Cimb 24may2008 Ho

6/3/2008
Make the RIGHT first steps to stock investment
Make the RIGHT first steps

to Stock investment
Workshop for CIMB Bank
Clicks TRADER
Saturday, 24 May 2008
9:00am to 12:00pm
By Benny Lee,
Copyright © 2008 by Benny Lee, NextView

INTRODUCTION
1996 :
• Got into the stock market frenzy while in college
• Started attending some technical anaysis seminar
• Got first charting software, MetaStock
1997 :
• Started trading the futures market in 1997.
• Was against the trend, Lost heavily
1997 – 1999 :
• Worked in a Recruitment Agency (Need to pay back debts!).
• Started to study about trading. Discovered and learned mistakes
• Developed trading strategies and traded lightly. Benny Lee
• Learned about Automated Trading Strategies
1999
• Started trading privately. Stocks and Futures, Malaysia and Singapore.
• Started learning TradeStation and Omnitrader.
• Training Consultant to a Software Company. (This was when my training experience started)
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6/3/2008

INTRODUCTION
2004 till present:
• Still trading privately
• Joined NextView Group as Regional Trainer, later as Chief Market Strategist
Training/Coaching Experience (More than 8 years):

Professionals and Retail Investors in Malaysia, Singapore, Thailand, Vietnam,
Pakistan and Hong Kong
Speaking Engagements (More than 6 years):

Malaysia, Singapore, India, Indonesia and Thailand

INTRODUCTION
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INTRODUCTION – WHY SHOULD WE INVEST?
• Provide a higher return compared to fixed deposits.
Average return on stock is about 10 – 12 % whereas fixed deposit is approximately
3–4%
2 SOURCES OF INCOME:
• Additional source of income from dividend.
Averagely 5% dividend of $ 100,000 (Par Value = RM 1.00) is RM5,000 additional
income a year.
• Good chance of generating wealth for yourself from capital appreciation

Buy IOICORP at RM 2.50 in 2006 and now RM 7.40. Profit of RM 4.90 (196% in
less than 2.5 years / 78% per year).
Buy PETDAG at RM 4.00 in 2006 and now RM 8.50. Profit of RM 4.50 (112% in
less than 2.5 years / 45% per year).

INTRODUCTION – PLANNING YOUR INVESTMENT
People invest according to their investment style, return

expectation and risk appetite.
Therefore, investors can be categorized as follows:
1. Value investors
2. Growth investors
3. Traders
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INTRODUCTION – TYPES OF INVESTORS
Value Investors:
Buy fundamentally sound stocks that are selling below
intrinsic value and hold them for years.
Growth Investors:
Buy stocks with a good business model, and high sales and
earnings growth.
Traders:
More likely to be short-term speculators.
E.g. Day traders, position traders, scalpers etc.

INTRODUCTION – TRADING VS INVESTING
Trading
vs
Investing
Which is better?
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1. REQUIREMENTS
THE INVESTOR LOOKS AT THE INSIDE
The investor finds value in the company and they buy believing that the company will
continue to have profit growth, no matter what the price.
THE TRADER LOOKS AT THE OUTSIDE

The trader does not care about a company and they buy believing that the price is right,
regardless of the company fundamentals.
2. COMMITMENT
THE INVESTOR FALLS IN LOVE WITH A COMPANY
The investor decides to last the relationship for a long period of time, despite knowing that
they have its ups and downs
THE TRADER INTEND TO HAVE A SHORT TERM RELATIONSHIP

The trader is not willing to have down periods with the company, therefore only commit
short term relationship

3. ACTIVITY
THE INVESTOR DOES NOT NEED TO LOOK AT SHARE PRICES ALL THE TIME
Investors who buy and hold are not affected by market volatility, therefore they do not cre
about price movements. They are only interested in dividends.
THE TRADER IS ACTIVE AND LOOKS AT SHARE PRICE FREQUENTLY

The Trader identifies opportunities to buy and sell at the right price and time. Therefore,
they have to monitor the share price actively and also trade actively.
4. COST
THE INVESTOR HAS HIGH COST MAINTAINING THE RELATIONSHIP
The investor needs to have holding power a.k.a. lots of money to hold a long term position.
Furthermore, dividends are taxable
THE TRADER HAS LOWER COST

The trader does hold a long term position therefore always have cash. Capital gains are not
taxable.
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Advantages and Disadvantages
Trading Investing
Expected Returns High Lower
Expected Risk Low Higher
Cost (Commission) Relatively Lower Relatively Higher
Tax Not Taxable Dividends Taxable
Uncertainty Risk Low High
Opportunity Cost/Liquidity Low High
Capital needed Low High
More Workload/knowledge Yes No

TRADING VS INVESTING
You decide which type that suits

you and your objective!
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SETTING YOUR TRADING OBJECTIVE
What is your objective in trading?
BE PRECISE AND REALISTIC!

Laying Down your Objective
Long Term Goal : To make the first million from RM20,000
Intermediate Objective : 40% per annum

Shorter Term objective : 10% every quarter
How : TRADING in the stock market
Methodology : A Trading plan that uses Fundamental and/or technical analysis.
Capital : RM 20,000
Capital Growth : In 5 years - RM107,000
In 10 years – RM580,000
In 12 years – RM1.13m
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HOW?
YOU SUCCESS
THE ACTION
Capital TRADING GOAL
PLAN

The ACTION PLAN – TRADING PLAN
As a blueprint leads to your trading goal.
Providing clear ideas on stock selection and getting relevant information

about selected stocks.
Providing steps on when to buy or sell the stocks.
Guiding investors through the process of money management and risk

management.
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Trading Risks
Your Trading Capital Your Goal

RELIABLE DECISION MAKING INFORMATION
There are 2 types of RISKS in trading:
i) Information/Analytical Risk
How much information did you get for this trade? Are your analysis
good (Technical/fundamental? Do you have enough experience? What
is the hit rate of your mechanical system?...etc
ii) Monetary Risk (Position size)

How much money are you willing to risk for this trade?
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6/3/2008

THOSE WHO FAIL TO PLAN, PLAN TO FAIL…
What is a Trading Plan?

A Trading plan is a set of ideas or rules to make trading decisions (entry and
exit), often known as trading set ups.
We make trading decisions through:

Quantifiable information
– fundamental and price information
- MOST RELIABLE SOURCE OF INFORMATION
Unquantifiable information (Second hand information)

– news, rumors, tips, recommendations

If news, rumours, tips are not reliable, can we rely on experts?
$7.10
Loss of RM
2.10 (29%) in
3 months
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6/3/2008

$4.18
Loss of RM 0.88
(21%) in 6 days

$9.20
Loss of RM 1.40
(15%) in 2 weeks
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6/3/2008

Fundamental Analysis
I) FINANCIAL PERFORMANCE
A good company has good financial performance. Performance based on the
revenue, profitability, cashflow, gearing, assets etc. It is the blood of the company
II) MANAGEMENT
A good company has a good management team. The management team’s experience,
contacts, exposure, leadership abililty, vision, mission etc. It’s the body of the
company.
It takes years to be able to study the fundamentals of a company. To get

fundamental information is another big obstacle/expensive.

Technical Analysis
A study of price (and volume) actions in the past to determine future price actions.
The study of price against time is done on a chart
A technical indicator, as its name suggests, indicates a price action and they can
be in the form of chart patterns (that repeat frequently) and statistical indicators
(like moving average).
It does not take a long time to understand how to analyze a chart. Price
information is cheap and easily available. I will provide you with a solid
foundation on how to use technical analysis today.
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OVERCOMING RISKS
Indicator 1: Indicator 3:
Eyes - Look Finger - Touch
Indicator 2: Indicator 4:
Nose - Smell Chemical –
Chemical
content
The more you understand, the less risk you encounter

TECHNICAL ANALYSIS AND WHY IT WORKS
What are the factors that make price move ?
• News and announcements,
• Speculations,
• Company’s performance,
• Economic and social conditions,
• Natural and man-made disasters,
• Different players in the market
• Many other factors
What do these factors do ?

Affects the demand and supply of a particular stock
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6/3/2008

TECHNICAL ANALYSIS AND WHY IT WORKS
What happens to stock price when demand overcomes supply?

Price goes UP
What happens to stock price when supply overcomes demand?

Price goes DOWN
MOVEMENTS IN PRICE IS REFLECTED IN THE PRICE CHART.
THE PRICE CHART IS AN AGGREGATE OF TRADING

DECISIONS MADE IN THE FINANCIAL MARKETS.

TRADING PLAN: THE 5 SIMPLE STEPS TO PROFIT
• Step 1: Identify potential stocks.
• Step 2: Select stocks with best probability of success.
• Step 3: Study chart of stock to time purchase.
• Step 4: Determine demand / supply of stock for

confirmation to purchase
• Step 5: Manage stock portfolio to improve

performance.
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6/3/2008

STEP 1: IDENTIFY POTENTIAL STOCKS
There are more than a thousand of counters listed in Bursa Malaysia

Stock Exchange. So, how to identify potential stocks to trade?
– News: Newspaper, television news, internet financial news,

magazines, seminars and workshops
– Research Reports: Research reports from stocking broking

houses and independent research houses

Research Reports from various sources using NextView Advisor Professional
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6/3/2008

Research reports from Bursa Malaysia’s website (CBRS)

STEP 2: STOCKS WITH BEST PROBABILITY OF SUCCESS
USING FUNDAMENTAL AND TECHNICAL ANALYSIS CRITERIA
FUNDAMENTAL CRITERIA
• Price-Earnings Ratio (PER)
– Avoid small cap stocks with high PER (>50 times) or very low PER (<3 times).
– Select stocks with EPS (Earnings per Share) growth > PER
– Relatively lower PER in the industry that is growing
• Dividend Yield (DY)

– Stocks with stable earnings & pay high dividend consistently.
• Price/Book:
– As low as possible
– Less than 1
• Return on Equity (ROE):

– As high as possible
– Greater than 10 percent.
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6/3/2008

USING FUNDAMENTAL AND TECHNICAL ANALYSIS CRITERIA
TECHNICAL CRITERIA
• Price in a well established trend
– Buy price that is in an up trend. Price stays above an average, and the average increasing
– Buy when price dips to the trend support level. Support and Resistance levels are determined by
trendlines, moving averages or more complicated indicators like Fibonacci retracements and
extensions.
• When price is in its “Base” period

– Price is relatively low and have been in that level for some time. Usually when volume is also
relatively low
• Intermarket analysis
– Development in an industry may affect stock prices in a sector. For example, rising Crude Palm oil
prices benefits companies related to this commodity and therefore is expected to rise.
• Potential Profit to Risk ratio

– There is a higher potential upside than downside, by identifying major support and resistance levels.

Technical Analysis
Trend indicators Indicators are indicating a
strong up trend
The Crude Palm Oil prices are skyrocketing
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STEP 3: STUDY CHART OF STOCK TO TIME PURCHASE
Determine Lower risk entry price
Price is way above the underlying trend

(average) and therefore overbought.
Lower risk entry is when price dips to its

support level and in this case, around
RM3.00 to RM3.20. Wait for price to reach
this level. Put this stock in your watchlist

(7 days later) from Step 1
1. Price now nears support level
2. Get ready to buy when price starts to reverse (Use

the Stochastic indicator to indicate reversal)
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6/3/2008

(10 days later) from Step 1
Stochastic crosses above its moving average, a price

reversal has occurred. Time to purchase

Buy Price = RM3.40
Stop Loss = RM 3.00 (RM0.20 / 6% risk)
Target Price = RM4.20 (RM0.80 / 23% potential profits)
Potential Profit to Risk Ratio = 3.8 : 1
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STEP 4: DETERMINE DEMAND/SUPPLY FOR CONFIRMATION
Time and Sales from NextView Advisor Professional
29 January, when stochastic provides price

reversal signal;
Total volume = 920,000 shares
Buying Strength = 471,960 shares (51.3%)
Selling Pressure = 448040 shares (48.70)
Selling Pressure Buying Strength

Get about 3 days of buying strength and selling pressure to determine whether
the market has been dominated by the bulls or bears in the past few days.
28 January Volume Distribution;

Total volume = 376,000 shares
Selling Pressure = 127,464 shares (33.9%)
27 January Volume Distribution;

Total volume = 1,548,000 shares
Selling Pressure = 764,712 shares (49.4%)
Total Volume Distribution for 3 days

Total volume = 2,844,000 shares
Buying Strength = 1,503,784 shares (52.87%)
Selling Pressure = 1,340,216 shares (47.13%)
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6/3/2008

Decided to Buy IJMPLNT at RM3.40, 10,000 shares.
Set Alert for Stop Loss at RM 3.00
Set Alert for Profit Target at RM4.20
Monitor IJMPLNT prices in portfolio.
You can set alerts and get portfolio management tool in NextVIEW Advisor
Professional.

STEP 5: MANAGE STOCK PORTFOLIO
What is a Portfolio?
• A portfolio is a collection of stocks, bonds, and other assets owned by an
investor or organization.
What is Portfolio Management?

• Portfolio Management is about which assets (e.g. stocks, bonds) to
invest, how much to invest in each asset, and monitoring the
investment to maximise return and minimise risks.
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6/3/2008


4.20
18 trading days later from

purchase date, Alert received
with price at RM4.20
3.40
RM0.80 profits (23.5% profits) in about 1 month !
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6/3/2008

YOUR WINNING EDGE
A winning trading plan will not be able to succeed if the
TRADING INFRASTUCTURE of trading is not in place.
IMPORTANT TRADING INFRASTRUCTURE:
1. Your Trading tool

2. Your Broker
3. Your Mindset

YOUR WINNING EDGE
NEXTVIEW ADVISOR PROFESSIONAL – The Ultimate trading tool for investors
and traders
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6/3/2008

YOUR WINNING EDGE

YOUR WINNING EDGE
THE MINDSET
Avoid the mistakes of unsuccessful traders
Based on trading experience, investors lose money because of the following reasons:
– Do not have an investment plan.
– Do not practice money management.
– Lack investment knowledge.
– Highly emotional.
– No discipline.
– Greedy.
– Gambler attitude.
– Do not learn from mistakes and repeat them instead.
– Buy on tips and rumours.
– Do not cut losses when they are wrong. (Cut profit short, let losses run)
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6/3/2008

YOUR WINNING EDGE
THE MINDSET
Develop the habits of successful investors
Develop the habits of successful investors by doing the following:
– Have an investment plan.
– Practice money management.
– Be patient, realistic, and rational.
– Do research before you buy the stock.
– Practice “Positive” and “Proactive” mental attitude.
– Establish a “Risk/Reward” ratio.
– Practice trading discipline by giving “Limit” Order.
– Have a cut loss strategy and cut your losses quickly.
– Keep a trade journal.

THE BEST INVESTMENT
“An investment in knowledge

always pays the best interest.”
Benjamin Franklin (1706-1790) author, printer, inventor, diplomat, scientist
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6/3/2008
THANK YOU!
I wish you all success in
your trading
benny@thenextview.com
www.tradinglobby.com
26

Cimb 24may2008 Ho

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6/3/2008

Make the RIGHT first steps to stock investment

Make the RIGHT first steps

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

Make the RIGHT first steps to stock investment

Training/Coaching Experience (More than 8 years):

Speaking Engagements (More than 6 years):

Make the RIGHT first steps to stock investment

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

• Good chance of generating wealth for yourself from capital appreciation

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

People invest according to their investment style, return

Therefore, investors can be categorized as follows:

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

THE TRADER LOOKS AT THE OUTSIDE

THE TRADER INTEND TO HAVE A SHORT TERM RELATIONSHIP

Make the RIGHT first steps to stock investment

THE TRADER IS ACTIVE AND LOOKS AT SHARE PRICE FREQUENTLY

THE TRADER HAS LOWER COST

Make the RIGHT first steps to stock investment

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

You decide which type that suits

Make the RIGHT first steps to stock investment

What is your objective in trading?

BE PRECISE AND REALISTIC!

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

Laying Down your Objective

Long Term Goal : To make the first million from RM20,000

Intermediate Objective : 40% per annum

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

The ACTION PLAN – TRADING PLAN

As a blueprint leads to your trading goal.

Providing clear ideas on stock selection and getting relevant information

Providing steps on when to buy or sell the stocks.

Guiding investors through the process of money management and risk

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

Your Trading Capital Your Goal

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

There are 2 types of RISKS in trading:

ii) Monetary Risk (Position size)

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

What is a Trading Plan?

We make trading decisions through:

Unquantifiable information (Second hand information)

Copyright © 2008 by Benny Lee, NextView

Make the RIGHT first steps to stock investment

Copyright © 2008 by Benny Lee, NextView