as above. I went through the school of hard knocks!! Where was Jeffrey's advice when I started out?

Jeffrey thinks that aspiring traders should begin their journey at phase three and work backward. The first step in becoming a consistently successful trader is to understand how psychology plays out in your own make-up and in the way the crowd reacts to changes in the markets. The reason for this is that a trader must realize that once he or she makes a trade, logic no longer applies. This is because the emotions of fear and greed take precedence – fear of losing money and greed for more money.

After the aspiring trader understands a bit of psychology, he or she can focus on money management. Money management is an important subject and deserves much more than just a few sentences. Even so, there are two issues that I believe are critical to grasp: (1) risk in terms of individual trades and (2) risk as a percentage of account size.

Once the aspiring trader understands this psychology, it’s easier to understand why it’s important to have a defined investment methodology and, more importantly, the discipline to follow it. Jeffrey uses the Wave Principle as his methodology. His advice in this realm is that whatever you choose to use, it should be simple.

So, there you have it... New traders, pay heed! :)

How is the Ringgit doing now?

Following my earlier write-up on the Ringgit, (see Where is our Ringgit heading to?), I said that the Ringgit is likely to weaken more then pre-peg levels of RM3.80 to USD after a short period of strengthening.

The Ringgit (MYR)is now strengthening in line with my earlier forecast. MYR, currently at RM3.5170, has strengthen from the RM3.6005, it wave-b high. It is likely to head towards the RM3.4355 levels in the coming weeks to complete wave-B, where wave-c is 0.618x of wave-a. RM3.4333 is also the 50% FR levels of wave-A.

Revised ST outlook for KLCI

After the index took out the 1,164 resistance, I knew that my earlier count was incorrect. After relooking and recalculating the waves, I think this is more likely the proper count, which was the alternative count earlier.

The KLCI is now at a critical juncture. It can either stop here and now, where wave 5=1.618x of wave 1 at 1170.6 while a RF of 2.0x is at 1,172. The MACD has been sporting a lower high every time the index hits a new peak. This is a bearish signal, suggesting that momentum is slowly dwindling. However, it remains only a warning signal, telling investors to be very cautious now.

However, there is also a good chance that prices could even continue on higher towards the 1,200-1,210 levels if wave 5=0.618x of wave 1 thru 3. We will have to wait and see.

Improve your trading success with Elliott Wave

EWI International is now offering investors a chance to get this 'trade guide/book' for free till 10 Aug. Just click on this link - http://www.elliottwave.com/club/best-of-traders-classroom/default.aspx?code=33996. Sign up and you will get this guide book for free. You will get to learn more about Elliott Waves and I think it will help you in your overall trading. Happy Reading and Trading!!

Thailand 1-1 Liverpool

I saw the game live on Astro last night. I wanted to catch a glimpse of some of the youngsters of Liverpool FC, particularly Nemeth and Pacheco. They are supposedly very talented and could make a few appearance this season - whether is in the Premier League or in Cups. Anyway, the whole game was not the usual Premier league game as clearly, the whole Liverpool team was not match-fit. Nemeth showed some great touches and skill when he had the ball. I think he could come good this season but it depends on whether Rafa thinks so too.

What do you think? Can Liverpool win the league this upcoming season? If Gerrard is charged with affray and IF he is not available for a few months, do you think we can still make it?

KLCI is hitting its short term peak soon

I believe that the KLCI is close to hitting its short term peak soon. At the time of writing, the KLCI is at 1147. I expect the KLCI to peak soon to complete wave 1. 1150 is based on 2.618x of wave 1 while 1153 is the based on the elliott channel. Its indicators are also showing signs of divergence, supporting the view that the benchmark index is close to a short term top.

Should the index do actually top near the 1150-1153 levels, it could pullback to at least the minimum 1132, back to Wave 4. Ideally, it should pullback to 1103-1120 of wave 3(iv), where the 38%FR is at 1115 and 50%FR is at 1104.

The alternative view (of a lower probability) is that the KLCI is already completed a short wave 2 down to 1132, then the index is likely heading towards 1218 next, suggesting that wave 3 has just begun and would likely extend further.

Where is our Ringgit heading to?

Based on the the Elliott Wave Theory, the Malaysian Ringgit appears to be heading for another round of weakening - meaning our Ringgit is going to buy less goods elsewhere. More expensive tech toys :(

The Ringgit has fallen to a low of RM3.7365 in early March from a high of RM3.13 in April last year. There was a clear and distinct 5-waves movement, which I have labeled A. Hence, it is now in correction mode with wave-a completed when the Ringgit hit RM3.4695. It has since rebounded to RM3.6005, just shy of its 50%FR level of RM3.6030.

In the near term, the Ringgit could strengthen towards 3.4355, where c is 0.618x of a. The 50.0% FR at 3.4333 is also nearby. Hence, there is a good chance that the Ringgit could head towards those levels in the coming weeks tom complete Wave-B. Whether it could strengthen further, we will have to see and take it wave by wave.

I have a BIG arrow at the end of wave-c of Wave B to show that the Ringgit is going to weaken to below RM3.7365 in the coming months. The Ringgit could falter to about RM4.00 (if wave-C is equal to wave-A) to the USD if wave-C stops near the levels mentioned above. If Wave-C is 1.382x of Wave-A, then the Ringgit could weaken to RM4.2737. This would mean that the Ringgit is going to be weaker (maybe a lot weakner) than it was when it was peg at RM3.80.

Be prepared for it as the weaker Ringgit could 'probably' cause the Malaysian stock market to fall as well, just like the Asian Financial Crisis in 1997/98. Is the KLCI heading back towards the 263 lows? That is another question for another day. Happy trading while it lasts.

Liverpool's fixture list for 2009/10

Liverpool 2009-10 Barclays Premier League fixtures:

August

15 Tottenham Hotspur (a)
19 Stoke City (h)
22 Aston Villa (h)
29 Bolton Wanderers (a)

September

12 Burnley (h)
19 West Ham United (a)
26 Hull City (h)

October

3 Chelsea (a)
17 Sunderland (a)
24 Manchester United (h)
31 Fulham (a)

November

7 Birmingham City (h)
21 Manchester City (h)
28 Everton (a)

December

5 Blackburn Rovers (a)
12 Arsenal (h)
16 Wigan Athletic (h)
19 Portsmouth (a)
26 Wolverhampton Wanderers (h)
28 Aston Villa (a)

January

9 Tottenham Hotspur (h)
16 Stoke City (a)
26 Wolverhampton Wanderers (a)
30 Bolton Wanderers (h)

February

6 Everton (h)
9 Arsenal (a)
20 Manchester City (a)
27 Blackburn Rovers (h)

March

6 Wigan Athletic (a)
13 Portsmouth (h)
20 Manchester United (a)
27 Sunderland (h)

April

3 Birmingham City (a)
10 Fulham (h)
17 West Ham United (h)
24 Burnley (a)

May

1 Chelsea (h)
9 Hull City (a)

Markets at new highs

As I write this blog, the markets around Asia are hitting new highs, higher than the June highs. KLCI is now at 1,120 while STI is also at a high of 2,432. Both markets should continue to edge higher in the medium term. KLCI should hit 1,160-1,170 and if we are lucky, the KLCI could even reach a high of 1,220. For the STI, it is likely to climb towards 2,640 levels. It is even possible for the index to hit 2,800-2,900 but it might be pushing it a bit. Nonetheless, both indices have a chance of riding on this strong wave upwards and rising to the higher end of the targeted range but it is still too early to confirm. We will have to wait and see if both indices can push past their initial targets. Happy Trading everyone coz this run could be the last run for a while. Once this run ends, the next fall will be a crash that will be an 'eye-opener'.

Back after a year out!

1 year have just passed with a blink of an eye. What have I done during the past year? Nothing much... getting on with life. Work, sleep, eat - in that order and that pretty much sums up the year :). Holidays u asked? Have been thinking a lot bout it but not doing much to actually make it happen. Does life actually get 'worse' when you get older?

Anyway, I will try to update this blog once in a while just for fun.. will try to add more stuff rather than just markets. :) probably add my favourite passion - footie, the EPL and of course Liverpool! hmm, what else can I add? I dunno, will add as I go.. Think that's enough for now.. catch ya soon!

Quote: Hopefully being a year older = a year wiser :)