Monday, 3 June 2013

03-Jun-2013 CSE Trade Summary

Crossings - 03/06/2013 and Top 10 Contributors to Change ASPI
Following Stocks Reached New High / Low on 03/06/2013

Quote for the day

"With every effort, I learned a lot. With every mistake and failure, not only mine, but of those around me, I learned what not to do. I also got to study the success of those I did business with as well. I had more than healthy dose of fear, and an unlimited amount of hope, and more importantly, no limit on time and effort... The point of all this is that it doesn't matter how many time you fail. It doesn't matter how many times you almost get it right. No one is going to know or care about your failures, and neither should you. All you have to do is learn from them and those around you because.. All the matter in business is that you get it right once. Then everyone can tell you how lucky you are."-  Mark Cuban

Sri Lankan shares slip from 1-week high; Foreigners buy

COLOMBO, June 3 (Reuters) - Sri Lankan shares slipped on Monday from their one-week high hit on Friday in thin trading, as retail investors booked profits in banking and hotel shares, but foreign buying in blue-chip companies helped an overbought market resist further fall.

The main stock index edged down 0.18 percent, or 11.38 points, to 6,451.68. It had closed at 6,463.06 on Friday, the highest since May 23, Reuters data showed.

Foreign investors accounted for around 54 percent of the day's turnover of 750.45 million rupees ($5.93 million), which was below this year's daily average of 1.05 billion rupees.

The bourse saw a net foreign inflow of 342.3 million rupees, extending year-to-date inflows to 14 billion rupees.

"The market is running on foreign buying. We will see continuous foreign buying with a bit of corrections," said a stockbroker asking not to be named.

The market's 14-day Relative Strength Index (RSI) was still in overbought territory, at 75.673 on Monday and has been above the upper neutral level of 70 since April 16, Thomson Reuters data showed.

Retail profit-taking pulled the banking index by 0.18 percent down, led by Commercial Bank of Ceylon which fell 1.05 percent.

Analysts, however, said falling interest rates helped investors to be still optimistic about the market.

The island nation's central bank unexpectedly cut its key monetary policy rates by 50 basis points on May 10 to boost economic growth in the face of subdued demand and the market interest rates have been falling since then.

The rupee ended weaker at 126.20/55 per dollar from Friday's close of 126.45/50 on importer and bank demand for the greenback, dealers said.
($1 = 126.5250 Sri Lanka rupees)

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

3 Rules for Safe Trading Strategies

Rule 1 - Never trade with borrowed money.

It's called "leverage" or "margin." Your trading strategies use money you borrow from your broker. Some people even max out their credit cards, or take out home loans. Don't do it!

It sounds so tempting -

*Put up only a little money. Your broker puts up the rest. * You make bigger profits. Get returns on the borrowed money as well as your own.

Until the roof falls in -

* Losses are multiplied as much as profits. If you lose, your loss is much bigger.
* If prices go down, the stock you bought with borrowed money is no longer worth enough to be collateral for the loan.
* Your broker can demand more money as collateral. That's a "margin call."
* If you don't have it, he can sell your stock.
* You lose almost everything.
* "Margin calls" can wipe you out.
* Meanwhile, you have to pay interest on the loan.

Buy shares with your own money, and you can ride out a price dip. Buy shares with borrowed money, and a price dip gets you a margin call. The added profit potential is more than canceled by the added risk.

Smart trading strategies are safe trading strategies. Don't use "leverage."

Rule 2 - Always take part of your winnings off the table.

At a Las Vegas casino, if someone wins at craps, they might "let it all ride." They keep betting everything they have - what they came with and what they've won. You know the end of the story. They win big - until they lose it all.

Using trading strategies like a Las Vegas gambler is a recipe for disaster.

People think "big trades make big money." They want to do the biggest trades they can. So they pile all their winnings into their next trade.

* That works until they lose. Then they lose big because they "let it all ride."
* An investor's job is to lower his risk. The lower his risk, the closer he gets to safe money.

The best trading strategies grow your portfolio slowly.

* Re-invest part of your share trading profits. 50% is a good amount.
* Set aside the rest. It will keep you safe in hard times.
* Take 50% of your profits even if you don't want to close a trade.
* With a $10,000 profit, take $5,000 immediately, and leave the rest invested.
* The $5,000 you saved cushions you against a later fall in the stock.

Rule 3 - Don't buy more when the price is falling.

What are your trading strategies when the price falls?
* Panic and sell at once - always bad.
* Hold on and hope - always bad.
* Stick with the Exit Strategy you decided in advance, and sell if and when the price falls enough - smart.
* Buy more - often bad.

Buying more when the price is falling feels smart -
* Lower your average cost.
* Get more of a good stock.

But remember that smart trading strategies are safe share trading strategies. Buy when the price is falling and you raise your risk.
* Increasing the size of your position raises your risk - automatically.
* The falling price gives you negative feedback about the stock even as you raise your risk.
* "Markets can stay irrational longer than you can remain solvent." ~ John Maynard Keynes.
* You assume the stock will bounce back soon. It may not.

Most people buy more of a falling stock because they don't want to be wrong. Don't let ego ruin your trading strategies.
By Robert Rubin

Do You Run With the Stock Market Herd?

Finally you have some extra money that you can call your own above that required for living expenses. Your extra money is true risk capital as you could lose it and not have to adjust your lifestyle.

Naturally, you want to see your extra money grow.

At today's low rates of interest saving your money in a bank doesn't entice you as it offers too little growth potential. The interest return is even below the inflation rate so you are a sure loser. You want something that gives a little more risk, with the hopes of having a much larger financial return. You turn to the stock market.

But wait! Are the risks involved in investing in the stock market worth the potential returns? Investing is a good tool to increase you money, but you have to keep an open mind and know what to look for.

Investing in stocks is a more risky business than many investors realize. However, there are some risks that fortunately, you can control.

For example, you must guard against investing in "hot" stocks that have already had a big run up in price level. True, some investors became wealthy by investing in "hot" stocks such as the "dot-com" bubble in the 1990s. Those who sold out near the highs, that is.

When the initial buzz around "hot" stocks begin to slide, so does the value of your investment. And fast.Don't forget the idea is to buy low and sell high, not to buy high and hope that an army of fools come along to buy even higher.

Once they fall, the "hot" stocks really fall hard in a short period of time. This means losing a big chunk of your money as will others like you who invested in these stocks. If you really need to invest in these stocks, you have to keep a constant eye on them and sell them when they start to level off or drop below a certain level.

To avoid such risks, some say that you should diversify your portfolio. But not too much if your funds are limited. Basically, to diversity means buying a little bit of several different types of stocks. In that way, if one stock gets down, another one of your stocks might be up and will help you recover your losses.

It is a good idea to have some stocks in different sectors, such as the technology sector, financial, telecommunications, biomedical, and consumer corporations. In time, you could add to your portfolio with precious metal and diamond indexes, and some general investment funds.

Another school of thought says it is better to have a highly selected basket of growth stocks and then to watch that basket like a hawk. Personally I think that this approach makes more sense, especially if you are starting out with limited funds, as a broad portfolio of stocks in many different sectors will tend to track the overall market, not out perform it.

In addition, there are companies that offer "safety stocks". It may be a sound decision to have shares of companies such as this in your portfolio. This is because such stocks most often offer a slow and steady growth, thus giving you an assurance of being profitable over the long term with your investments.

Do not rely on tips saying that this stock is "going to be big" and the like. These tips are often unfounded, and these stocks are almost always totally manipulated. Investing in these stocks might give you a higher short term return but in the long run, these stocks will just give you worries. Check relevant websites to see how your stocks are performing.

Investing in stocks can be very profitable but you do have to work at it to stay on top of the stock market. The best stock investments of all are those that are made after a bear market has run it's course. Then you can invest in top flight companies whose shares have reached very cheap prices after being dragged down by the bear market.

PE ratios at the bottom of bear markets usually reach levels of 5 or 6. Compare that to the present PE ratio of about 20 and you can see that today stocks are not cheap.

Unfortunately, most investors can not bring themselves to buy at extreme lows as market sentiment at that time is completely negative and most people have a herd instinct that they can not overcome. When running with the herd fear overcomes judgement and they are much more likely to be sellers at important lows rather being able to overcome their fear and to be buyers.

The same type of problem occurs with the herd at market tops. Then the herd is so optimistic about the outlook for the stock market that they forget about prudent evaluations of a stock and will pay almost any price to get on board.

To be a successful stock investor you must be able to think for yourself and cut away from the herd mentality. You also need a lot of discipline so that you can patiently wait for good stocks to reach extremely attractive price levels before adding them to your portfolio. When you buy shares in good solid companies at cheap prices over time good things are going to happen to the value of your portfolio.
By: Gerald Greene

Quote for the day

“There are more opportunities today than there have ever been, but - and this is the biggest bit - if people don’t recognize them, can’t exploit them, don’t have the capacity, the education, the confidence and the self-belief, then it don’t matter how many opportunities there are.”- Tom Hunter