As the local index broke out of the 6000 levels in confluence with the 100-day moving average, several names have emerged, and one of which is a blue-chip company. Golden Bull (@johngranda) successfully spotted one of those potential leaders — Jollibee Foods Corp, or $JFC. This trader is an active member of the Investagrams community who endlessly provides his analysis and insights focusing on the local market.
As seen in the pattern of the said stock, it exhibits a VCP pattern. Mark Minervini coined the said pattern in his book “Trade Like a Stock Market Wizard.” This means that the said pattern displays contraction in its volatility from its previous data to the following or present data. Moreover, it consolidated for six months, which solidifies that its breakout of the underlying base may be robust. Indeed, the bigger the base, the higher in space.
Example of a VCP Pattern
Moreover, Golden Bull (@johngranda) also mentioned the importance of also looking into moving averages as it is a form of support and resistance levels. In the book of Jason Cam named “The Trading Code,” the author explained that moving averages could be used as dynamic support and resistance. It is dynamic because merely moving averages are moving each day due to its statistical formula. Static support and resistance levels, on the other hand, are only not moving and are horizontal, just like the blue rectangle box that is representing the resistance of the underlying base in the figure above.
It is safe to say that $JFC has broken out of the pivot high of the underlying base in confluence with the 200-day moving average. Breaching the 200-day moving average is crucial as it is in a long-term horizon, which ultimately makes it more significant than that of the 20-day, 50- day, and 100-day moving averages.
A breakout of the 150-peso pivot area was an ideal buy point as it was the confirmation of the ascending triangle breakout accompanied by massive volume. It is a low-risk, high-reward trade, as the stop loss levels for the said breakout point is around 144 (-5%), and the take profit areas could be the structural resistance at 180 (19%). As of this writing, the stock ended the trading session strong. Let us see if another constructive base will be formed to place our ideal 2nd tranche.
The said stock needs to break and sustain the 180-peso levels to assert its dominance further. Although we can also expect the displayed name to pullback on the old resistance turned to new support in confluence with the 200-day moving average. At the very least, the 150-peso levels should hold. It is also expected that since the $PSEi is increasing, $JFC should, and it is a bluechip stock.
Congratulations to those who were able to maximize the momentum of $JFC. Lastly, kudos again to Golden Bull (@johngranda) for sharing his execution. Your FREE 1-Month InvestaPRO access is on its way!
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Along with a multitude of factors to consider before properly trading the markets, correct position sizing and tranching parameters are imperative. These two aspects are within the spectrum of the Risk Management System where it is factors that a market participant can control.
It is a fact that there are matters that we cannot control in the financial markets, such as the price movement, black swan events, errors in the trader’s end (e.g. internet connection), among others. Instead, we can direct our focus to aspects that we can control, such as our management with risk, our trade plan, our trading psychology, among others.
The importance of proper position sizing and tranching is to mitigate our risk of depleting our portfolio drastically. Going all-in on one trade is as risky as jumping on a body of water without assuring whether it contains toxic chemicals, a shark, or whatnot.
A market participant must test the waters first, then scale or pyramid their position on the way up to increase their value-wise profits. This is the polar opposite to that of averaging down, where an individual would increase their position as the stock decreases. The problem with this is that there is an inevitable risk that the said name would go lower, which would decrease their value-wise losses drastically. As Jesse Livermore exclaims, thou shall not average down.
To deploy a proper position size on an individual’s trades, the trader must assess their desired number of stock positions. Initially, holding four to six names is ideal. However, there is a multitude of traders who owns ten stocks at a time. Mark Minervini would hold 20-25 positions at a time. As they say, to each their own.
The advantage of having multiple positions is that there is a high chance that you could possess a potential leader given that the scope is larger than that of a trader who wishes to acquire or maintain, for example, five positions. The problem with this approach is that you will be spread too thin.
You could apply any approach with your trades if, in the end, your winning stocks are substantially scaled on the way up. This is to fully take advantage of the direction of the trend. For example, although Mark Minervini holds that many positions, he eventually ends up with at least 10 positions as time progresses. Wherein the 20-25 positions will be cut in 10 based on the individual performances of a stock. Essentially, the laggards in his portfolio are thrown away. Mark’s leading stocks are incrementally scaled on the upside. Pluck the weeds and water the flowers, as they say.
It is best to test the waters before purchasing a said stock. If you want to hold five stock positions at a time, the trader can deploy 10% of his portfolio to a name with 1VAR. As the trade goes in your favor, the trader can add another tranche or a new trade incrementally for the said stock, so on and so forth, until their position encompasses 20% of their portfolio. This will enable the trader to maximize the movement of the said stock, wherein their value-gains will incrementally increase.
Source: warriortrading.com
It is only applicable to scale your positions on the upside if an opportunity represents itself. Therefore, you must not force the tranche trade if there is no deemed opportunity at all. Every trade should have a basis. Always remember that patience is the key to navigate the trading landscape.
Again, you can do any approach if you apply proper risk management in all your trades. Always make sure to properly allocate our positions in a trade to maximize the opportunity at hand. Our goal as traders is to survive and prolong our journey as a market participant. Focusing on the bigger picture is of the essence to open one’s mind in this endeavor. The goal of a trader should be lifelong sustenance of the profits that they earn.
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As there are different types of people that you will meet in your journey in life, the same principle applies at the beginning of your respective phase towards success in trading the markets. An aspiring market participant will ultimately submit themselves with a conscious choice of selecting what type of trader should they be.
These kinds of traders are separated into four categories, namely Day Traders, Momentum Traders, Swing Traders, and Position Traders. Each category is distinctive to that of its counterparties in terms of its timeframe and its style of approach towards a certain name.
Source: OneMinuteEconomics.com
Day Traders
These are are market participants who get in and out of a stock or any asset class within a few minutes to a few hours. These types of traders do not hold any position overnight wherein they would sell all their existing positions before the market closes. Most day traders use leverage to further amplify their percentage gains and losses from incremental price movements.
Momentum Traders
These people focus on bigger moves such as a breakout or a breakdown for long and short trades respectively. Ideally, these types of traders latch on to price movement that is supported with massive volume until the trend bends. The timeframe for such traders may last for a few hours to several days.
Swing Traders
These traders are similar to Momentum Traders. This type also latches on to the prevailing trend until it bends. The timeframe for such traders typically lasts from a few days to numerous weeks. Both Momentum and Swing Traders focus on daily moves rather than intraday fluctuations, which is most applicable for traders who are also working a day job.
Position Traders
Lastly, Position traders focus more on the bigger picture moves in a stock or any asset class. This type of trading is the exact opposite of Day Trading. Position Traders typically anticipate explosive moves that they deem to last in the longer term. Also, they are not concerned with daily fluctuations as they naturally hold their positions within a few weeks to numerous months.
It is possible to mix these types depending on your personality and your goal towards the financial markets. For example, an individual could both be a mix of Swing and Position trading as they wish. To further aid an aspiring market participant on what type of trader do they belong, they may ask these questions amongst themselves.
What is my time horizon? Do I want to hold names in the short-term, medium-term, or long-term?
How much time could I spend in trading the markets? Do I have a day job? Can I trade the markets while I am working or only whenever I am free?
Do I want to see results quickly? Is it okay for me to execute trades every time or sometimes?
Whichever type of trader that an individual may decide to be, it all comes down to their commitment to this craft. This endeavor requires patience, discipline, and hard work. An aspiring market participant should dedicate their deliberate practice or one’s 10,000+ hours to succeed in the markets.
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In 2015, we created Investagrams with the mission of enabling more than 10 million Filipinos to invest. At the heart of our company is our passion to help our fellow Filipinos by empowering them in their investing journey.
Merely five years later, Investagrams has made an impact to the lives of more than 650,000 Filipino traders and investors. We have provided our community access to great equalizers — education and tools that allow them to prosper in the stock market.
Despite all of this… the reality is we are still far from our aspirations for the Filipino people.
The Dip
They say that 9/10 start-ups fail. The journey of running a company that aims to create positive and radical changes is really hard.
At times, we couldn’t execute due to lack of resources. We have been rejected countless of times. While some of our goals got delayed.
With this pandemic, just like most SMEs and companies, we also had our own set of critical challenges but we didn’t let the circumstance defeat us…
Our approach in every challenge is that each problem presents an opportunity. We use all the negatives as an opportunity to be better.
The Rebirth
Everyday we ask ourselves, how can we take it to the NEXT LEVEL? How can we further serve the Filipino people?
We believe it is now time to push the tempo and rise to the challenge.
We go beyond educating and providing you analytic tools in the stock market.
We go beyond being a virtual trading platform that is only used for practice.
We go beyond being a start-up with limited resources, that is often counted out in this industry.
We will work hard to be a formidable organization that will create more powerful innovations in the investment space.
We will always remember our roots, but we go deeper into our mission to serve our fellow Filipino investors.
You are witnessing our rebirth. We are Investa.
What’s Ahead
In the next few days, week, and months you shall see more exciting innovations from us. As always, we prefer to surprise and delight, we’ll let you know once each new feature/innovation is ready.
From Day 1 we have remained committed and sincere on our mission of enabling more than 10 million Filipinos to invest. Despite all the challenges, we will never falter or quit, because this is our LIFE’s purpose. We know that the Filipino people are worth fighting for.
We strongly believe that through the Investa platform, we can impact the financial growth of more Filipinos moving forward.
We also want to create a positive change in the cultural and educational dimension of our country. We know that if someone leads by example, our brothers and sisters will find their ways as well.
Tulungan lang tayo mga ka-investa as always. Marami pa tayong magagawang solution and innovation para sa mga kapwa Filipino natin.
You are the reason why we are here. You are our inspiration. God speed to all of us fighting for our dreams and doing our best to make an impact to the person next to us.
For this week, we would like to congratulate our featured trader: Spidey a.k.a. @spidey!
This trader was able to spot a stock affiliated by Nickel, one of the tradeable metals in the commodities market, called $NIKL or Nickel Asia Corporation. Spidey a.k.a. @spidey, is an active member of the Investagrams community who endlessly spreads his knowledge on the local market using Technical Analysis.
He mentioned the implications of the said candlestick pattern last October 8, 2020, wherein the displayed name exhibited a shooting star candlestick pattern, indicating a beginning of a downtrend. However, it is worth noting that a breakout of its pivot high invalidates the said downtrend bias for a said stock or any asset class. Moreover, given that Nickel prices heavily influence $NIKL, traders must check Nickel prices for more conviction in trading this stock. The same is true with names that are affiliated with any commodity or whatnot.
Technical wise, the stock broke out of the channel line that gave a 25% return (based on the October 12, 2020 top) in 4 days. The channel line was supported with a below-average volume, and the said breakout was supported with massive volume, which are critical features for any asset to continue its advance. It is a low-risk, high-reward trade, as the stop loss levels for the said breakout point around the 3-peso area could be below 2.95 (-4.5%), and the take profit areas could be the structural resistance at 3.8 (25%).
In the bigger picture, the said name is displaying an inverse head and shoulders pattern. It is ideal for the said stock to rise in confluence with the Nickel Futures to solidify its state for a significant reversal.
It is best for $NIKL to consolidate and hold above the 3.4-peso area with dried-up volume to form a constructive base. A break above the 3.8-peso area confluence with massive volume is superlative for this stock to continue its dominance.
As stated by Spidey a.k.a spidey, basing one’s bias through a single candlestick pattern may catch you off-guard. It is still ideal to be more focused on the cluster of candlesticks than a single candlestick. Then again, it depends on the end-user.
Congratulations to those who were able to maximize the technical swing of $NIKL. Lastly, kudos again to Spidey a.k.a spidey for sharing his trade analysis. Your FREE 1-Month InvestaPRO is on its way!
It may seem really challenging and difficult, but it’s not only the job of the accountants or finance majors to check out and interpret the values in the financial statements. Difficult to absorb this? Well, yes. It will be difficult to take in. Number here, numbers there! But, understanding the balance sheet is both an art and science. It takes determination and a great skill in interpreting the numbers.
The balance sheet is one of the important financial statements that not only accountants must see, but even investors and traders. If you want to see the financial position of the company, check on the balance sheet! It reflects the growth of the assets and liabilities. At the same time, with the numbers on the balance sheet, you can see how the company handles the debt, “Malaya na ba sa utang?”. Now let’s understand the structure of the balance sheet. There are 3 main elements that makes up a balance sheet. We have the assets, liabilities, and owner’s equity. Now, let’s get to know more of each element.
The Assets
Assets are known to be the resources of the company, which is divided into 2: the current and non-current. The difference between the current and non-current is the liquidity. Current assets are the resources that can be easily converted into cash, on a time period of 1 year. You must check on this portion to know if the company relies more on assets than liabilities. The examples of current assets are cash, accounts receivables, and prepayments.
On the other hand, non-current assets are the resources that would take more than a year to be converted into cash. These types of assets do not necessarily need a during of 12 months to have the resources cashed. Some examples are long term investment, PPE (Plant, Property, and Equipment) and other intangible assets.
Checking the summary of the balance sheet or the graph of the assets can say a lot about the company’s growth on their resources. You may want to consider a company who can also easily liquidate its resources!
The Liabilities
Liabilities are obligations of a certain enterprise or a company. Just like the assets, liabilities are divided into a current and non-current liability. Current liabilities are expected to be settled within 12 months or 1 year. Examples of current liabilities include accounts payable, notes, loans, and interest payable. Meanwhile, non-current liabilities are expected to be settled after 1 year. Examples of this are mortgage, bonds, and long-term notes payable.
“Utang na naman!” Is this necessarily a bad thing? No! Liabilities can serve as another source of assets. However, if it turns out that you rely on too much liability, you can experience financial hardships! Remember, kahit si Aling Marites, mahihirapan kakasingil ng tatlong buwang utang mo!
The Equity
The equity illustrates the claimed resources of the business by the owner. These includes the capital investments, drawings, common stock, preferred stock, and the retained earnings. Take note that if the company has a negative equity, it illustrated that the quantity and value of its assets are not capable of covering the company’s liabilities, and this is a warning signal!
The balance sheet is more than just the assets, liabilities, and equity. This financial statement shows if the company is able to pay its obligations when times are rough, just like during this pandemic. With the help of the balance sheet, you can identify whether or not the company is a good investment through its value in assets, liabilities, and equity!
At the same time, mastering the skill in checking at the figures can help you know the company’s growth and sustainability. Continue to be wise and disciplined in studying your lessons and analysis! Sooner or later, you are able to choose your stocks wisely!
For most people, the moment they start learning strategies and demo trade here and there, they can’t wait to put their money in their brokers ASAP.
But another question arises…
“Should I trade with the extra money?”
“I don’t have any source of income, how should I get capital?”
“Should I go all-in with my savings to trade the stock markets?”
So, in this guide, I’ll be sharing with you different ways on how you can start (and grow) your trading business.
It doesn’t matter whether you are a student, an employee, or an already consistently profitable trader.
But first…
Let’s be clear
If you want to start a trading business because you need to pay your lifestyle, or immediately want to replace your full-time job…
Then I highly suggest you don’t, as the worst time to start a business is through desperate times.
Yes, having a business can give you exceptional rewards, but it does not guarantee you a fixed income all the time, or even a return of investment.
Which is why trading is a business that should not be approached with an employee mindset.
But if you will approach this trading business in such a way that you’re…
going to build a personal and financial empire, instead of trying to survive
acting from your vision instead of your fears
ready to learn the skills needed (and to pay the price) to become an exceptional trader
Then I can almost guarantee you that you will enjoy this amazing journey of a lifetime.
So let’s start…
#1: Your Most Supportive Investor
This may not sound like a grown-up move but they can be your #1 supporter and first investor even if you don’t have any track record.
But you have to let them be aware that trading in the financial markets is not a get rich quick scheme.
So never make promises or guaranteed returns to them. Another thing that you should do is to show them that you are going to trade the markets with a plan and not just enter and exit randomly.
Your trading plan may constantly change as a newbie, but let them know that you are not starting with “lack” as this is good for you and your “investor” Finally…
Make sure they won’t sacrifice important payments or be in debt to give you capital.
Because IF the worst happens, you don’t want your decision to trade the markets affect your whole family.
Next…
#2: Using Your Hard-Earned Cash Properly
As an employee, it’s easy to say that you should save money and invest extra funds.
But trading is not just a side hustle or a part-time job, it is a business that requires commitment and energy.
So one thing you must do first is to…
Build a safety net
You must have a 3-6 month emergency fund in case something happens, and eliminate consumer debts.
Because the last thing you ever want to do is to trade because you need to pay the hospital bills or pay your debts as it puts your mind in an environment where you will be forced to perform and expect guarantees in the market.
Have a budget plan Always remember that a budget plan is goal-oriented.
So there’s no such thing as a fixed rule or percentage on managing your money, it is up to you!
But having it will always set your priorities straight, fulfilling responsibilities and personal goals at the same time.
As an example, you can allocate your monthly income to the following • 25% = Needs/Expenses • 25% = Wants/Self-Investment • 15% = Passive investing • 35% = Trading capital Again, this is just an example.
So you want to ask yourself what you want and adjust the percentages accordingly.
Overall, I want you to know that what we are doing here is to put you in the right environment to trade.
Moving on…
#3: Taking Your Trading Into The Next Level
I highly suggest that you choose this step once you have found consistency in the markets, and not when you’re just starting, but here are some sources you can consider…
1. FTMO (Paid):https://ftmo.com/en/welcome/#objectives You must complete their challenge of profiting at least 1% and not lose more than 1% within 30 days You can get funded up to $100,000 but this will depend on the challenge FEE you will pay
If you are someone who trades the forex markets as a momentum or day trader, then this is for you, as the challenge and time required is quite short. 2. PSYQUATION (Free):https://psyquation.com/ To qualify, you must have a PQ score above 75 with a 6-month track record on their platform.
You can receive funding up to 150,000 AUD and 20% of profit is yours, all you need to do is to use your trading capital and build a track record.
Again, if you are someone who trades the forex markets, then this is for you. 3. FUNDSEEDER (Free): https://fundseeder.com/home It is a platform led by Jack Schwager, but conditions and funding amount is not disclosed.
You can also trade any financial markets in the world with their accredited brokers, so if you are someone who trades global markets, then this is for you.
Now…
The reason why I mentioned that you should only choose this step if you’ve already found consistency is because pursuing institutional funding or managing other people’s money with an inconsistent and self-destructing trading habit is like pouring fuel over a fire.
So if you haven’t found consistency within yourself yet, then the chances of you finding consistency with other’s money are unlikely.
Finally…
Bonus: Controlled “Tuition” Fee
If you want to start your trading journey with having “low risk” and “high reward,” then this method is for you. Let me give you an example…
If you are dedicating a ₱100,000 trading capital to trade the markets, only put ₱20,000 (20%) on your trading account as you start trading. Once you gain consistency in the markets and not lose everything for the first 3 months (depending on trading style)… Place another 20% of your initial budget capital into live trading. If you mess things up early but only put 20% of your budget into live trading, then you have experienced a learning opportunity (the reward) at a low cost
On the other hand, if you managed to allocate 100% of your capital budget, then you’ve reached the stage of consistency that’s above the majority! Remember, confidence comes from competence and something you must prove to yourself gradually.
So…Which Option Should You Pick?
Overall, every person is unique and has different circumstances.
So, you can choose an option on how you can raise capital, and then improve on it, or tweak it in a way that’s appropriate to your situation.
With that said…
What are the other ways on how you can raise trading capital (legally)?
Let me know in the comments below.
Contributor:Jet Toyco
Investagrams Username: @Jet_Toyco
About the Contributor:
Jet Toyco is a private executive trading coach and a systematic trading portfolio fund manager at TradingwithRayner.
He is also a public helper of the trading community that is always open to questions anytime to give the knowledge people deserve at no cost, and no hype.
