Lessons about Trading

Today, I made a trade on a very hot stock that's been rallying on the market recently. In case you're wondering what IFCA MSC is, it is a IT software company which produces and sells GST-ready business software to property companies in Malaysia and also China. According to the CEO Leong Nyu Kuan, they are also venturing into the education sector soon. With a RM53million book order, its earnings per share for FY2013 was 0.4, and therefore at RM 0.855 it is now trading at 32x P/E and achieves an ROE of 20%. Pretty healthy company. For more details of IFCA MSC, please click here's the link.

From the chart, this is a very good trading stock because the volume is very high on a daily basis. In fact IFCAMSC was the top trading stock at 66 million shares today. In chronological order since Monday:
T1(Mon): The stock was at 76 sen (lowest), attracting buying interest amongst traders.Highest close for the day was 81.5 sen.
T2(Tues): It opened at 81 sen, and rallied to 89 sen on very high volume(46 mil).

Daily Chart for IFCAMSC

T3(Wed): Today is T3! The stock opened strongly, hitting a high of 93.5 sen before retreating to 85.5sen on closing. Many people were profit-taking from their holdings and have decided to cut losses.My mistake was to enter at T3 at a higher price before traders start profit-taking. Very expensive lesson indeed.

Personal lessons learned from today's trade:
1. Do not be greedy, and believe in yourself. Remember to trade with the head(logic) and not with the heart(feelings)
2. Trust your own instincts, especially on the entry price. Weight between the RISK vs REWARD of your trade action.
3. Buy/Enter the market at low price, to reduce your risk.
4. Beware of T1 of each rally, and then do your own calculation on risk and reward if you enter the market late. There is a chance that contra traders will exit on T2/T3, so be very careful on when you are entering and time your exit!
5. Have a very good understanding on technical analysis and charting. Always understand what the signals are trying to tell you, the day trader. Otherwise, do not be a trader.

All about Technical Analysis

Some important notes to remember about Technical Analysis Indicators

1. RSI

• Objective : To determine the true value of an oscillator and understanding  overbought or oversold positions
• At the bottom of the chart , the RSI, on a scale of 0-100, indicates that the overbought position is at 70 and the oversold position is at 30. An investor may choose to reset the indicators' parameters to 80 and 20. This helps the investor be sure when making the decision to buy or sell an issue, and not "pull the trigger" too fast.
• Some traders have found that the RSI works best when it's compared to short-term moving-average (MA) crossovers. Using a 10-day MA with a 25-day MA, you may find that the crossovers indicating a shift in direction will occur very close to the times when the RSI is either in the 30/70 or 20/80 range; the times when it is showing either distinct overbought or oversold readings. Simply put, the RSI, sooner than almost anything else, indicates an upcoming reversal of a trend, either up or down.