it dawned upon me that i have been sharing the same points with some of my clients. Thus, i have decided to jot down some points for your reference and convenience.
These are very general questions and views. Ultimately the aim of this is to share different logic and perspectives of market participants so as to 'know your enemy to fight the battle better'.
Is it true that the higher the price, the better the shares?
No, not true. The share price is affected by the number of available shares in the market.
In lay man terms, think of it as 1 X $10 and 20 X $0,50. Both have the same valuation of S$10. Price is just a resultant of the number of shares in the market.
Why do traders want to look at STI first before buying/selling?
Since STI is made of around 30 blue chip stocks, it is normally used as a gauge to judge general stock movement.
Once again in layman terms, you will want to know what is the weather like before heading out in a boat for fishing. No one loves to be caught in a storm (selldown)
Why are there people still buying into the shares of loss-making companies?
There are 2 possible reasons to this.
1. there is a chance that the company may be bought over by another company. it is a gamble that the take over price might be higher than the current market price. Example the recent takeover of TigerAir by SIA.
2. Some traders prefer to catch the rebound and trade according to the trading flow. It is possible that when there are accumulated shorts buying back, closing the positions on the same day. Thus resulting in a wave of buying, pushing the price up.
Why 'Buy on rumors, sell on news.'?
When there are speculations, there will be some traders who will want to 'try their luck' and get some of the shares. Once the news is announced, and assuming that the share price does not move much, it is a natural tendency for the speculators to sell the shares. Before these speculators sell their shares, it is only logical to sell the shares before the price gets any lower.
Likewise on the same note, think of it as a game of musical chairs. When the hype and music is ongoing, the buyers will drive the price higher and higher. Once the music stops, aka when news is out, there is nothing to look forward to but to cash out the shares, taking whatever is left. Ideally, you should avoid being the guy stranded with no chair to sit on.
Of course perhaps in the long run, it may go higher. Still, it is better to 'take money first.'
Is rights issue a good thing?
This is subjective. Yet, overall it is normally not a good thing. Simply because rights issue will introduce more shares, and 'price is broken down by more shares', diluting the value of the existing shares.
Yet, if the company is doing rights issue for a positive purpose, rights issue may be a good thing.
Why do some traders are particularly interested in stocks that exhibited a horizontal line?
Personally I like to spot for such horizontal trends. It is a sign that there are some buying ups at a certain price. On the flip side, there is also a possibility that there is some dumping at a certain price. Once these buying/selling is over, the price would either move up or move down.
To handle such situation, I would check more on company fundamentals, charts, volume, and etc to make a guess what is the next possible movement. The picture below is an example of which im still monitoring.
Are charting softwares useful in helping to have a better trading accuracy?
I know some charting companies require subscribers to pay for some sophisticated charting software, promising them close to 100% wins.
Charts can help to watch for support and resistance price levels. Yet it does not determine the future possible movement of the shares. This is especially so for penny counters when there is a big buyer coming into the market, he can easily drive the price up, until someone were to sell it down or so.
It is a 'good to have' but not 'must have'. In any case, UOBKH trading platform comes with a charting software for reference. If there is such a charting software with 100% accuracy, we will all be very rich very soon.
Am you a Remisier? Is it true that Remisier is better than stockbroker?
No, i am not a remisier.
Both got the same job duties. Except the fact that Remisier is commission based.
I am an employee who is not commission based.
Happy weekends!
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