Category: Latest Posts

What is Leverage?

Leverage is a form of an operational facility provided to an investor by a broker that enables traders to take positions larger than the required amount of capital. By just paying down a portion of the total position value, the investor’s market exposure is increased. In other words, using leverage in trading entails using funds through a form of credit.

How does leverage work?

Let’s say a trader decides they need more money to trade while having PHP10,000 in their account. They might then decide to use the leverage that a broker offers. They could have invested PHP100,000 if they opted to apply a 1:10 leverage (10,000 X 10). The broker will essentially lend you the remaining funds to enable you to start the position after taking a specific amount as margin, which varies depending on the type of financial instrument.

Getting into detail about the Concept of Leverage

Let’s assume that your trading account has PHP10,000 in it. You choose to invest this amount in shares at a cost of PHP50. As the price rises during the day, you once more close the bet when it reaches PHP60. Let’s now analyze what would happen if we trade with and without leverage.

Without using it, the price has increased by PHP10, and 100 shares would cost PHP5000. The value of these 100 shares has increased by PHP10. In this scenario, your overall profit is PHP6,000 or 20%.

Now, let’s say that you choose to apply a 1:10 leverage to your investment. Currently, shares cost PHP100,000 to purchase. A trade on 1000 shares is available. The value of these shares has increased by PHP10. In this scenario, your overall profit is PHP10,000 or 200%.

As you can see, applying leverage would allow you to benefit more in this situation. However, keep in mind that the same thing may have occurred in the other direction. When using leverage, your loss would have been greater if the price had dropped.

Advantages and Disadvantages

Leverage allows traders to join and handle larger money with a little margin, which is a benefit. This is enticing to many traders, but it’s crucial to keep in mind that it can have a double-edged effect by amplifying both gains and losses. You can use the remaining free margin for subsequent trades because you only need to set aside a small amount of your total available balance for one position. 

Leverage can boost your earnings, but it can also multiply your losses. Therefore, it’s essential to handle leverage responsibly and consider the possible consequences of a losing trade. Furthermore, your trade may be put into “Margin Call” if you don’t have enough money in your account to cover a potential loss. If this occurs, your broker can close your holdings to reduce the risk for both of you.

How do I minimize my Risk with Leverage Trading?

Although using leverage can result in substantial returns, it’s wise to remember that there is always a chance of losing money. Having a strong risk management strategy in place, such as defining the maximum percentage of your account balance you wish to risk per trade, is one way to limit risk.

To limit the greatest amount you can lose on a deal, use stop-loss orders. However, keep in mind that stop-loss orders are not guaranteed, and you can encounter some slippage during periods of low liquidity.

By using a trading plan and keeping a trading record, you can keep your emotions in check. Trading using leverage can be alluring because it gives traders the ability to control a much larger stake than they would otherwise have.

Now You Know!

It’s important to monitor and manage one’s position continually. An investor must first determine whether the cost of debt is less than the potential return before acquiring a leveraged position. If an investor doesn’t have enough capital to cover any potential losses, they shouldn’t ever acquire a leveraged position.

Lastly, it is advisable to refrain from employing excessive leverage while first learning to trade. Leverage should only be used once you have a firm grasp of how to profit from trading. You can greatly boost your revenues if you use this effective tool correctly.

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Clueless on how to invest in the stock market?

The stock Market can be a frightening world to step into, but in reality, investing isn’t as hard or complex as it might seem. With Prime+ Research, we want to do our part to provide you with the right mindset and strategy to be profitable in the market. 

Let us guide you to start your investing journey today 

@nicolepanlilio takes the spotlight for this week’s featured trader as he shares his knowledge with us on crypto! Let’s take a look at how @nicolepanlilio uses this to his advantage. 

In a quote by Marty Schwartz, he says “My attitude is that I always want to be better prepared than someone I’m competing against. The way I prepare myself is by doing my work each night.” When trading in the market, the best thing you can do is be prepared! Don’t get all too confident thinking that trading is a no brainer. Plan your trades ahead of time and get that buck!

@nicolepanlilio shared his thoughts on $XNO and the potential course it might go by utilizing technical analysis.

Let’s take a look at @nicolepanlilio’s analysis on $XNO. First of all, he took notice of the volume which spiked at the 5 minute time frame. Volume usually indicates whether or not a coin is liquid. The higher the volume, the more liquid it is. He also took note of the double top pattern. This pattern usually signals a trend reversal, meaning that price is most likely to go down. Next is the RSI, a momentum indicator, which tells us whether or not a coin is overbought or oversold. And lastly, support and resistance lines which  show specific price points on a chart that are expected to attract the maximum amount of either buying or selling.

TECHNICALS OF THE TRADE

Technically, $XNO at the time was trading at a downtrend. First we can observe that it was retesting resistance lines before plummeting back down in the 5 minute timeframe. We can also see that it’s trading below MA 21, indicating signs that it’s heading towards a down trend. As for the RSI, it is around the 50 levels meaning that there are neither more or less buyers/sellers in the market. Trading volume is substantially low considering the fact that it has recently been on a rally. 

Through the analysis of @nicolepanlilio, a successful trade was made, earning him profits in the long run. 

FUNDAMENTALS OF THE TRADE

In order to bring automated microtransactions to the language localization sector, The Nano Foundation and FynCom have joined forces.

Their pilot project, which aims to translate The Beginner’s Guide to Cryptocurrency and Nano into French, Spanish, Portuguese, German, and Dutch, has officially begun today. As part of the project, translators and approvers will receive nano rewards instantly and automatically for each word they translate.

WHAT SHOULD BE MY NEXT MOVE

Looking at the current state of $XNO, it would be wise to wait until price touches MA support levels. It seems to be ranging with little volume after the huge price spike in the last couple days. Be advised that it could be very risky to trade $XNO at this point since anything can happen. Add some positions on support, and start adding up again once it breaks resistance. 

Additionally, take note as well of the price of $BTC as most coins rely on its price. 

With all the information gathered, it is best to plan your trades ahead of time by listening to recent news on $BTC as well as your chosen coin. Don’t rely only on technical analysis alone, but fundamentals too. Practice due diligence and that way, you’ll be able to become a successful trader. 

Once again, KUDOS to @nicolepanlilio for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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TRACK FOREIGN FLOWS ON INVESTAGRAMS

We have a new update coming your way, InvestaPrime Elite subscribers!

A long time request we’ve been getting is for you guys to be able to$ track the positioning of the foreign funds in the local market. With our newest feature you can now:

See what foreign funds are buying and selling

See the foreign funds composition in stocks you’re monitoring

You can now find a new edge in the markets

Check out our foreign flows tracker here: http://invs.st/IVGWForeignFlowsTL

One of the greatest marketplaces in the world is the foreign exchange market, or forex market. It is a worldwide decentralized or over-the-counter market where currencies are traded. When venturing into the Forex market, it is best to learn the basic forex terms. These forex terms should be kept in mind to help you not get confused during trading. There is a lot to learn about forex terms, so below are some of the basic terminologies to help you get started. 

Currency Pair

A price quote between two distinct currencies is referred to as a currency pair in the foreign exchange market. A currency pair’s first listed currency is referred to as the base, while the second listed currency—which serves as the benchmark—is known as the quote.

Base Currency

The first currency in a forex pair quotation is referred to as the base currency. One currency will always be quoted in relation to another on the foreign exchange market because you are buying one while selling the other.

The second currency, also referred to as the quote or counter currency, will appear after the base currency.

Let’s have a PHP/USD pair as an example. The base currency is the peso and the quote currency is the US dollar. If the price of the PHP/USD pair is 0.87, it means that you would need $0.87 to buy a single peso.

Quote Currency

Quote currency is the second currency included in a forex pair. This forex term also goes by the name of the counter currency.

The cost of buying one unit of the base currency by selling the quote currency is reflected in the price of a forex pair.

USD is the quote currency in the pair PHP/USD.

Exchange rate

An exchange rate determines the price at which one currency will be exchanged for another and has an impact on international trade and money transfers. In the Philippines, the exchange rate is typically stated as the peso equivalent of one US dollar. For instance, P59 Equals $1 US.

Ask Price

The price displayed on the right side of a quote is the ask price, which is also referred to as the offer price. This is the cost at which the base currency can be purchased. The offer price, as seen from the market maker’s perspective, is the price at which they are prepared to sell the underlying.

The bid price is marginally lower than the market price, whereas the offer price is marginally higher.

Bid Price

Bid Price is the cost at which a currency pair can be sold. This forex term, as seen from the market maker’s perspective, is the cost at which they are prepared to purchase the underlying asset from the trader.

While the offer price will always be marginally higher than the market price, the bid price will always be marginally lower.

Spread

The Spread is known as the difference in pips between the ask price and the bid price.  Transaction fees are replaced by the spread, which stands in for brokerage service expenses.

Appreciation 

Appreciation is an increase in the value of an exchange rate. For a variety of factors, including governmental policy, interest rates, trade balances, and business cycles, currencies appreciate against one another.

Depreciation

Depreciation is the decrease in the value of an exchange rate. Political unrest, interest rate differences, weak economic fundamentals, and investor risk aversion are a few examples of the causes of currency depreciation.

Gapping 

A price that opens much higher or lower than the previous day’s close without any trading taking place in between. This forex term implies that a limit or stop order may be filled at a price other than the one at which it was placed.

Pips 

The smallest price change that a currency exchange rate can make is called a pip, which stands for “percentage in point.” This forex term measures how much a currency pair’s exchange rate has changed in the forex market. Pips are the units used to measure market gains and losses.

Lot 

Forex is typically traded in lots. The base currency is divided by 100,000 to get the size of a typical lot. It is frequently impractical to trade just one unit of a given asset or security due to its actual worth. In these situations, traders will utilize lots, which are predetermined quantities of a specific item that are bought or sold in each transaction. An “odd lot” is one where the position size differs from the standard lot size.

Leverage 

With a little initial investment, an investor can use leverage to expand their trading power and control a larger position on the market. Leverage works by increasing your exposure to an underlying asset by using a deposit, also known as margin.

Equity

Equity refers to the entire amount of money, including your profit and loss, that is in your trading account. Your equity would be PHP 70,000, for instance, if you invested PHP 50,000 into your account and you also made a PHP 20,000 profit.

Margin 

Margin is the minimum deposit needed to maintain an open position. This forex term is a security deposit that the broker maintains while a forex trade is open rather than a transaction fee.

Used Margin

It is the sum of money set aside by your broker to ensure that you don’t wind up with a negative balance and may continue to trade in your open positions.

Free Margin

Free Margin is the amount of money in your trading account with which you can open new trading positions. You must deduct the margin from your open positions from your equity in order to calculate free margin.

Margin Call

When a trader receives a notification that the capital in their account is insufficient to maintain an open position, it is known as a “margin call.” This forex term may force the trader to exit positions to lower the required maintenance margin or provide additional funds to balance the account.

Stop loss 

The term “stop loss” isn’t just solely a forex term; it’s also widely used among traders of all markets. A stop loss order is a risk management technique that enables the closing of a position once it reaches a certain predetermined price. If prices continue to move in the investor’s negative direction, this helps guard against more losses on an open investment. Please be aware that, due to slippage, placing a standard stop loss order does not ensure that you will be filled at that specific market price.

Take profit 

Same with “stop loss,” this forex term is also used by traders from various markets. As a risk management tool, a take profit order enables a position to be automatically closed after it achieves a certain predetermined profit target. This can guard against losing money if the price suddenly changes direction before the investor can close the bet.

Profit/Loss

The amount of money received from realized (closed) trade positions after a transaction.

Now You’re All Set!

It seems like there’s a lot, right? Well you don’t need to worry about it, because once you’ve familiarized yourself with these terms, it’ll just get easier. 

We hope that you’ve learned forex terms, and remember, don’t stop learning new things! There’s more terms to learn along the way and more familiarizing needs to be done. Keep that grind up and you’ll be a successful trader in no time!

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TRACK FOREIGN FLOWS ON INVESTAGRAMS

We have a new update coming your way, InvestaPrime Elite subscribers!

A long time request we’ve been getting is for you guys to be able to track the positioning of the foreign funds in the local market. With our newest feature you can now:

See what foreign funds are buying and selling

See the foreign funds composition in stocks you’re monitoring

You can now find a new edge in the markets

Check out our foreign flows tracker here: http://invs.st/IVGWForeignFlowsTL

In a quote by Warren Buffet, he says “Risk comes from not knowing what you’re doing.” As a trader, one of the things you need to be worried about is not having enough knowledge to make a successful trade. Yes, some may be lucky, but luck may run out. Knowledge is everything when it comes to trading, and that’s what @vetsin did. 

@vetsin takes the spotlight for this week’s featured trader as he shares his knowledge with us on stocks from the PSEI by utilizing fundamental analysis with the help of Investa University. Let’s take a look at how @vetsin uses this to his advantage. 

Let’s take a look at @vetsin’s analysis on $URC. One of the notable things he pointed out was the stock’s fundamental analysis. Because most of the data provided were positive, it convinced him enough to say that the stock price was bound to go higher. Moving on, we can see that he has plotted out support and resistance lines which helps identify points of demand and trends. The EMA cross, a trend indicator, was also used to help identify the average price based on recent data. Moreover, the MACD, a trend indicator, was also spotted which helped show the relationship between two exponential moving averages (EMAs) of a stock’s price.

TECHNICALS OF THE TRADE

Technically, $URC at the time was trading at a range. Looking at the EMA, it is seen the price has touched support, indicating that it may bounce back up. Moreover, we can see the RSI is still around the 50-60 levels. This usually means that the stock price still has enough potential to go even higher. Lastly, we can see that the MACD has crossed. When this happens, the trend switches from negative to positive. This allows $URC’s price to push even higher. 

Through the analysis of @vetsin, a successful trade was made, earning him profits in the long run. 

FUNDAMENTALS OF THE TRADE

URC, or Universal Robina Corp., reported a net income of P9.72 billion for the nine months of the year ending September 30, a 13% decrease from P11.23 billion in 2021 because of a gain in asset sales recorded the previous year. Operating income growth was matched by a 9 percent increase in core net income, which excludes one-time gains.

WHAT SHOULD BE MY NEXT MOVE

Looking at the current state of $URC, we can notice a few things that could either plummet or skyrocket in price. First, we can see that it has broken out from the resistance of PHP130. This means that the possibility of the price going higher is most likely to happen. Next, the RSI is not at its overbought levels, indicating that it still has more potential to increase. However, looking at the MACD, we can see signs of reversal. This could cause prices to either go in a range or head downwards (considering the other indicators).

Given this, it is preferable to test buy this stock and not go all in. Try investing a few shares from time to time and buy only at support lines or possible breakouts. Moreover, increase your knowledge by heading over to Investa University to learn more about what to do and what not to do in trading.

Once again, KUDOS to @vetsin for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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In a quote by Arian Adeli, he says “A successful trader must learn to be a good loser before he can start winning.” Losing days are normal, especially when you have just started investing. To avoid more coming, learn from your mistakes and keep learning new things. Only then will you experience winning days or even years. 

@patient_investor_ph takes the spotlight for this week’s featured trader as he shares his knowledge with us on stocks from the PSEI. Let’s take a look at how @patient_investor_ph uses this to his advantage. 

@patient_investor_ph shared his thoughts on $ABA and the potential course it might go after analyzing its monthly, daily, and weekly charts.  

For the first post on his stock analysis, @patient_investor_ph plotted out 4 technical indicators that will help assist in identifying price movement. We can first see a resistance line at 2.65 which is needed to be broken for prices to push upward. We can also see RSI, a momentum indicator, closing into the overbought levels (70 RSI). Volume is also seen, which usually tells us if there are more buyers or sellers. And lastly, the DMI assists in determining if a stock is trending while also attempting to measure the strength of the trend.

The same goes for the second post, only this time he uses the weekly time period. @patient_investor_ph has also added an Ichimoku indicator which is used to gauge momentum along with future areas of support and resistance.

As for his third post, we can see that he has plotted out a distribution stage marked as a yellow rectangle. This phase begins as the markup phase ends and prices enter another range period.

TECHNICALS OF THE TRADE

As for the technicals, let us focus on the daily time frame. Technically, $ABA at the time was trading in a range, particularly at the 2.20-2.70 area. RSI traded as low as 40-50 RSI (fair), and up to 90 RSI (overbought). Notice also how volume spiked on certain days followed by fairly low ones afterward. The MACD, a momentum indicator, was mostly bearish during the trading period before showing signs of reversal around the 19th of October.

With all the information gathered and collected, @patient_investor_ph was able to stay bullish and was rewarded with gains in his trades. 

FUNDAMENTALS OF THE TRADE

In a quarterly report posted by PSE Edge, $ABA reported a gross income of P75.38 million, or 55% lower compared to the gross income of P137.45 million for the comparative period last year. The company’s gross income came from a gain on the sale of investment property amounting to P27.55 million; dividend income amounting to P15.20 million, and other income amounting to P27.84 million.

WHAT SHOULD BE MY NEXT MOVE

As $ABA closes into the PHP3.00 levels, it is best to hold whatever you have on the stock for now and wait for the breakout. The RSI is showing overbought levels which is very risky in trading. As of the moment, wait until a breakout of PHP3.00 is confirmed and start buying from there. If you have positions in $ABA now, you may sell it as there could be a possibility that the price would drop.

Given this, it is preferable not to buy yet and wait until the price breaks the resistance line. Be patient and your returns will be rewarding.

Once again, KUDOS to @patient_investor_ph for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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Want to learn more lessons to help you build a crisis-proof system? Check out the Investa Summit 2022: Opportunities in Crisis! Our world-class and industry-leading speakers will be giving you in-depth experiences and lessons on the bear market we’re facing, and how we can find opportunities moving forward.

A dead cat bounce is a brief and insignificant recovery of stock prices, after a steep decline. Dead Cat Bounces are considered a continuation pattern in technical analysis. It may seem like a reversal at first glance, but it is just a retracement of the current trend. The phrase comes from the belief that even a dead cat would react to being dropped from a distance.

What Causes a Dead Cat Bounce?

Investors mistakenly think the price has dropped to its lowest point causing a brief rise in stock price brought on by them. Additionally, it could result from investors clearing short positions, thinking mistakenly that the bottom has been achieved, or searching for oversold assets. In the end, the dead cat bounce is not supported by fundamentals and the market quickly resumes its downturn.

Importance of Dead Cat Bounce

Traders must grasp as much information as they can when trading with technical indicators. Dead Cat Bounce is one of the most common technical patterns you will encounter in your journey. As stated above, it’s a short relief rally followed by a downtrend. Traders that fully understand the concept use this as an advantage when shorting in the market. Moreover, it’s also beneficial for short-term traders to make profits from the short rally. This will allow them to earn potential profits, even on a downtrend! 

It’s important to back suspicions on dead cat bounces with both technical and fundamental analysis. This is because the pattern cannot be identified with certainty until it is analyzed in hindsight. Traders must do due diligence and proper analysis to avoid getting mistaken. After all, no one can truly predict the bottom of the market. 

Examples of Dead Cat Bounces

Remember what we said about short relief rallies? A clear example of that statement can be seen in the chart of $BTC below. We can see a short rally that typically lasts a few days before plummeting down into its bearish direction.  A dead cat bounce normally only lasts a few days, though it might occasionally last for a few months.

Another example is the chart of $APT. From the onset, the coin was already in a downtrend which produced a dead cat bounce.

The downsides

1. Difficult to Detect

The biggest problem with the dead cat bounce is that it can only be accurately detected after it has happened. Analysts may attempt to predict it using statistical tools, but it is unlikely to be certain until enough time has passed. Until then, it is difficult to tell if an increase in the share price indicates just another counter-trend rally or the start of a stock recovery. 

2. Length of dead cat bounces

Traders can never really tell how long a dead cat bounce will last. It might happen anytime between a few days and several months. The challenge of correctly identifying one is made more challenging by the unpredictable nature of the price pattern.

Conclusion

A dead cat bounce is a brief increase in a securities or index’s price following a significant correction or downward trend. It is quite challenging for analysts and traders to distinguish them from a straightforward trend reversal because they are typically only seen after the fact. The opportunity is usually good for short-term traders, as it might allow them to generate profits from the short rally. Investors can start short positions on the security as a result of the incident.

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Want to learn more lessons to help you build a crisis-proof system? Check out the Investa Summit 2022: Opportunities in Crisis! Our world-class and industry-leading speakers will be giving you in-depth experiences and lessons on the bear market we’re facing, and how we can find opportunities moving forward.

In a quote by Ray Dalio, he says “In trading, you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep the money.” Trading requires a lot of skill in order to be successful. Moreover, a strong mindset in trading requires you to have control over your emotions. Once you are able to achieve this, trading will simply be a walk in the park.

@ichigo33 takes the spotlight for this week’s featured trader as he shares his knowledge with us on stocks from the PSEI. Let’s take a look at how @ichigo33 uses this to his advantage. 

@ichigo33 shared his thoughts on $SCC and its potential course of action

During this specific trading period, @ichigo33 has plotted out multiple indicators which helped in identifying the potential direction for $SCC. Let’s start with the exponential moving averages ranging from 10-50. This EMA provides a regularly updated average price to aid smooth out price data. Typically, a stock is in an uptrend if price is above the EMA. Conversely, it is in a downtrend if the price is below EMA. The RSI, a momentum indicator, can also be seen in the chart. This indicator tells us whether or not a stock is overbought (above 70) or oversold (below 30). We can also see support and resistance lines which help determine market psychology and supply and demand.

TECHNICALS OF THE TRADE

Technically, $SCC at the time was at a downtrend movement. As we can see in the chart below, the price is below all EMA indicators ranging from 10-50. This typically means that a stock is in a downtrend. Notice how every time the price touches the EMA line, it bounces back. This is because the EMA is already acting as a resistance line. We can also see that RSI is below 50, meaning that most traders are selling their current positions.  Lastly, there seems to be a consistency in selling volume. Though it may seem like a good time to buy, it’s best to check out the stocks fundamental news. 

With all the information gathered and collected, @ichigo33 was able to predict price action and avoided a possible 20-30% loss. 

FUNDAM ENTAL S OF THE TRADE

As officially disclosed in the PSE EDGE platform, $SCC has reported a Q3 profit of P10.1 billion, around 153% up from the 3rd quarter of 2021. However, it is currently down 6% from the second quarter of 2022, around P10.8 billion in profit.

$SCC then said that this could be the cause of high coal and electricity prices in the past months. Moreover, they noted that Q3 performance is at its lowest as a result from bad weather and low demand.

WHAT SHOULD BE MY NEXT MOVE

In the daily timeframe, $SCC seems to be reversing. The MACD, a trend following indicator, is showing signs of reversal. Not to mention, the RSI is also heading upwards, but towards a resistance level of 30 which can be a problem. We can also observe that the price is gaining buying volume after being in the bearish side for the past days. 

Given this, it is preferable to buy a few shares with its current price action. Once RSI has broken 30, you may buy more shares as well. Because the stock price is down so deep, accumulating shares of this stock would be the best option. 

It would also be sage to buy the dips without spending a lot of money in view of the condition of the market. Always do your analysis and stay up to date on news that is pertinent to the stock you have picked.

Once again, KUDOS to @ichigo33 for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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