Investing Online And BPI Trade

INVEST ONLINE WITH JUST ONE CLICK, says the BPI Trade flier that Marginal Stock Trader took on his way out of the BPI Securities Corporation office last week when he went there on official business at BPI Head Office, Ayala Avenue corner Paseo de Roxas, Makati City, Philippines.

BPI Tade Flier
Marginal Stock Trader decided to share in this post the contents of the said BPI Trade flier:

Get Efficient, Convenient Access to your Investments with BPI Trade!

A unique and advanced online investment facility, BPI Trade gives you online connection to invest in Common Stocks, Fixed Income Securities and Mutual Funds right from your Internet-connected PC. So go ahead, buy that stock or make that placement. . .at your convenience.

Simply log on to www.bpitrade.com and make your investment orders. With BPI Trade, everything you'll need is with us. . .online!

Get the best investments with great benefits to match:
BPI Trade empowers you to choose from a variety of investment products to fit your needs. It also gives you the investment information you need and keeps you updated anytime, anywhere!

Common Stocks

• The lowest Commission Rate of 0.25% allowed by the PSE
• Get updated with Real-time Market Information direct from the PSE
• Real-time Order Status via Email/SMS
• Off-Hours Order Taking
• Online Confirmation Advise next day
• Online Statement of Account on the 1st day of the following month
• Email/SMS confirmation on matched deals, high/low share prices and closing prices
  

Fixed Income Securities

• Trade T-Bills, Fixed Rate Treasury Notes, and Retail Treasury Bonds
• Shortest tenors available
• Always quoted at competitive rates even for the lowest minimum investment
• Off-Hours Order Entry
• Online Confirmation Advise
• Email/SMS Alerts on Maturities and Transaction Status
  

Mutual Funds

• Invest in ALFM Peso Bond Fund
• Historically higher yields compared to traditional bank products
• Php100,000 minimum investment
• participation fees (sales load) WAIVED
• Online Contributions and Redemptions
• Email/SMS Alerts on Transaction Status
  

A secure website for your peace of mind!
BPI Trade has a "firewall" that protects you from unauthorized access. With your unique User I.D. and Password, only you can access your BPI Trade account. BPI Trade will run only with browsers that support a 128-bit high level Secure Socket Layer (SSL) protection. These browsers can communicate securely via encryption, which changes the order of data you send and receive through the Internet channel. With these, you can have peace of mind knowing that all your trades are safe and secure.

With BPI Trade, managing your portfolio is made easy!
BPI Trade gives you the flexibility to shift your investments between fixed income securities, mutual funds and stock market securities.

Enroll in BPI Trade now, log on to
www.bpitrade.com
and click "Apply Now"

For more information, log on to www.bpitrade.com or
e-mail BPI Trade at bpitrade@bpi.com.ph

Performance for July 2009

ONLINE STOCK TRADING transactions for the month of July 2009 resulted to a 2% decrease in Marginal Stock Trader's BPI Trade trading account beginning equity of 10,000 pesos as of this month's last trading day.

Based on his Weekly Total Equity Tracker, Marginal Stock Trader's portfolio on July 31, 2009 is valued at 9,816 pesos. Of this amount, 30% is allocated for his anchor stock or stock position maintaining balance, and the other 70% is held in cash.

Marginal Stock Trader has also updated his own resistance and support levels based on Minor Top and Minor Bottom. As of July 31, 2009, we placed our Minor Top at 317.50 pesos and Minor Bottom at 285 pesos.

OnlineTrading Monthly Results

HIS ONLINE STOCK TRADING PLAN, STRATEGIES AND IDEAS already tested and updated after a period of almost 12 weeks in a live trading environment, Marginal Stock Trader finally decided to close all his outstanding positions this month in preparation for a fresh start by August 2009 and this time with little bits of trading lessons learned here and there.

Start low
We said in one of our early post Make a Living As a Day Trader that we would start with just one trade per week and a very low weekly profit goal of 30 pesos. We managed to make 6 trades out of 12 weeks and even made a weekly profit of 29 pesos as of May 2009 on the average.

Delayed reaction
Beginning June 2009, we started to learn something about technical analysis, Japanese candlesticks, long position and short position, and Minor Top and Minor Bottom. We made decisions based on our understanding of technical indicators. We also tested the limits of our stop loss strategy based on the Minor Bottom of 270 pesos for Ayala Corporation stock at that time.

This month's result was a disaster. We got our first lesson in losing money through our biggest single loss so far of 370 pesos equal to about 4% of our trading equity. We looked away from our original stop loss rule and ended up selling at the bottom price of 265 pesos.

Add to this is our misreading of the trend that triggered a decision to go long on Ayala Corporation at 312.50 pesos, which turned out to be the top for an entry price.

Loss-limit system
By the 9th week since we entered our first order in live trading at the Philippine Stock Exchange through our online broker BPI Trade, Marginal Stock Trader added an important element in our stock trading plan that allows us to better put a cap on our losses: a loss-limit system.

This system placed our single trade loss limit at 2% and our maximum monthly losses at 6% based on our equity in our trading account. Our Weekly Total Equity Tracker shows that as of July 24, 2009, our month-to-date losses was cut by more than half to about 3% compared to 7% a week before.

Stock portfolio
For the period May 11, 2009 to July 27, 2009, our stock portfolio consisted of just one issue, Ayala Corporation, our online broker is BPITrade, and we only trade common stocks at the Philippine Stock Exchange.

BPITrade Fund Withdrawals

BPITRADE WITHDRAWAL PROCEDURE to get the money out of our trading account is easy. But for those new to BPITrade here is how to go about getting hold of your funds. By the way, this post is in response to a question we received from one of our readers:

Subject: Question lang po

From: Jun
Date: Wed, Jul 22, 2009 at 10:08 AM
Subject: Question lang po
To: Marginal Stock Trader


Sir Good morning po.

Pano po ba magwithdraw from BPI Trade? Di ba punta lang sa Services tapos Withdrawal, then indicate ung amount.
Automatic ba un mapunta sa account ko sa BPI Savings, un ginamit ko para magtransfer ng fund sa BPITrade using
Expressonline?

Matagal po ba bago matransfer?

Salamat.

Withdrawal Procedure
Correctly, our reader Jun had already answered in part his own question. Let me just add more details.

Step	Action
1	Sign-in to your BPITrade account
2	Go to Services
3	Click on the link Withdrawal Request
4	Fill up the amount to be withdrawn in figures and in words and click the Submit button.

The amount withdrawn will be available on your nominated beneficiary account (BPI savings or checking account with ATM card) the next day.

Weekly Total Equity Tracker

MARGINAL STOCK TRADER tracks his BPITrade trading account weekly equity balance through this post. For that purpose, we have adapted the system suggested by Jason Van Bergen in his Investopedia article Limiting Losses.

Week	Date	Cash Position	Stock Position	Total Equity		% Gain/(Loss)		Remarks
	17-Jul-09	10,000	-	10,000				beginning equity, this year
29	18-Jul-09	970	8,325	9,295		(7.1%)		stopped trading
30	24-Jul-09	6,816	2,900	9,716		(2.8%)		closed 2 of 3 positions
31	31-Jul-09	6,816	3,000	9,816		(1.8%)		ending equity, this month
32	07-Aug-09	9,567	-	9,567		(2.5%)		traded 30 shares, closed all positions
33	14-Aug-09	9,567	-	9,567		(2.5%)
34	20-Aug-09	9,567	-	9,567		(2.5%)
35	28-Aug-09	9,567	-	9,567		(2.5%)
	31-Aug-09	9,567	-	9,567		(2.5%)		ending equity, this month
36	04-Sep-09	9,567	-	9,567		-
37	11-Sep-09	9,567	-	9,567		-
38	18-Sep-09	9,567	-	9,567		-
39	25-Sep-09	9,567	-	9,567		-
	30-Sep-09	9,567	-	9,567		-		ending equity, this month
40	02-Oct-09	9,567	-	9,567		-
41	09-Oct-09	9,567	-	9,567		-
42	16-Oct-09	9,567	-	9,567		-
43	23-Oct-09	9,567	-	9,567		-
44	30-Oct-09	6,544	2,925	9,469		(1%)		bought 10 shares @ 300
	31-Oct-09	6,544	2,925	9,469		(1%)		ending equity, this month
45	06-Nov-09	6,544	2,950	9,494		0.3%
46	13-Nov-09	6,544	3,025	9,569		1.1%
47	20-Nov-09	6,544	3,025	9,569		1.1%
48	27-Nov-09	6,544	3,000	9,544		0.8%
	30-Nov-09	6,544	3,000	9,544		0.8%		ending equity, this month
49	04-Dec-09	9,481	-	9,481		(0.7%)		sold 10 shares @ 297.50
50	11-Dec-09	9,481	-	9,481		(0.7%)
51	18-Dec-09	9,481	-	9,481		(0.7%)
52	25-Dec-09	9,481	-	9,481		(0.7%)
	31-Dec-09	9,481	-	9,481		(0.7%)		ending equity, this month
	31-Dec-09	9,481	-	9,481		(5.2%)		ending equity, this year

Last updated: February 22, 2010
Marginal Stock Trader calculates his equity each week. This includes all of the cash in his BPITrade trading account, cash equivalents and the current market value of all open positions in the account. This weekly total is compared with the equity total on the last trading day of the previous month and, if we are approaching the 6% threshold, we prepare to cease trading.

In fact, when our 6% loss-limit level is breached, we may -- depending on our appraisal of the situation -- go even further and close all of our outstanding positions, and spend the rest of the month on the sidelines.

Employing a 6% monthly loss limit allows Marginal Stock Trader to hold three open positions with potential for 2% losses each, or six open positions with a potential for 1% losses each and so forth. For more, read our previous post Loss-Limit System for Traders.

Loss-Limit System for Traders

MARGINAL STOCK TRADER is not a stranger to losing money in online stock trading at the Philippine Stock Exchange trading his favorite stock Ayala Corporation. Of course, losing money in the stock market is inevitable for stock traders. And losing our hard-earned money is not an easy experience, which can be emotional at some point. Therefore, organizing a loss-limit system is critically important specially for small capital online stock traders.

Single trade loss limit
For our single trade loss limit, "a common level of acceptable loss for one's trading account is 2% of equity in the trading account" says Jason Van Bergen in his Investopedia article Limiting Losses. The capital in our trading account is our risk capital, the capital that we employ (that we risk) on a day-to-day basis to try to garner profits for our online stock trading business.

Monthly loss limit
"A general rule for overall monthly losses is a maximum of 6%" of our portfolio added Van Bergen. As soon as our account equity dips to 6% below that which it registered on the last day of the previous month, we stop trading.

Trading account
Marginal Stock Trader has a total of 10,000 pesos as of July 17, 2009 in his BPITrade trading account. This means when establishing our position, we should also establish a stop loss rule within a maximum of 2% loss of the total equity in our account. Our stop, however, may be anywhere from a 0-2% total loss. Thus, we set our 2% single trade loss limit at 200 pesos. Consequently, our 6% monthly loss limit is placed at 600 pesos.

Application of loss-limit system
Let us consider our trading portfolio of 20 shares of Ayala Corporation stock purchased at an average cost of 286 pesos or a total cost of 5,723 pesos. A loss of 200 pesos is equal to a net sales proceeds of 5,644 pesos. This is also equal to an exit price of 280 pesos pesos per share if all of our outstanding positions were to be closed all at once and the orders were to be placed with BPITrade. If done in two transactions, then our stop loss exit prices are placed at 265 pesos and 277.50 pesos.

Transaction Date	No. of Shares	Entry Price		Total Cost		Stop Loss Price
29-Jun-09	10	290		2,925.32		277.5
16-Jul-09	10	277.50		2,798.04		265
TOTAL	20			5,723.36		280

This arrangement fits well with our Marginal Stock Trader Updated Stock Trading Plan (For more, read Online Stock Trading Plan Updated).

Buy Weakness Trading Strategy

MARGINAL STOCK TRADER's post Lessons in Losing Money was the first time the concept of buy weakness was ever mentioned in this website. In that post, we talked about why we sold our Ayala Corporation stock at a loss. One of our stop loss rule was activated on June 30, 2009 when the price of the stock hit 265 pesos. But we also look at this decision as an opportunity to experience this buy weakness strategy.

Trading strategy
Buy Weakness is a "proactive trading strategy in which a trader takes profits by closing out of a short position or buying into a long position," says Investopedia. "Buy weakness strategy is used when the price of the asset being traded is still falling but is expected to reverse and move against the trader."

Profit and loss plan
When viewed in the light of our updated profit and loss plan, we said that we will be satisfied to buy the stock at 237.50 or lower. In the event, however, that the stock moved up contrary to our initial expectation, we shall enter a position at 277.50 pesos.

Entry price
From the day we sold 10 shares of Ayala Corporation stock on June 30, the nearest price to 237.50 pesos is the low of 260 pesos on July 3. After that date, the stock established a support price at 267.50 pesos for the trading period July 7 to July 15 and a resistance at 275 pesos.

Marginal Stock Trader's take is that the stock -- beginning July 6 -- was on consolidation mode for 8 trading days. This ended when the price of the stock broke past the resistance level on July 16, reaching the high of 280 pesos and closing at 277.50 pesos, which incidentally is also our stop loss entry price.

Trading plan
This point highlights the importance of having a definite plan and specific decision criteria. Nevertheless, there still remains an occasion when we come to a crossroad and needed to make a choice between two opposite paths.

What is the probability of the stock price falling to our desired level of 237.50 pesos on or before July 31? Was the breakout at 277.50 pesos closing price means were back to an uptrend now? What about the Marginal Stock Trader rule of maintaining a cash position -- to be used only when entry price is nearest the latest minor bottom -- that leans towards holding back the buy signal triggered by our stop loss rule?

Savings program
Marginal Stock Trader finally decided on July 16 in favor buying 10 shares or 1 board lot of Ayala Corporation stock at 277.50 pesos. Hence, our maintaining cash position shall come fresh trading capital accumulated through a savings program.

Profit and Loss Plan Review

PROFIT EXIT STRATEGY AND STOP LOSS RULE are among the most important components of Marginal Stock Trader's updated online stock trading plan. Professional traders admit that deciding on a "set of limits that determines the maximum loss or gain an investor will take on a stock", says Investopedia, is basic to stock trading to prevent excessive losses or to lock in profits. This is where our Profit/Loss Plan comes in handy.

Profit target
Our online stock trading plan has this profit exit strategy: simply add 35 pesos to our entry price, and exit the trade as soon as prices move up 35 pesos. We shall tweak this strategy a little bit by creating a more general decision criteria. We shall set the maximum gain we will accept at 12% above the price at which we bought the stock. Our goal is to lock in profits at this point.

Stop loss rule
In this rule, we aim to avoid mounting losses from holding on to a falling stock hoping for a rebound. Here, Marginal Stock Trader lists three options:

• First option, based on our updated Online Stock Trading Plan is a fixed peso amount: simply subtract 12.50 pesos from our entry price , and exit the trade as soon as prices move down 12.50 pesos.
  
• Second, percentage of our entry price: we shall set the maximum loss we will tolerate for our position at 5% below our entry price.
  
• Third option, percentage of Minor Bottom. This stop loss rule was briefly described in the article Stop-loss: Add science to the art of using stoploss by Jayesh Patel. As of June 30, 2009, we have identified a Minor Bottom at 250 pesos. We exit the trade as soon as price hits 5% below this level at 237.50 pesos.

Marginal Stock Trader has no prefererence over any one of these three options. But let us look at his latest trade. He decided to exit at 265 pesos his long position in Ayala Corporation -- bought at an average price of 299 pesos -- with expectation of this stock going down further. We will be satisfied to buy the stock at 237.50 or lower.

In the event that the stock moves up, contrary to our initial expectation, we shall buy the stock at 5% above our last selling price preventing additional losses. Hence, we shall purchase the stock if the price moves up 12.50 pesos.

Carrying out the plan
Our plan has a double requirement: we have to sell our stocks (1) if they fall to a certain level and (2) if they rise to a certain level. This plan must be implemented strictly or we expose our trading capital to more risk than what we might want to take.

Related Posts:
Lessons in Losing Money
Accumulating Shares of Ayala Corporation
Long Position in Ayala Corporation

Marginal Stock Trader Balance Sheet

BALANCE SHEET is a "financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time," says Investopedia. Marginal Stock Trader's Balance Sheet will be reported in this post and updated monthly.

Date		Cash		Receivables		Stocks		Payables		Capital		Profit/ (Loss)
May 31, 2009		874		2,713		-		-		3,500		87
June 30, 2009		3,561		2,614		5,967		2,925		9,500		(283)
July 31, 2009		6,816		-		3,000		-		10,000		(184)
August 31, 2009		9,567		-		-		-		10,000		(433)
September 30, 2009		9,567		-		-		-		10,000		(433)
October 31, 2009		6,544				2,925		-		10,000		(531)
November 30, 2009		6,544		3,000		3,000		-		10,000		(456)
December 31, 2009		9,481		-		-		-		10,000		(519)

Marginal Stock Trader's Balance Sheet is the easiest way to measure the achievement of our goal of making 12,500 pesos monthly trading profit.

Related Posts

Marginal Stock Trader SMART Goals and Plan
Developing Day Trading Strategy for Stocks
Online Stock Trading Plan Updated
Marginal Stock Trader Learns By Experience
Lessons in Losing Money

Lessons in Losing Money

LOSING MONEY IN THE STOCK MARKET IS EASY that you may never know what hit you if you are not prepared. Marginal Stock Trader learned that lesson today when he sold 10 shares of Ayala Corporation stock at 265 pesos per share. This was triggered by his stop loss setup of 5% distance below the Minor Bottom of 270 pesos according to his previous post Online Stock Trading Plan Updated. Hence, the decision to exit came sooner than expected.

Surprise move
In the preceding post published yesterday, Marginal Stock Trader still maintained a long on Ayala Corporation stock. There was even a mention of time-stop loss anticipating a sideways market until end of July 2009 based on relevant indicators monitored. Therefore, it is a surprise that the stock managed to fall below Minor Bottom so soon.

Emotions and money
Indeed, emotions can never be detached from money. More so if it is about losing some of our savings diligently accumulated over a period of time we deemed significant. Here is where our stop loss rules should prevail to avert any further loss.

Stop loss rules
Based on Marginal Stock Trader's updated trading plan, our stop loss rules are as follows:

• 12.50 pesos below the entry price, or
• 5% below the identified Minor Bottom of 270 pesos.

Our Ayala Corporation shares has an average acquisition cost of 299 pesos based on our latest post Accumulating Shares of Ayala Corporation. Our nearest stop loss order should have been at 287.50 pesos. But we decided to go beyond that and use the next stop loss dictated by our Minor Bottom. Thus, we must exit anywhere within the conservative range of 257.50 to 270 pesos based on our updated trading plan.

Decision time
Today the price hit 265 pesos that served as the closing price for the day and this month of June 2009. This event activated our second stop loss exit rule.

We sold 10 shares out of 30 shares we have accumulated over the month. We are willing to trade only 20 shares according to one lesson we discussed in a post Marginal Stock Trader Learns By Experience. We said it is important to always have an inventory of 10 shares or 1 board lot of the stock for protection against huge losses.

This means we keep 10 shares forever and we trade the rest. But we decided to just trade half of what we are willing trade, which means selling only 10 shares for now.

New Lesson Learned
Today's trade led Marginal Stock Trader to formulate a new rule for beginning stock traders with minimum number of shares or board lots:

"Always keep a cash position equal to one board lot based on identified Minor Top plus the minimum monthly Average Daily Balance for our BPI Direct savings account linked to our BPITrade account. "

This amount is prepared for extremely favorable and rare entry signals like when the price trades below stop loss level based on recent Minor Bottom.

Buy weakness
At this time, it would have been ideal if we have 3,500 pesos in available cash to take advantage of falling stock and buy weakness.

Outlook
Reading from the Market Watcher Daily Market Summaries for Philippine Stock Market prepared by BPI Trade this June 30, 2009, the keyword is consolidation, even a hint of continuation of current trading pattern. Marginal Stock Trader will, for the time being, follow the rules found in our updated stock trading plan.

Accumulating Shares of Ayala Corporation

AYALA CORPORATION price is so irresistible this month, Marginal Stock Trader needed to hike his stock trading equity for the second time last June 26 by another 3,000 pesos to build a total stock trading equity of 9,500 pesos.

With cash available, he bought another board lot of 10 shares for a total inventory of 30 shares with an average entry price of 299 pesos per share under his stock portfolio.

Date	No. of Shares	Total Cost	Average Entry Price	Comment
6/2/2009	10	3,150	315	Entry price is the highest closing price for this month to date.
6/18/2009	10	2,875	301	Entry point is ex-dividend date.
6/26/2009	10	2,925	299	Week 26 moderately indicated a RESTART. This signal is used to spot when the stock is likely to end its Reaction/Correction and resume its main trend.

Marginal Stock Trader has a total of 8,950 pesos for his stock position and 550 pesos for his cash position that is just enough to cover for the monthly maintaining Average Daily Balance of his BPITrade account.

We still affirm and abide by our decision made in a previous post Long Position in Ayala Corporation based on the signals exhibited by indicators, trend channels, and price support and resistance levels relevant to us.

Have we made a sensible decision? Were the indicators sensitive enough to detect the trend for the next couple of weeks? We will find that out by the end of July 2009 in accordance with our time-stop strategy mentioned in a previous post Developing Day Trading Strategy for Stocks.

Marginal Stock Trader Learns By Experience

MARGINAL STOCK TRADER learned recently by experience that online stock trading with a minimum stock position of one board lot or 10 shares of Ayala Corporation stock requires a different set of rules that may never concern adequately funded stock trading operations.

Among the rules that matter at the marginal level are those relating to:

• monthly maintaining Average Daily Balance (ADB) of our BPITrade settlement account;
• stop-loss and profit-taking considerations;
  
• stock trading strategy.
  

Maintaining Cash Position
Our online broker, BPI Trade, requires a monthly maintaining Average Daily Balance (ADB) of 500 pesos for our BPITrade settlement account with BPI Direct Savings Bank. As a non-ATM deposit account, the BPITrade settlement account earns annual interest according to the amount of daily balance:

• 0 - 499 pesos - 0.000% p.a.
• 500 and above - 1.750% p.a.

Suggested Reading: BPI Trade Settlement Account

Stop Loss and Profit Target
Our stop loss rule based on our updated Marginal Stock Trader Online Stock Trading Plan is as follows:

"Our stop loss rule shall be expressed in a fixed amount of 12.50 pesos per share of Ayala Corporation. We simply subtract the peso amount we specified from our entry price , and exit the trade as soon as prices move down 12.50 pesos."

For our profit target, here is what we have:

"Our profit exit strategy shall be expressed in a fixed amount of 35 pesos per share of Ayala Corporation. We simply add 35 pesos to our entry price, and exit the trade as soon as prices move up 35 pesos."

These rules are useful only when our stock position or the number of shares we maintain is more than one board lot of 10 shares for Ayala Corporation stock.

Here is what may actually happen.

Let us refer to the stock trading transactions found in Marginal Investor post Trading Profits Of A Swing Trader. For his first trade, entry price on February 23, 2009 is 202 pesos per share and exit price on March 27 is 220 pesos. For his second trade on April 1, entry price is 204 pesos and exit price on April 17 is 224 pesos. Marginal Investor boasted of as much as 8% in trading profits.

Profit-taking is good up to that point in April. The problem, however, is that Marginal Investor wanted the same profit target for the third time and waited for an entry price very close to his two previous trades. The price went to as low as 214 pesos on April 21, but he did not enter a trade. The price never looked back and went on to as high as 285 pesos a month later.

The hard lesson is for the beginning online stock trader with only one board lot to play, never trade that one board lot. Keep it as a kind of stock position maintaining balance, or an insurance policy, or a fallback. To be able to trade, make haste to accumulate enough money and buy another board lot.

In fact, this is what Marginal Stock Trader did last June 18, 2009. We increased our trading capital by another 3,000 pesos to have a total fund of 6,500 pesos. On the same date, we bought 10 shares of Ayala Corporation at 285 pesos per share based on tempting entry signals. We now have a stock position of 20 shares and a cash position of 560 pesos with BPI Trade.

Stock Trading Strategy
Like what we said in the previous section, our online stock trading plan will apply to the second board lot of 10 shares equal to one-half of our stock position. This is aligned with our risk tolerance of 50% loss of capital stated in our online stock trading plan.

Marginal Stock Trader has identified his own resistance and support levels based on Minor Top and Minor Bottom. As of June 18, we placed our Minor Top at 317.50 pesos and Minor Bottom at 270 pesos.

Better Strategy and Better Profits
We have improved our online stock trading strategy for the beginning stock trader. This should result to better performance and better stock trading profits.

Online Stock Trading Plan Updated

Marginal Stock Trader is updating his online stock trading plan with this post. Like what I've said before, this exercise is largely a practical application of the expert advise given in PART 2 of the international bestselling book The Complete Guide to Day Trading: A Practical Manual From a Professional Day Trading Coach by Markus Heitkoetter.

MARGINAL STOCK TRADER TRADING PLAN

For the year 2009

Section 1: Financial Goal

Marginal Stock Trader wants to make:

• 150,000 pesos per year
• 12,500 per month
• 3,000 per week
• (see the post Marginal Stock Trader SMART Goals and Plan)

Marginal Stock Trader account size:

• 3,500 pesos for opening balance
• (see the post Make A Living As A Day Trader)

Marginal Stock Trader is willing to risk:

• 50% of his trading capital
• (see the post Long Position in Ayala Corporation)

For more details about the next sections, please see the post Developing Day Trading Strategy for Stocks:

Section 2: Selecting a Market
Marginal Stock Trader will trade the following market:

• stock market
• Philippine Stock Exchange
  
• trading just a single issue, Ayala Corporation stock
• using BPI Trade for online broker
  

Section 3: Selecting a Timeframe
Marginal Stock Trader will trade the following timeframes:

• 10 days
• 30 days
  

Section 4: Selecting a Trading Style
Marginal Stock Trader will use the following approach:

• trend-following for primary trading strategy
  
• trend-fading for secondary trading strategy
  

The underlying idea is:

• for trend-following – when prices are moving up, we buy, and when prices are going down, we sell
• for trend-fading – when prices are trading at an extreme (e.g. upper band of a channel), we sell, and then we try to catch the small move while prices are shifting back into “normalcy.” The same applies for buying.
  

Section 5: Entry Signals
Long Entry:

• Using Simple Moving Averages for trend-following: BUY signal is generated when the closing price moves above the moving average
  

Short Entry:

• Using Relative Strength Index (RSI) for trend-fading: BUY signal is generated when the RSI crosses the oversold-zone from below

Section 6: Exit Signals

• Simple Moving Averages: SELL signal is generated when the closing price dips below the moving average.
• Relative Strength Index (RSI): SELL signal is generated when the RSI crosses the overbought- zone from above.

Profit Target: Our profit exit strategy shall be expressed in a fixed amount of 35 pesos per share of Ayala Corporation. We simply add 35 pesos to our entry price, and exit the trade as soon as prices move up 35 pesos.

Stop Loss: Our stop loss rule shall be expressed in a fixed amount of 12.50 pesos per share of Ayala Corporation. We simply subtract the peso amount we specified from our entry price , and exit the trade as soon as prices move down 12.50 pesos.

Minor Bottom: As of this date, Marginal Stock Trader has also identified a Minor Bottom at 270 pesos. Should there be any prolonged reaction period and we are caught in a long position, we set our stop loss at 5% below this line at 257.50 pesos.


Related Post:

Marginal Stock Trader

Harami Candle and Trend Reversal

TREND-FOLLOWING can be an exciting task for the beginning stock trader. And when you add watching the Japanese candlesticks on a daily basis for our favorite stock Ayala Corporation, you are in for a great game.

Marginal Stock Trader wants to share with you what he learned about a reversal candlestick called harami, the "pregnant" candle. When we see this on a daily chart following an up or downtrend of more than six days, we are advised to immediately ask ourselves if the Minor trend is about to reverse direction.

The harami candle can occur both after an uptrend or downtrend.

Let us use the trading days beginning June 2, 2009 when our Ayala Corporation stock established a downtrend. In this case on June 9, the day immediately preceding the green harami candle, there is a large, real body red candle. The bears appear to be fully in the driver's seat.


The next day on June 10, however, a small real body green candle appeared within the larger real body. This is the harami candle. It was said that the reversal signal is more potent if it is the opposite color -- like the one we have on June 10 -- as this color change shows that the decline has stalled. The bulls are now on strong ground and are engaged in a struggle for power with the bears.

We are told also by those familiar with candlestick charting to always look carefully at the next day's candle, the one that follows the harami candle. This refers to the one on June 11, last trading day of Week 24.

The experts cautioned that sometimes harami merely signifies that the stock is entering a period of consolidation (meaning that the shares will trade sideways). If, however, our Ayala Corporation stock advanced the day after the harami candle takes place, then there is an increased likelihood that the shares have put in a Minor bottom.

Indeed, this is what happened on Thursday: the stock advanced. The 297.50 pesos open equals the low and the 307.50 pesos close equals the high. Listening to those skilled in this field, then we should be alert to a change in trend.

Outlook for Week 25
Here is Marginal Stock Trader's beginner's forecast for trading period June 15 to June 19, 2009. Since the Ayala Corporation stock we are following is currently in a short-term downtrend, then today's advance following the harami candle of the previous day warns of an impending period of sideways trading, or perhaps reverting back to its Major trend: an uptrend.


Data Source
Philippine Stock Exchange through online broker BPI Trade

Suggested Reading

Harami: This Candle Can Help Nutrure Your Profits
Stop-Loss: How To Use It In Trading

Ayala Corporation Trend-Following Update

PRICES ADVANCED MODERATELY from open to close and buyers were aggressive in today's trading of Ayala Corporation stock. The close of 297.50 pesos is greater than the open that also equals the low of 292.50 pesos.

Buyers controlled the price action from the first trade and bid prices higher. Sellers, however, forced prices down from the high of 300 pesos by the end of the session. Consequently, today and yesterday's high and low are identical, which effectively prevented a gap down. In addition, the stock's high/low range of 5 pesos is somewhat narrow.



But check this out. Compared to the volume of 899,562 recorded in May 29, we now see a high volume decline that still means a bearish confirmation. Current volume traded was placed at 103,650 shares. The last time that we had a lower volume was 7 weeks ago on April 23, 2009 with 69,650 shares.

Outlook for June 11, 2009
To be honest, trend-following on a daily basis is not easy. In other words, it is quite hard. Admittedly. Even harder is to make an assessment and a forecast of what may happen in next day's trading. Marginal Stock Trader just tried this one week of trend-following exercise and learned a lot. The hard way.

Now, what is in store for tomorrow? Coming from a greenhorn in candlestick charting, we reckon that the pattern at hand is a bearish harami with respect to our existing uptrend. According to interpretation available from experts, we may expect sustained increase in selling pressure for this week's remaining trading days.

But here is the catch. If we would consider the last couple of days for our short-term forecast, then what we have instead is an existing downtrend to reverse. Thus, our pattern could also be interpreted as a potential bullish harami. This signals that significant selling pressure remains and could indicate capitulation followed by sudden increase in buying pressure and potential reversal in the next 1 or 2 days.

Data Source: Philippine Stock Exchange through online broker BPI Trade




Marginal Stock Trader would to like to share with you a comment we received through an email:

From: Jun
Date: Tue, Jun 9, 2009 at 12:19 AM
Subject: Online Stock Trading
To: microbusinessman@gmail.com


Hello Sir. I'm Jun. I work as an engineer at the Laguna Technopark.
Recently, I got interested in investing in the stock market. Actually po nag-apply nko
for an account at BPITrade waiting for approval nalang. Once, I was browsing the
web for tips regarding day trading, I happen to pass by your Marginal Stock Trader blog.

I will constantly check your blog for new post from now on, and read all your previous posts,
I find it very helpful.

I'm initially investing maybe 20k and try my luck at day trading, hopefully with the help
of your blog and dozens of others, I can also learn and earn from the stock market.

Sincerely,
Jun

Thanks Jun for the email. Your comments are much appreciated.


Suggested Reading

Candlestick Bearish Reversal Patterns

Marubozu Candlesticks Green and Red

SELLERS CONTROLLED THE PRICE ACTION from the first trade to the last trade on June 9, the second day of Week 24. The Ayala Corporation stock's 300 pesos open equals the high and the 292.50 pesos close equals the low.

Here is an example of a Marubozu. This candlestick do not have upper or lower shadows and the high and low are represented by the open or close.

Support level breach
Strong selling pressure is now clearly noticeable and is demonstrated by the break out below our 300 pesos support level. In addition, prices declined moderately from the open and sellers were more aggressive this time. Although we are waiting for a gap down for confirmation, we still think this day may foreshadow a turning point or mark a future resistance level.



Outlook for June 10, 2009
Selling pressure overwhelmed buying pressure for five days now within our trading range. But it remains unclear whether or not sustained selling or lack of buyers will continue to push prices lower. A gap down, long red candlestick or high volume decline means bearish confirmation.

Learning About Candlestick Charts

CANDLESTICK CHARTING has its own unique language and terms like Marubozu, Spinning Tops, Doji, Harami Position, Hammer, Hanging Man, Shooting Star and a more. Understanding their meaning, including a feel of the emotions involved, may give us a better insight about some ways we can be play the stock trading game.

Marginal Stock Trader became aware of candlestick charts only for a couple of weeks. Thus, his familiarity with it maybe described as superficial at best. Nevertheless, let us see how a novice can use this technical analysis tool for his day-to-day stock trading operations.

For Week 24 covering the trading period June 8 to June 12, our general outlook is to take a long position in Ayala Corporation. Please read our previous post Japanese Candlesticks for Stock Trading for more details.

June 8, 2009
Ayala Corporation open equals the high of 305 pesos and the close equals the low of 300 pesos. This indicates that sellers controlled the price action from the first trade to the last trade.

The stock traded at 305 pesos for over an hour until 10:10 a.m. The next 15 minutes of trading was at 302.50 pesos. And from 10:25 a.m. onwards, the price stayed at 300 pesos.

Trading range was narrow at 5 pesos and is equal to 2 fluctuations. Main number of trades was placed at 89. It looks like both sides - buyers and sellers - are positioning themselves for the next move. That includes Marginal Stock Trader who bought 10 shares at 312.50 pesos last week.

Learning by experience
Admittedly, Marginal Stock Trader is just very new to this candlestick chart. Nevertheless, we would like to write about how we are applying this tool in our online stock trading so we could learn some hard lessons by experience.

Trading range
By our own reckoning, we consider the trading range to be somewhere between 300 pesos (support) to 315 pesos (resistance). A break above 315 pesos is a victory for the bulls (demand) and a break below 300 pesos is a victory for the bears (supply).

Price fluctuation
In terms of price fluctuation, we would consider 5 pesos to be narrow, 10 pesos is somewhat wide, 15 pesos is wide, and 20 pesos to be very wide.

Outlook for June 9, 2009
Based on experience of recent weeks, we would say the trading range is good for 6 to 8 trading days, then price breaks out above the trading trading range. This break is usually indicated by a gap up, or sometimes by a wide price fluctuation. The trendine is consistently upwards for the past weeks. But we also know that today's close, as well as last week's closing prices, is already approaching the 52-week high for Ayala Corporation. In addition, the stock is approaching the current resistance level, hence an alert to look for signs of increased selling pressure and potential reversal.

Our data source is the Philippine Stock Exchange through our online broker: BPI Trade.