Choosing Stocks With PRINCE D Criteria

In my book "I Love Stocks" I used a set of financial ratios as stock selection criteria, they are:

PE ratio, Return on equity, Institutional (big players) support, Net tangible asset, Current environment scan, Earnings per share growth and Dividend yield. Taking the first alphabet from each we can get: PRINCE D or we call it the Prince D, like Princess Diana.

In January, I have come up with a list of stocks to share with my students who attended my stock analysis workshop (see the tables below). Many people have been telling me they are waiting for the big crash after election then they will enter the market. Then I asked them, what if there is no crash, and the price shot up after election, would you still buy then?

If everyone thinks there is a crash on certain dates, most likely you wont see one because a stock market crash happen unexpectedly, not on anticipation.

Then when can I buy (into the stocks)?

One good strategy is to buy on stages. Buying on stages will eliminate the negative emotion that is affecting your judgment in stock selection. For example, you may invest 1/3 before election, another 1/3 of your available funds in May, and the final 1/3 in November and hold the stocks until 2014 - 2015. The reason why invest in May and November is because if you look back at the historical prices for our KLCI, there are certain months always experience cycle low, they are: February, May, August and November. If you are a long term investor who has decided to invest regularly in the stock market these months are good entry points for you.

Below are 3 categories of stocks for selection. The first is the dividend stocks, good for FD alternative. 2nd group is small cap stocks as I think small cap stocks offer better capital appreciation than the larger caps now. The 3rd group is the political linked stocks which I believed if BN wins, these stocks will soar.

Everyone has their own investment style, personally I do not like to speculate, I prefer to buy and hold, or I hold until there is fundamental change in the investing environment such as inflation is too high, interest rates are rising or theres a war.

This article is not for stocks recommendation, its for educational purpose.

Happy investing,

Pauline Yong

Pointbreak Week 1 I like what I see !

This is the first review I will be writing for the Pointbreak expert advisor built for the metatrader 4 platform. As you know, I started to test this expert advisor a week ago as a personal request from the maker.

I am always skeptical with new expert advisors (anyone who has been into them for a while would!) but Pointbreak has been like a glimpse of light at the end of the tunnel.

Many expert advisor makers are always talking a lot about their experts amazing profits, low draw downs, etc. They in fact talk the talk, but 99% of them do not walk the walk. As I have told you many times, they are based on unreal assumptions.

Pointbreak has surprised me, challenging some of my core beliefs. Pointbreak does not use a fixed stoploss, it is thus subject to massive drawdown. This, unlike other experts, is hedged with the fact that this expert uses amazing money management, being very conservative while it trades. This also shines against the fact that it is one of the most aggressive experts I have ever seen, it stays on the market all the time.

I have watched its trading method along this week and I have found it to be rather splendid. It does a pyramid like scheme where it opens positions in several directions, following the trend. This does not mean that Pointbreak would "die" in a ranging market. Pointbreak will then use an alternative method to reduce draw down. Since the EUR/USD trends most of the time, balance is greatly shifted towards the trader.

Pointbreak could, in fact, turn into my personal favourite, definitely a keeper. We will see how it does next month. The statement can be seen here. Here is screen shot of the expert in action. You can always find the ea here.
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vpsland com A vps Review for Mt4 Expert Advisors

When we all get serious about using expert advisors for trading, one of our first absolute needs becomes finding a reliable vps. A vps or virtual private server is a computer server in which you load your metatrader program and your expert advisors, the server stays on almost all the time , having a 99,99% uptime is required for trading.

I searched a lot for a decent, cheap, reliable vps service. Finally, I found exactly what I was looking for. At vpsland.com, for the small price of 25 USD a month, you get a fully configurable and installed virtual private server. You can use enough RAM to load about 7 instances of metatrader while your expert advisors and your resources are limited to about 25% of the actual servers (which are quad core, dual processor, Xeons). This setup is so good, it was good enough for performing quantum chemical calculations which are very computationally demanding.

I have been with them for about 4 months and they have not disappointed me once. Their support is super quick and I have never had any downtime with my expert advisors (I use resources a lot with about 5 instances running all the time). I login using remote desktop which makes the vps just like your home computer.I also upload files using the ftp client and server filezilla (which I installed by myself).

I also never reboot my vps owing to the fact that this affects the performance of experts which rely on factors that are reset when metatrader is restarted. Overall I think this vps service is top notch, also a plus is that you do not need to purchase a domain name to open up your account and start your server. I would highly recommend vpsland to anyone out there who seriously considers trading using a virtual private server.

If you want to learn more about expert advisors you can run in your vps you can look at my expert advisor reviews which can be accessed from the drop down menu on the left sidebar. If you want to learn about expert advisor evaluation, why most commercial expert advisors fail and how you can start to profit using long term stable strategies please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Forex Day Trading Why you should not do it

When I started trading forex, one of the first things I was introduced to was day trading. As you know, day trading is the art of opening up positions that last for less than a day and end up with a profit. The reason I write this article is to talk to you about some of the myths, misconceptions and truths surrounding day trading and finally, why day trading is not a positive way to start for a forex newbie.

First I would like to address some of the myths that revolve around day trading.

Day trading is not profitable because intraday market movements are random and chaotic - This is an absolute myth. It evolved because intraday movements seem random and chaotic, which does not mean they are. The thing is that movements that occur within smaller timeframes seem more volatile (hence chaotic) than movements that occur in larger timeframes which seem to adapt better to fundamental analysis. But, you can always see in smaller timeframes (60 min vs 1 day) what you see in bigger ones, you see trends, retracements, etc.

It is impossible for your wins to overcome your losses in day trading - This is absolutely false, it is very possible to win most of the time in day trading. Obviously this depends on your actual strategy and the way you face the market and control yourself.


Now I will tell you some of the truths behind day trading

Day trading is the strategy that benefits brokers the most - This is true and it is one of the reasons why it is one of the most taught strategies (brokers sponsor most classes, right ?). The main reason is that people that trade intraday open and close many trades, which benefits brokers by the spread. The other reason is that day traders often use a tight stoploss criteria which makes them vulnerable to stoploss hunting by the brokers.

Day trading involves a higher risk of loss - This is actually true as the market tends to oscillate more in smaller time frames. This means that it is easier for the market to reach your stoploss also means that you need to risk more lots or increase your leverage to get the profit you would get in higher time frames.

Day trading is harder - It is actually much harder. It is not very hard to see trends, retracements and price patterns on the daily chart but this seems much more obscure on the lower time frames. The reason why many traders tend to day trade is purely emotional. Trading in larger time frames involves a much larger probability trade but with a possibly larger open draw down risk due to temporary market movements.

As you can see from the arguments I just exposed, it is quiet obvious that although day trading may be a profitable strategy for very experienced traders it is NOT a good starting point for the forex newbie. This does not mean that you ignore smaller time frames remember that all charts show you the same data in a different arrangement. Smaller time frames are still absolutely necessary to find entry and exit points for trades that would involve a larger time frame.

For example, if you see that there is a downtrend in GBP/USD in the daily chart you do not enter based on this chart. You go to the one hour or four hours chart and wait for a retracement there to enter the trade.

In fact, almost every experienced trader will agree with me in that middle term trading is the best way to make money for the forex newbie. It is much easier and the probabilities are higher. The only problem is that newbies have a huge problem with market oscillations as they dont fully understand them. They hate having a wider stoploss and waiting four days or two weeks for a trade to finish.

If you are interested in middle term trading you should practice in a demo account to get used and see what normal market oscillations are.

Please comment if you feel this post missed something (or if you liked it !) !

Starting a New Project The Free FXReviews Ebook

If you have been a regular visitor of my website during the past 8-10 months, you will know I have been updating my blog daily for most of this time. There were several reasons why I decided to do this, mainly because I wanted to increase my ability to write creative content and because I wanted to create a loyal based of readers who would always find new articles everyday. I think I have achieved both of these goals in the sense that it is now much easier for me to come up with new posts for the blog and my website is registering a very good 30-40% of returning visitors, some of which I think read my blog on a regular basis (thank you for stopping by ! :o)). Now I feel it is time to take this "daily writing" and all the generated content to the "next level", so to speak. On todays post I will talk to you about a new project I will be starting dealing with all this content that and a new, free ebook that will come out as a result :o).

I have noticed during the past 6 months that most of the articles I write are not read a lot and most of them end up as part of my archives, being accessed only sporadically once or twice every month. Most of the people who find my blog through google end up in articles dealing with backtesting, renko charts, tick charts, Watukushay experts, Ayotl and mainly, in articles dealing with Commercial EA reviews. I feel that this is a waste of content since I believe some of my best contributions are actually the articles that are less-found through search engines.

How to fix this issue ? Some of you have suggested that my navigation system is pretty bad and that I should change it to a more "category sorted", "user friendly" way of finding my different posts and articles. You are absolutely right in this sense but the truth is that I am bound by the limitations of the blogger platform which does not allow me to input posts categories and generate menus with as much freedom as I would like. Of course, changing websites might be a solution for this (changing to a more powerful platform like wordpress) but the fact is that I would lose search engine placement and important links which make this move probably not so good for the blog right now.

After reading some websites dealing with content organization and how to make old, unvisited, yet extremely relevant content surface, I decided that the most productive and so the best way to get my content out there would be to organize it in a free ebook. So what I will be doing right now is pretty simple, I will be taking many of my blog posts and I will edit them so that they can be "stitched together" in an ebook. This ebook will become available totally for free and it will become - hopefully - a vital piece of information for new traders who are looking into becoming long term profitable traders using automated trading systems. The ebook will deal with many issues I have discussed within posts like doing backtests, simulation reliability, backtesting pitfalls, scalping systems, martingale systems, surviving draw down periods, EA design, etc.

Does this make the current ebook irrelevant ? Of course not ! The current ebook contains a lot of content which has never been published on the blog and it is bound to stay as the guide it has always been for people new to automated trading. What I seek with the new free ebook is to organize the blogs content and make it easily accessible for people who will not easily get to all those archived articles. It will be more of a "blog summary" which I think will prove absolutely useful for many people out there. Right now I am aiming for a 30-50 page ebook but the final length will depend on how much content I take from the blog and how much space it takes after editing it to fit a more "ebook feel".

Certainly the current ebook will have some changes (sorry, I know it hasnt been updated for a while !) which I will discuss on tomorrows post. I will be working on a very important remake and content addition in July and other similar changes and I am definitely thinking about offering it only within Asirikuy as for me everything is kind of bundled now and I fear that people buying only the ebook are not getting "the whole picture". Again, I will explain all of this in much more detail on tomorrows post :o).

If you have any suggestions or opinion about this new free ebook project dealing with the blogs contents please leave a comment. Is there any post you would like to see on the ebook ? Do you think the idea is good/bad ? Which posts do you think would be very useful if you were a new trader ? Which posts did you find particularly interesting ? Please leave a comment :o).

If you would like to learn more about automated trading and how you too can learn to design your own trading systems based on sound trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Mental Accounting

Suppose you are going to a movie and as you enter the cinema, you discover that you have lost your movie ticket you’ve just paid RM10 for. Would you spend another RM10 to get a new one? If you are like most people, you would probably think twice because you will feel that you will end up paying RM20 for a movie actually worth RM10!

Now let’s construct the scenario differently. You are going to see a movie. On your way to the movie theatre you drop a RM10 note on the bus. You are disappointed, of course, but would this affect your decision to buy the movie ticket? You will probably say to yourself: “Damn it! That’s my luck!” Arriving at the cinema, you will forget about the incident and stand in line to get a movie ticket.

In fact, the above research was conducted by some psychologists who discovered that only 46 percent of those who lost a ticket were willing to buy a replacement ticket, whereas 88 percent of those who lost an equivalent amount of cash were willing to buy a ticket. Since the lost ticket and the lost cash had the same value, their loss should have been experienced in the same way, but why were there twice as many people willing to ignore the lost cash but not the lost ticket? Why is it that you feel more pain in losing the movie ticket than the ten-dollar note?

This is due to a psychological phenomenon proposed by the famous psychologist, Richard Thaler, known as mental accounting. It says that people tend to separate and categorise income and expenses into different accounts in their heads. For example, you might have an entertainment fund, an investment fund, an education fund for children and so on.

Losing a movie ticket and having to buy a second one takes RM20 out of your entertainment fund when you planned to take only RM10, so it’s “out of my budget”!

Many of us commit this mental mistake in our daily lives without realising it. For example, we treat the company bonuses, capital gains from selling stocks, dividends and tax refunds as a “windfall” source other than our normal source of income. We splurge on luxury items such as LV bags, Caribbean Cruise and Rolex watches with this “windfall” money in spite of having a housing loan and a car loan due for payments.

Somehow we have grouped our income and expenditure into separate mental “funds” or “budgets” that are not easily combined. Money received as part of our salary is treated differently from money received as a bonus. Similarly, money spent to buy a fixed asset is viewed differently from the same amount of money spent to treat ourselves to a dinner at a luxury restaurant.

From an economic perspective, these mental accounting rules violate the economic principle of “fungibility”, which means that all money is equal. A dollar is still a dollar whether you get it as a gift from a friend or from your salary. Hence, when the principle of fungibility is violated, people act in economically irrational ways.

Stock investors often apply mental accounting when making investment decisions. We have the tendency to treat capital gains as windfall money and indulge in luxury goods with the profits. Imagine how much money we can accumulate if we simply reinvest the money into various forms of investment and let our money grow for us.

Free Expert Advisor Portfolio 2 Week 4 Profits are In !

Last week I was very disappointed with the performance of both of my free expert advisor portfolios with both of them reporting loses. I apologize for not making two separate posts - one for each portfolio - as I was busy with new years eve, etc.

The first month has ended for the second expert advisor portfolio. The debuting experts being Ichimoku5, Moneymaker, ADXCrossTrader and UniversalMACross. The rest of the settings are available in earlier posts about this portfolio.

The credit goes primarily to Ichimoku5 and Moneymaker both contributing almost every trade. The UniversalMACross has done one trade, which took profit and the ADXCrossTrader has done almost 10 trades with most of them going out at breakeven and one of them taking a loss.

I was happily surprised when I saw that this portfolio has recovered all of its draw down and is now hovering above a 10% profit. With a maximal draw down of 25% it is still not as bad as the first portfolio which has managed to get to a 40% maximal draw down (although it is in profit right now).

Personally I did not think that this expert portfolio would last this much, and much less, with a profit. I thought the experts would wipe out the account in a matter of days or maybe two weeks at best. I am glad to now know this not to be true. I am pleased to know that there may be a hope that combinations of free expert advisors might work.

We end a first month in profit, the statement, as always, can be viewed here.