6/3/2008

RIDING THE TRENDS

For ATIC Ho Chi Minh City 2008

Presented by: Benny Lee, NextVIEW

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

INTRODUCTION
1996 :
• Got into the stock market frenzy while in college
• Started attending some technical anaysis seminar
• Got first charting software, MetaStock

1997 :
• Started trading the futures market in 1997.
• Was against the trend, Lost heavily

1997 – 1999 :
• Worked in a Recruitment Agency (Need to pay back debts!).
• Started to study about trading. Discovered and learned mistakes Benny Lee
• Developed trading strategies and traded lightly.
• Learned about Automated Trading Strategies

1999
• Started trading privately. Stocks and Futures, Malaysia and Singapore.
• Started learning TradeStation and Omnitrader.
• Training Consultant to a Software Company.
Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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INTRODUCTION
2004 till present:
• Still trading privately
• Joined NextView Group as Regional Trainer, later as Chief Market Strategist

Training/Coaching Experience (More than 8 years):

Professionals and Retail Investors in Malaysia, Singapore, Thailand,
Vietnam, Pakistan and Hong Kong

Speaking Engagements (More than 6 years):

Malaysia, Singapore, India, Indonesia and Thailand
Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

INTRODUCTION

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

CHARACTERISTICS OF MARKETS

Understanding types of markets

Markets literally means the price action in a specific period of time. A stock
price can move in to different types of markets in different periods of time.

There are basically 3 types of markets:

Trending Market
Sustained large increase or decrease in price over a significant period of time characterizes
a trending market.

Directionless / Trading Market

A Directionless/Trading (also known as Choppy) market is characterized by smaller,
insignificant up and down movements in price, with the general movement sideways.

Volatile Market
A Volatile Market characterized by sharp jumps in price. This can happen in any period of
time.

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

INDICATORS TO IDENTIFY TREND

How do you identify a market ?

THE MOVING AVERAGE

2 – 30 day moving average – Short term trend

31 – 60 day moving average – medium term trend

61 above day moving average – long term trend

Trending market
When price stays above/below the moving average

Choppy Market
When price crosses the moving average frequently

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

INDICATORS TO IDENTIFY TREND

Bearish Bullish

150 day EMA

- Long term

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

INDICATORS TO IDENTIFY TREND

10 day EMA
- Short term

TRADING

bull bull bull bull bull bull

bear bear bear bear bear bear bear

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

INDICATORS TO IDENTIFY TREND

TRENDING MARKET
Or
TRADING MARKET ?

30-day moving average

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

INDICATORS TO IDENTIFY TREND

TRENDING MARKET
Or
TRADING MARKET ?

30-day moving average

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

TRADING DECISIONS WITH INDICATORS
Buy on Up trend Reversals Sell on Down trend Reversals

Using the Moving Average

SELL

Moving average

BUY

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

TRADING DECISIONS WITH INDICATORS

$165

60 day moving average

$75 Profit of $90 (120%) in 8 months

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

TRADING DECISIONS WITH INDICATORS

Chart with 30 day exponential moving average

What is your anticipation of the below price action ?

1 2 3

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

TRADING DECISIONS WITH INDICATORS
What is your anticipation of the below price action? - ANSWERS

1 2 3

WHAT IS THE PROBABILITY OF WINNING A

TRADE FROM AN INDICATOR ?

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

TRADING DECISIONS WITH INDICATORS

Moving Average weakness

- When market is trading

30 EMA

Whipsaws

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

TRADING DECISIONS WITH INDICATORS

CHARACTERISTICS OF A TREND-FOLLOWING STRATEGY

STRENGTH
HIGH PERCENTAGE ON WINNING GAIN
LOW PERCENTAGE OF LOSS AMOUNT

WEAKNESS
20-30 % WINNING TRADES (WIN ONLY 3 OUT OF 10 TRADES)
HIGH CONSECUTIVE LOSSES

THE ULTIMATE OBJECTIVE OF A TREND-FOLLOWING TRADER IS TO MINIMIZE

THE LOSSES DURING SIDEWAY MARKET AS MUCH AS POSSIBLE WITH
EXTRA CONFIRMATIONS

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

BETTER INDICATION WITH ADX
IMPROVING THE ODDS WITH DMI/ADX INDICATOR
Developed by Welles Wilder (Developed RSI as well) is an indicator that identifies
trend strength of the trend.

The DMI Indicator consists of 3 lines.

Line 1 = Plus Directional Index (PDI)

Line 2 = Minus Directional Index (MDI)

Line 3 = Average Directional Index (ADX)

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

BETTER INDICATION WITH ADX
THE DMI CHARACTERISTICS

The Plus Directional Index (PDI)

The PDI summarizes upward trend movement.

The Minus Directional Index (MDI)

The MDI summarizes downward trend movement.

Bullish : When the PDI is above the MDI

Bearish : When the PDI is below the MDI

The Average Directional Index (ADX)

The ADX indicates whether the market is trending (Strong trend) or ranging (weak trend).

Strong Trend (Trending) : ADX turns upwards, very strong if above 25

Weak Trend (Ranging) : ADX turns downward

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

BETTER INDICATION WITH ADX

Up trend reversal

Down trend reversal

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

BETTER INDICATION WITH ADX

PDI and MDI with ADX

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

BETTER INDICATION WITH ADX

• THE ADX INDICATOR CAN BE USED AS A GUIDE TO

DETERMINE TREND STRENGTH

• USED WITH OTHER TECHNICAL INDICATORS TO

CREATE SHORT OR LONG TERM TRADING PLAN

• COMBINE WITH OTHER TECHNIQUES SUCH AS MONEY

MANAGEMENT AND RISK MANAGEMENT TO CREATE A
TRADING STRATEGY

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

RIDING THE TRENDS

ADX ON VNINDEX

+50 (5%)

+500 (90%)

+200 (58%)

153% or 315% on
compounding basis

Copyright © 2008 by Benny Lee, NextVIEW Investor Education (www.thenextview.com)

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RIDING THE TRENDS

THANK YOU!
I wish you all success in
Investment
benny@thenextview.com

Copyright © 2008 by NextVIEW Investor Education (www.thenextview.com)

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