Benny Fat Part1

4/16/2008
Combining Fundamental and Technical Analysis
Making BETTER trading decisions with

Fundamental and
Technical Analysis
(FaT)
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)
1
4/16/2008

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
2
4/16/2008

TRADING VS INVESTING
Copyright © 2008 by Benny Lee, NextView 1

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
4/16/2008

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.

You decide which type of method suits you!
4
4/16/2008

UNDERSTANDING THE 2 RISKS
WHY DO TRADERS FAIL?

NO PLAN
• Becomes emotional…
• Gets Confused…
• Be at the mercy of others… To Buy or not to Buy
• Lack of Discipline…
• Leads to FEAR…


NO RISK MANAGEMENT
• Does not know the risks…
• Becomes a gambler…
• Afraid to lose…
• Leads to FEAR…
5
4/16/2008


NO MONEY MANAGEMENT
Bad reward to risk ratio

Have huge drawdowns…
Becomes over greedy
Leads to FEAR…

INGREDIENTS OF TRADING CONFIDENTLY
Money Risk
Management Management
STRATEGY
Trading Plan
6
4/16/2008

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
Unquantifiable information (Second hand information)

– news, rumors, tips, recommendations

Fundamental
vs
Technical
Analysis
7
4/16/2008

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?

FUNDAMENTAL AND TECHNICAL ANALYSIS
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. Later I will show you how
to get the Analysts work for you.
8
4/16/2008

HOW TO FIND EXPERTS WORK ON COMPANY FUNDAMENTALS?
Broker Research Houses
Most equity brokers have their own research department and they will provide you
with their reports if you have an account with them.
OPEN AS MANY ACCOUNTS WITH DIFFERENT BROKERS. LET THEIR EXPERTS DO
THE WORK FOR YOU.
Independent Research Houses

Independent Research houses are research companies that are not affiliated with any
broker or fund managers. Their reports are believed to be less biased. However,
independent research report services can cost you a lot.

Real Time News Stream
The most cost-effective way is to subscribe to a real-time news that compiles and
aggregates all reports from research houses and feed the info to you. For Example,
the Dow Jones Newswire Market Talk that features reports from many brokers.
Realtime DJ News from

NextView Advisor. The
Advisor has a platform that
provides a search function
on archived news.
9
4/16/2008


PROBLEMS WITH FUNDAMENTAL ANALYSIS REPORTS
Source: Bursa Malaysia

10
4/16/2008


When you make a decision based on Fundamental Analysis, you are getting ready for at
least a 1 year commitment, high cost (cash liquidity) and go through market volatility.
$7.10
MOST OF THE TIME,

Price Falls After
Recommendation
$5.00 (5/3/08)
11
4/16/2008

$3.22
MOST OF THE TIME,

Price Falls After
Recommendation
$2.72 (5/3/08)

$4.18
$3.90 (5/3/08) MOST OF THE TIME,

Price Falls After
Recommendation
$3.30 (22/1/08)
12
4/16/2008

$9.20
MOST OF THE TIME,

$8.20 (5/3/08)
$7.60 (24/1/08)
Price Falls After
Recommendation

FUNDAMENTAL ANALYSIS DOES TELL YOU THAT THE COMPANY IS GOOD

FINANCIALLY, BUT DOES NOT TELL WHEN IS THE BEST TIME TO BUY AND WHAT
IS THE RIGHT PRICE
THAT IS WHY WE NEED TECHNICAL ANALYSIS
WITH BOTH, YOUR TRADING DECISION RISK IS MINIMAL!
13

Benny Fat Part1

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Benny Fat Part1

Uploaded by

Copyright:

Available Formats

4/16/2008

Combining Fundamental and Technical Analysis

Making BETTER trading decisions with

Copyright © 2008 by Benny Lee, NextView

Combining Fundamental and Technical Analysis

Combining Fundamental and Technical Analysis

Training/Coaching Experience (More than 8 years):

Speaking Engagements (More than 6 years):

Combining Fundamental and Technical Analysis

Copyright © 2008 by Benny Lee, NextView

Combining Fundamental and Technical Analysis

Copyright © 2008 by Benny Lee, NextView 1

Combining Fundamental and Technical Analysis

THE TRADER LOOKS AT THE OUTSIDE

THE TRADER INTEND TO HAVE A SHORT TERM RELATIONSHIP

Combining Fundamental and Technical Analysis

THE TRADER IS ACTIVE AND LOOKS AT SHARE PRICE FREQUENTLY

THE TRADER HAS LOWER COST

Combining Fundamental and Technical Analysis

You decide which type of method suits you!

Copyright © 2008 by Benny Lee, NextView 4

Combining Fundamental and Technical Analysis

WHY DO TRADERS FAIL?

Copyright © 2008 by Benny Lee, NextView 5

Combining Fundamental and Technical Analysis

WHY DO TRADERS FAIL?

Copyright © 2008 by Benny Lee, NextView 6

Combining Fundamental and Technical Analysis

WHY DO TRADERS FAIL?

Bad reward to risk ratio

Copyright © 2008 by Benny Lee, NextView 7

Combining Fundamental and Technical Analysis

Copyright © 2008 by Benny Lee, NextView 8

Combining Fundamental and Technical Analysis

What is a Trading Plan?

We make trading decisions through:

Unquantifiable information (Second hand information)

Copyright © 2008 by Benny Lee, NextView 9

Combining Fundamental and Technical Analysis

Copyright © 2008 by Benny Lee, NextView 10

Combining Fundamental and Technical Analysis

There are 2 types of RISKS in trading:

ii) Monetary Risk (Position size)

Copyright © 2008 by Benny Lee, NextView 11

Combining Fundamental and Technical Analysis

It takes years to be able to study the fundamentals of a company. To get

Copyright © 2008 by Benny Lee, NextView 12

Combining Fundamental and Technical Analysis

Independent Research Houses

Copyright © 2008 by Benny Lee, NextView 13

Combining Fundamental and Technical Analysis

Realtime DJ News from

Copyright © 2008 by Benny Lee, NextView 14

Combining Fundamental and Technical Analysis

Copyright © 2008 by Benny Lee, NextView 15

Combining Fundamental and Technical Analysis

Source: Bursa Malaysia

Combining Fundamental and Technical Analysis

Copyright © 2008 by Benny Lee, NextView 17

Combining Fundamental and Technical Analysis

MOST OF THE TIME,

Copyright © 2008 by Benny Lee, NextView 18

Combining Fundamental and Technical Analysis