Moving Average Fundamental In Technical Analysis

Moving averages are one of the most popular tools for technical analysis. Before that, let's look what technical analysis is if you have no idea what it is. But if you have no idea what what stock is at all, you can read this post first: Stock Market 101. :)


What is Technical Analysis?

Generally, there are 2 types of stocks analysis method. The first one is called "Fundamental Analysis" where you analyze the stock based on the financial data (e.g. annual report). Few popular and useful methods that I mentioned in my previous post are

• Earning Per Share (EPS) Ratio 
• Price Per Earning (PE) Ratio

On the other hand, technical analysis doesn't look at the financial data at all. It analyzes the stock based on 2 things:

• Prices Move in Trends
• History Tends to Repeat Itself

It basically means that there are always 4 stages of stock cycle in any time frame as I mentioned in my previous post. Because of this 4 stages of stock cycle, technical analysis can make such prediction which cycles you're at and suggest whether you should buy or sell. Cool, isn't it?


What is Moving Average?

If you look at the technical analysis chart you always see this symbol MA, it basically means moving average. There are MA 10, MA 20, what do they mean? The number refers to days and it basically means 10-day and 20-day moving average respectively.  

Example: 10-day MA for APPL

Let's look at the fundamental calculation for 10-day moving average (MA 10):

First Average X    = (Sum of Day 1 until Day 10) / 10

Second Average Y = (Sum of Day 2 until Day 11) / 10

Third Average Z   = (Sum of Day 3 until Day 12) / 10

.... 

....

The first average X is at Day 10 and look back to the past for 10 days. So it basically reflects to the past 10 days average at that point. When you join the X, Y, Z together, you will get a line and this line is called 10-day Moving Average (MA 10) "trend line". So, if the line is moving upward,  it is upward trend. If the line is moving downward, it is downward trend. Simple right?

The good news is you don't need to calculate your own, most online chart (e.g. the yahoo technical analysis chart) allows you to plot the MA trend line. In general, there are 10-day, 20-day, 50-day, 100-day and 200-day moving average. It depends whether you're a short term or long term investor. For example, the larger the number (e.g. 200-day MA), it is usually used by long term investors. It also means that the longer MA will move slower than the shorter MA.


When Moving Averages Crossover...

When MA is used in pair, because of one is moving slower than another, it will have a crossover at certain point. When the fast line (shorter day MA) crosses over and above the slow line (longer day MA), it indicates a "Buy Signal" and similarly if the fast line is below the slow line, it indicates "Sell Signal".

Let's look at this example for Apple share, plotting the MA 20 versus MA 50. The MA 20 if faster line which is in green and the MA 50 is slower line in red.

• At crossover 1, MA 20 is below MA 50. Sell indicator, it tells you to sell!
• At crossover 2, MA 20 is above MA 50. Buy indicator, it tells you to buy!
• At crossover 3, Sell indicator...
• At crossover 4, Buy indicator...

You will need to look at which combinations of MA provide meaningful information to you. Basically you need to try and error for each stock because it works for one stock, it may not work for another stock.


Summary

I hope this is useful for you to understand the fundamental of technical analysis. I'm not sure how practical is this as I'm pretty new to this but I at least refer to technical analysis indicator for selling my company stock but sometimes I do not wait for the crossover to sell because I have already made enough money out of it. Sometimes, we shouldn't be too greedy especially in stock investment. :)

Some fundamental stock experts do not keen at all on technical analysis but in my opinion, I think we should look at both. Feel free to share your comment here if you have experiences on using technical analysis to make your decision in your stock investment! Do you find it useful?

[Update: April 21 2014]: Another very useful technical analysis tool that you can use is "Support & Resistance", you can find more about it here: How to Use Support & Resistance in Stock Investing?. 

Useless Features Review on Samsung Galaxy S3

This is not really a personal finance blog post but more on a product review which I haven't done for quite some time. I'm going to share with you my review (from user and practical perspective) on the Samsung Galaxy S3 that I bought lately. You may continue to read on you're interested...

Somehow not many people talk about  the negative side of this, so I will just start with this useless features review on Samsung Galaxy S3. Of course, this is merely from my perspective.

Useless Features

•  S Voice is completely useless. It seems cool, but I don't think it is effective for me to instruct my phone by voice as compare to conventional way. I can do it a lot more faster than not using the voice. Also, it is not practical in most of the time.

• Pre-installed softwares cannot be uninstalled and the only thing you can do is to disable them so that they won't run in startup. For example ChatON is a useless software by Samsung where now everyone uses WhatsApp.  You can't basically uninstalled them unless you root your device.

• Motion activation  is another cool but useless or less practical feature in my opinion. Well, the most useful motion feature is probably the "Turn over to mute/pause". if you really want to use it. The rest motion features are merely for showing off purpose.

• Multiple burst shot is cool but I think if you can capture with single shot, the picture quality is better. Unless, you really want to capture a keep moving object, then probaly the burst mode is good.

• Face detection to unlock screen is yet another cool but useless feature. It makes me unlock the screen slower. Guess it is another feature to show off!

What are the useful features? All the features that you can find out from web except with those that I mentioned above are useful enough. For example, the "Smart Stay" feature is pretty cool and also useful. It is very practical too!


Buy or Not Buy?

Overall, it is a good buy for me because it helps my life getting effective. Perhaps I have been outdated for too long with my windows mobile in HTC but if you really have cost concern, you should consider buying low-end Samsung smart phone which I think it serves an almost similar features. Good luck!

Malaysia is the most Sluggish Country in Southeast Asia

I can't help myself to blog about this here when I saw this article shared from a  facebook's friend which stated that Malaysia is the most sluggish country in Southeast Asia, ranked 10th "laziest" nation in the world. The original article is here.

In summary, here is the laziest country scoring based on the survey from "The Lacent"(i.e. TheLancet.com). where the highest the percentage is , the laziest the country is. I'm not sure how they do the survey but it seems like you need to pay for it to get the data.


Laziest Country Scoring

South-east Asia
Malaysia - 61.4% (ranked 10th in the world)
Indonesia -29.8%
Philippines - 23.7%
Thailand - 19.2%
Vietnam - 15.3%
Myanmar -12.7%
Cambodia - 11.2%

Top 3 in the World
Malta - 71.9%
Swaziland - 69.0%
Saudi Arabia - 68.8%


Rest of the Countries
China - 31.0 %
India - 15.6 %



Do you believe it?

The next question is do you believe it? Is Malaysia really that bad? The biggest slacker in South-East Asia? Ranked number 10th in the world? Can you believe it? My first impression was I tried to deny it but after some thoughts, I tend to agree with the survey based on my daily observation in my surroundings. But I could be wrong.

Here are what I observe

• University standard is getting lower and lower. For example, a basic fundamental of digital logic question, most graduated electrical or electronic student cannot answer that. What's going on? Forgot to tell you, some of them are first class student too.

• Younger generation cannot take pressure. They like to take short cut (e.g. expecting high increment with minimum effort). When they face challenge, they look for the way out. Is it Generation Y culture? or is it Malaysia problem?

• Top performer in a company is not really a top performer in a company. I have seen many cases in my company that the top performer is not because they're super good, it is because the rest are too worst! Also, can't find any better than them in the market too.

• Have a chance to talk to a first class oversea student from Vietnam who study in Malaysia. Her CGPA is 4.0 flat so I curious and  I asked how she did that. She just told me surprisingly Malaysia education standard is very low and students are very lazy, that's why relatively I'm the best. How true? But the above survey seems justify this.

• Older generation is also getting affected by the laziness culture. Take me as an example, I started to getting to slack more already as compared in the past. This happens to the people who are the same generation with me too. So old and new generation also lazy, what will happen next?

So, what is your take on this? How far do you believe this survey is true? What do you see in your surroundings? Do you see a similar trend that I see?

TakeAways from Private Retirement Scheme (PRS)

This post is specifically for Malaysian - our PM launched a new voluntary private retirement scheme (i.e. PRS) for all Malaysian! You can check the announcement here. Well, I think this  a good news. So, let's see what are my key takeaways from this announcement?


Key Takeaways

• You may ask what is the difference as compared to EPF? The obvious one, EPF is mandatory and PRS is voluntary.

• Tax relief is up to RM 3K as compared to EPF is RM 6K. Well, it is additional. What it means is if your tax bracket is 26%, you will able to save up to RM780

• Contribution frequency is flexible where else for EPF is monthly.  I think this is very similar to mutual fund investment where you can also setup a monthly investment if you want to.  

• You can only apply this PRS through approved PRS providers. They are AmInvestment Management Sdn Bhd, American International Assurance Bhd, CIMB-Principal Asset Management Bhd, Hwang INvestment Management Bhd, ING Funds Bhd, Manulife Unit Trust Bhd, Public Mutual Fund and RHB Investment Management Sdn Bhd.

• You can choose what funds to invest but I guess that is still based on the term and conditions of the PRS providers above. You should check with your agents. For EPF, you only have partial freedom. Remember you can opt for withdraw the money from EPF for investing in mutual funds?

• Withdrawal is similar to EPF, the entire fund in your PRS can be withdrawn when you reach your retirement age (55 years old - used to be 60), you die or you migrate to another country. For partial withdrawal for per-retirement, there will be 8% tax penalty. This is different from EPF where withdrawals can be made without penalty for specific purpose (e.g. pay for housing loan and education). Anyway, for detail you should check with your PRS provider to confirm. 

I believe the details on how to apply this PRS will be communicated by the PRS providers soon. For example, if you're using Public Mutual and I will expecting your agent will be contacting you about this scheme. If not, you can approach them assuming you're interested to apply.

I think I will go for this as it can help me on the tax relief. Will you? One risk that you must understand is the fund that you invest in may be losing money. To minimize such risk, I think the PRS providers will mostly offer those low risk funds rather than aggressive funds. So overall, I think this is safe to invest.

Donate Money Can Make You Rich?

When I was young, my brother told me the secret to rich is to make donation. The more you donate, the richer you’re. So I asked him what exactly the donation that you mean? Did he mean giving advices or consultations? No, the donation is a real donation here in a physical "Money" form, he said. Huh? Is that really make sense? It didn't seem possible to me at all.

I still do not have the answer until today because he didn’t really explain that to me. Perhaps he did not know the answer himself and read this information from somewhere else but have no idea why. But anyway, I have figured out the answer by my own but still not sure if this is the real answer and let's see if my answer makes any sense to you.


Why it can be possible?

How can it be possible by donating money can make you reach? I have been thinking and I finally come to a conclusion why it can be possible. The ultimate answer is you're in control of your money by donating money.


(1) You're In Control

The first thing that you may ask, what is the return in terms of money when you give away your money? No, you don't get anything physically. However, when you are able come to a stage that willing to donate your money, it basically means that you're in control of your money. The control here doesn't exactly mean that you're good in personal finance. The "control" here  means you are in control of your  "emotion" towards your money. In other words, your emotion is NOT controlled by your money and I think that is the first thing or fundamental that everyone of us should learn in personal finance
 

(2) Make Better Judgement

When you're in control of your emotion, you can make a better judgement.  When you can make a better judgement, you can make a better investment. When you can make a better investment, you will get your higher return and in long term you will become rich. That sounds simply but I believe that is true. A truly rich people always have a very high Emotional Quotient (EQ). If you see those riches who have very low EQ, I bet their rich will not able to sustain and I have seen many examples as such.


Conclusion

In short, the fundamental of becoming rich is really on controlling your emotion! However, when you tell this to anyone, no one will get it. If this concept is easily be understood, then everyone will be good in manage their money already but this is not the case. You and I know that.

Therefore one clever fella came out this idea, instead of telling everyone that controlling emotion is the fundamental of becoming rich, he/she is telling everyone that donating your money can make you rich without telling the real intention that is when you start to able to let go the money, you're in control of your money rather than being controlled. So, people follow without releasing the fact that they're increasing their EQ and eventually they will get rich by donating.

It seems ridiculous but what do you think? The way I look at this, the only thing to argue here is do you think a person who is willing to donate his/her money means that they're better in control of their emotion? 

My First Feng Shui Criteria Before Invest in Property

In my previous post, I mentioned that there are 4 different types of Feng Shui believer and I'm basically the "Type 3" of Feng Shui believer who makes a lot of common sense out of Feng Shui. However, regardless of you believe in Feng Shui or not, the property price will still be affected by Feng Shui. So, you still cannot completely ignore Feng Shui.

What I would like to share with you is  my first and most common Feng Shui or environmental factor that I look at before I invest in a property. Assuming I want to buy a residential property in a township, the first thing that I look at is how many different routes can enter to the township. It must have at least 2 different routes enter into your property area and the more the better. Let's see the following maps to illustrate this:


Example A: 1 route to the township

It is not good because there is only 1 way or 1 route to the township. Assuming if any thing happen that blocks the route, you have no way to go out or you have no way to go in. You basically stuck there!

Example B: 2 routes to the township

This is better than example A because there are 2 different routes to township and it is preferable at different entrance as shown. If it is a small area, one entrance is fine too. Of course, if there are more different routes and different entrances to the township, it will be better.


I'm not sure if that makes sense to you but this is the first thing how I evaluate a property before I decide to buy a property. I will usually try to avoid a property area with only one route and one entrance, and if property that has more than 2 routes entrance, I will usually give it higher weightage in my decision making.

Let me know what you think, what is your first "Feng Shui" or environmental criteria before you decide whether you want to invest in a property? What is the first thing that you look at?

Try to Avoid Using "According To"

I attended a seminar last week and the speaker basically over used the words "According To". I think this is very bad, but of course he will disagree. The fundamental problem is you lose the accountability if you use too many other people statement to make it a point. It ends up your audience will think like this - since there are so many "according to", why do I still want to listen to you? I may as well listen to the person that you rely on.

You can use according to, but try to give your comment or argument towards the statement that made by another person whether you disagree or agree and also tells the reasons why. Please don't ever use that to support your idea. The even better what you can do is re-paraphrase without using the  words "according to" because somehow I just feel that the words "according to" try to push away the responsibility to someone else. Don't you think so? For example, you can said something like this: Person X says this too and I totally agree with that because [reason1], [reason 2] and [reason x] rather that using the words "according to".

Even from your day-to-day work, whenever you give a talk, speak to your clients or even talk to your boss, you should always try to avoid using "According To". This is basically to make sure all the words that come from your mouth, you're responsible for that and have 100% confident on it. Then, people will only trust you and believe in you.

So, what do you think? How often do you use the words "according to"? In fact, it is very "nice words" to use especially if you want to push away responsibility and you do not want to own your words, isn't it?