Tuesday, February 15, 2011

Now You Can Subscribe To Pauline Yong’s Trading Strategies Through ChartNexus XPertTrader Charting Software.


In collaboration with ChartNexus, Pauline Yong has incorporated her unique trading strategies into ChartNexus XPertTrader charting software so that subscribers can apply the strategies to buy and sell blue chip stocks and other general stocks in Bursa Malaysia as well as other foreign stock markets.


Benefits of Subscribing the ChartNexus XPertTrader Charting Software


After subscribing ChartNexus, you can use Pauline Yong’s proven trading strategies – Sigma Wealth (SW) Blue Chip Buy Signal, SW Blue Chip Sell Signal to scan your watchlist, preferably the blue chip stocks list regularly for any buying or selling opportunities.


The SW Blue Chip Buy Signal is designed to scan for buying opportunities for blue chip stocks that are intended for medium term to long term hold, hence speculation is not encouraged here when applying this strategy. On the other hand, the SW Blue Chip Sell Signal is to scan for weaknesses in the market so that investors will not hold on to the losers in a severe downtrend.


However, if you have some knowledge in technical analysis and you want to construct your own rules, you may do so as long as you are the subscriber for ChartNexus XPertTrader™ as it is a unified trading system that combines a stock screener, a rule composer and a backtester for creating powerful rules to help you identify winning stocks.


For examples, you may build your own sophisticated trading system using the most popular technical indicators such as Moving Average, MACD, RSI, Stochastics, and more. You may also detect Japanese candlestick patterns such as doji, harami, hanging man, 3 soldiers and more. Hence, not only you can apply Pauline Yong’s Sigma Wealth strategies, you can also construct your own strategies too!


XPertTrader Charting Software also comes with Extra Free Bonus


1. Exclusive access to XPertTrader Library
2. FREE access to 10-year historical market data
3. FREE version upgrades, fast support, 14-day money back guarantee and more


All these is just RM74 per month or RM960 per year!


For more info on the sign up process, please log on to: http://www.stocktips123.com/ChartingTool.html


Tuesday, February 8, 2011

Prospect Theory

According to Tversky and Kahneman, the prospect theory explores how an individual behaves when face with a risky situation. This theory suggests that when we are presented with choices, we consider the effects of each option relative to our present circumstances. Will we gain or lose relative to our current status quo? Definitely, we prefer gains because it is always better to receive money than to lose it. Hence, Kahneman and Tversky’s crucial contribution was the recognition that losses and gains are not weighed equally - for the same amount of gains and losses, losses hurt more than gains.

Below is the diagram showing the difference between the human perception on gains and losses. As shown, gains and losses relative to the current status quo are measured on the horizontal axis, and the perceived value of these gains and losses is presented on the vertical axis. As indicated, losses produce a greater change in value than equal size gains: losses hurt more than gains.


Similarly, many investors will not sell anything at a loss, as investors feel more comfortable taking a profit on an investment than selling an under-performing stock at a loss. Investors are more likely to take comfort from paper loss than establishing a real loss. This common investor behaviour is due to the prospect theory of magnifying the effect on losses. Or sometimes, people have high hopes that the price of the stock will recover and often focus on returning to a neutral position before exiting. This ‘get even’ attitude has probably wrought more destruction on investment portfolios than bear markets.

Hence, the understanding of prospect theory is extremely useful for an investment manager in obtaining a clearer understanding of shareholders’ perceptions towards investment. It acknowledges that investors focus on gains and losses of individual investments and not on the overall picture. Emphasis is also given more to losses than to gains, to the extent that losses are more painful after prior losses and subsequently lead to a greater risk of further irrational decisions.

Happy investing,
Pauline Yong

Tuesday, February 1, 2011

Overconfidence

Under the paradigm of traditional financial economics, decision makers are considered to be rational and utility maximizing. The assumption of rational expectations is simply an assumption - an assumption that could turn out not to be true.

Behavioural Finance has the potential to be a valuable supplement to the traditional financial theories in making investment decisions. For the past few weeks I have introduced several behavioural finance concepts including: Availability Bias, Representative Bias, Anchoring Bias, Mental Accounting and Framing Effect. Next, I’m going to tallk about “Overconfidence”.

Overconfidence is a very common behaviour whereby investors tend to think that they know more than they actually do. They often overestimate their predictive skills and believe they can time the market. One classic example is listening to rumours. Investors who make investment decisions based on listening to hearsay rumours tend to be overconfident about the situation. Personally, I know a lady who listen to rumours got lucky the first time, she invested RM100,000 in a particular stock based on rumours from her fund manager friend. Her RM100,000 later became RM300,000. The next time she became greedy and invested RM300,000 into another stock recommended by the same fund manager, however, there was bad news regarding the company’s product and her RM300,000 became RM100,000.

Hence, being overconfidence may bring us good fortune at times, but it may also cause losses in our portfolio. To overcome this mental bias we need to follow our investment plan, practice diversification and always remind ourselves not to fall prey to those mental biases.

Finally, wishing all a Happy Chinese New Year! May the year of Rabbit be a prosperous one for all stock investors.


Happy investing,
Pauline Yong