TOP 5 THINGS YOU MUST ABSOLUTELY KNOW BEFORE TRADING SINGAPORE STOCKS. by

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1 TOP 5 THINGS YOU MUST ABSOLUTELY KNOW BEFORE TRADING SINGAPORE STOCKS by Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 1

2 General Disclaimer & Warning SingaporeStocks.com.sg is in the business of providing directory services or forums for discussion whereby Singapore investors can share information with each other and in so doing become better investors. The services information and data made available on SingaporeStocks.com.sg including facts, views, advice, analyses, opinions and recommendations of individuals and organisations are for general information purposes only. It is not intended as investment advice and must not be relied upon as such, SingaporeStocks.com.sg and its third party information providers are not giving or purporting to give or representing or holding ourselves out as giving personalised financial, investment, tax, legal and other professional advice. Any facts, views, advice, analyses, opinions and recommendations expressed or made available by any individual or organisation are those of the respective author(s). SingaporeStocks.com.sg cannot and do not endorse, and cannot be responsible for such facts, views, advice, analyses, opinions and recommendations expressed, or advocate any commercial dealings in any securities, investments or classes of securities or investments nor does the inclusion of a link to other web site(s) or resources imply any form of endorsement by SingaporeStocks.com.sg. You must always seek the relevant professional advice before otherwise making any such financial, legal or commercial decisions. SINGAPORESTOCKS.COM.SG DOES NOT PROMULGATE OR PUBLICISE ANALYSES OR REPORTS. ANY ANALYSES OR REPORTS THAT MAY APPEAR ON THIS WEBSITE ARE MERELY INCIDENTAL TO SINGAPORESTOCKS.COM.SG'S NORMAL FUNCTIONS. SingaporeStocks.com.sg, its related companies, and its owners, directors, officers, agents, employees or contractors do not (a) give any representation or warranty as to the reliability, accuracy or completeness of any information on this Website; or (b) warrant that any of the functions contained in any information on this Website or your access to this Website will be uninterrupted or error-free. All rights reserved. Unauthorised resell or copying of this material is unlawful. No portion of this document may be copied or resold without written permission. SingaporeStocks.com.sg reserves the right to use the full force of the law in the protection of its intellectual property including the contents, ideas, and expressions contained herein. Copyright SingaporeStocks.com.sg Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 2

3 Must-Know #1: Tips for Choosing a Brokerage Firm A brokerage firm is a company that serves many stock brokers who specialize in stock trading, and are there to direct you in making a trade. There are two main types of brokerage firms: full-service brokerage firms and discount brokerage firms. But before you choose a firm type, there are several things that you need to know about yourself: Know your financial goals. You need to know how much money you can afford and are willing to use for investing. Since different brokerage firms have different minimum requirements for a starting account, knowing your financial goals will help you narrow down your firm list. Know your knowledge background. It is important for you to recognize how much knowledge you have about stock trading and investing because it helps you decide in between a full-service firm or a discount firm. Know your plans for trading. Do you have any idea of how many trades you want to make per day, per month, or per year? How much time can you devote on making trades? Answers to these questions will help you select the most suitable firms and services. Summary - Questions to ask yourself before choosing a brokerage f irm: 1. How much money will I use for stock investing? 2. How much do I know about stock trading? (Some basic online research can help you realize). 3. How much time will I spend on stock trading? 4. How frequent do I want to make a trade? 5. Do I want value stocks, growth stocks, or both? Value Stocks: stocks priced based on their fundamental values such as dividends, earnings, sales etc. Growth Stocks: stocks that appreciate in value and usually yield a higher than average growth. 6. Do I want a median to full range of financial service or do I want to trade more on my own? 7. Do I have a reliable access to the internet and am I comfortable using it? Last bit of advice when choosing a specific brokerage firm: Make sure you at least talk on the phone, if not interview in person with one or two brokers from firms that you are interested in. It is important that you can talk comfortably and honestly Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 3

4 with your broker(s). Try to get references from your friends, relatives, or colleagues for professional brokers that they know. Which Type of Firm Should You Choose? As we introduced in the previous page, there are two types of brokerage firms: full-service brokerage firms and discount firms. A Full-service, also known as a traditional brokerage firm offers one-on-one services. Brokers from those firms provide specific advice to investors about what to buy and sell based on their comprehensive and extensive research. In addition, they also prepare portfolios for their investors, which keep track of all the stocks, bonds, mutual funds, or any investments that they own. Full-service stock brokers are generally available through phone calls or s if the investors need any guidance to buy or sell for your account. Most of them also offer other financial services and they get paid mostly, if not all, through commissions. This being said a full-service brokerage firm charges a high commission rate and requires a higher minimum investment to open an account. Full-service brokerage firms are for those who have a substantial amount of money for investing because the firms will do solid and valuable research to offer investors beneficial opportunities. However, if the investors investment is not large enough, the high commission along with other fees may add up their potential returns. In this case it would be wiser to choose a discount firm instead. A discount firm offers few basic services such as limited advice and research with much lower commissions. However, the firms may charge a minimum fee for each trade investors make. Discount brokers offer little or no investment advice. They simply execute orders when investors decide to buy or sell an investment. Furthermore, instead of having a private stock broker, investors will do most of their trading online. If they choose to call in their order, they will be assisted by the first available broker. Some discount firms are called deep discount firms because they are just online services that give their customers total control of trading. As a result they offer the lowest service fee with no minimum investments. The two types of discount firms are suitable for investors who are confident about trading, who like having low or no minimum investment, and enjoy online trading using their own knowledge. Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 4

5 Must-Know #2: Commission Rates in Singapore Brokerage Firms In Singapore, brokerage firms are usually both full-service and discount. In other words, they offer advisory trading services if investors need them even for online and telephone trading. However advisory services charge a much higher commission rates than non-advisory services. In addition, there is a minimum commission for each trade that differs from firm to firm. Furthermore, in order to encourage higher value trades, Singapore brokerage firms often charge lower commission rates as investors trade more money. However, additional fees such as trading access fee can be charged by brokerage firms. Here is an example of a brokerage firm that offers internet, mobile, and telebroker trading services. Firm Name: Phillip Securities Firm Website: Tel: (65) poems_enquiry@phillip.com.sg POEMS Services (SGX shares only) Value per Contract Non-Advisory Advisory Online Phone Online Phone First 50K 0.28% 0.375% 0.33% 0.50% Next 50K 0.22% 0.30% 0.25% 0.40% Thereafter 0.18% 0.225% 0.20% 0.25% Minimum S$25 S$40 S$25 S$40 **Plus Clearing Fees of 0.04% (maximum of $600) & SGX Access Fee of % on the contract value and GST on brokerage, Clearing Fees & SGX Access Fee. Most Singapore brokerage firms charge a commission rate of 0.275%-0.28% for online trading services without advisory assistance. For offline services the commission rate is usually 0.40%- 0.50%. Commission rates with advisory services are always higher. Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 5

6 List of Singapore Brokerage Firms Below are a list of eight well-known Singapore brokerage firms and their basic information. **Note: Additional charges other than commission rates can be found on the website provided. Name Contact Trading Method Starting/Min Comm. UOB KayHian (65) cs@uobkayhian.com Online Offline 0.275% or S$ % or S$40 OCBC Securities Singapore Exchange (SGX) LimTan Securities AmFraser Securities DBS Vickers Securities DMG Securities Kim Eng (65) (65) (65) mail@limtan.com.sg (65) esupport@amfraser.com.sg (65) info-sg@dbsvonline.com (65) clientservices@dmgaps.com.sg (65) helpdesk@kimeng.com Online or Mobile Advisory Online or Mobile Online or Mobile Advisory Online Mobile Online Mobile Advisory Online Advisory Mobile Online Offline Online Offline 0.275% or S$ % or S$40 Fully negotiable for all transactions 0.28% or S$ % or S$ % or S$ % or S$40s 0.28% or S$ % or S$ % or S$ % or S$ % or S$ % or S$ % or S$ % or S$40 For Directory of Securities Members please go to: Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 6

7 Must-Know #3: 10 Biggest Mistakes Beginner Traders Make Trading is NOT easy. There are many factors investors look out before making a trade. A seemingly simple small mistake can lead to a big loss. Beginner traders often make more mistakes either because of their misunderstanding or lack of understanding of the market. Below are ten most common mistakes beginner traders make. They may be something you haven t done or something you already felt regret for. However, understanding the mistakes now can keep you alert and help you avoid making them in the future! 1. Trading too large Can you fight greed? Many beginners make the mistake of trading too large because they think they can get rich by winning one trade but instead they lose most, if not all of their equity in the process. Keep reminding yourself- I m just a beginner trader, I shouldn t be overconfident! If you still can t control yourself, the best solution is to reduce your account balance so you won t be able to make a large trade. 2. Following the News Following the news is the worst trading strategy! Things written on the newspaper are very likely to be either exaggerated or altered to influence the public. News can be a reference of what the government or public will react to certain change or situations. But remember to never take it as a trading signal. 3. Not having a trading plan If you do not have a trading plan, you can be very lost and confused when you need to make trading decisions because you don t know how much you can trade and what you will do after making the trade. Therefore, having a concise trading plan can help you build your wealth. Plan out how much you will trade in the next week, month, and year; how many trades you want to make per week, month, and year; how many markets you want to trade in etc. This way, by having a solid idea of what you are doing, you will be able to have full control of your trades. 4. Listening to the experts For beginner traders who lack confidence, they often think they don t know anything and desperately want to find advice from people whom they think are experts. Remember, the tips you heard from your friend are very likely to be some casual comment of a taxi driver. 5. No emotional control It is relatively difficult for beginners to control their emotions when they just start trading. Just remember don t go too extreme, whether it s fear, greed, impulsion, or impatience! Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 7

8 6. Not being able to exit a trade fast enough Often times beginner traders are too emotionally attached to certain stocks, believing that they will receive more rewards if they stay with the stocks. However they didn t realize that the longer they stay the more can go wrong. As a beginner, the best way to avoid substantial losses is to take the profit and move on quickly, or cut loss fast when you realize that the trade is going wrong. 7. Trying to predict movements Many beginner traders think the way to win money is to forecast price movements in advance. They do not realize that with uncertain and unpredictable changes in trends, simply guessing prices will just give them a higher chance of getting a loss. 8. Fighting against the market trend Never fight against the market trend! Although the market trends are not to be followed precisely, it is never a good idea to go against strong market trends. Instead, always look out for long and intermediate trends of the individual stock, the sector of the stock, and the market. Understanding these trends can give you a basic direction of what to do next. 9. Not doing company research Beginner traders do not realize how valuable it is to know a company s key financial information before buying their shares. Even for the well-known companies, it is important to do some research about their growth, debt, and future potential to know which way the share price will go. 10. Not choosing a brokerage firm carefully New traders often desperately sign up for any brokerage firm just so they can make a trade. They have no plan about how they ll make a trade, whether they need a lot of assistance or not, and how much are the commission rates and additional charges. Two brokerage firms can charge significantly different even for the same plan. Therefore beginner traders should definitely spend some time looking for a reliable brokerage firm. Compare the services offered, commission rates, and reviews for brokers for each firm before making a decision! Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 8

9 Must-Know #4: How to Open a Stock Trading Account in Singapore Before you start making trades online or offline you will need to open a stock trading account. Do not panic, opening a stock trading account nowadays is fairly easy and fast. STEP 1: Go to the stock brokerage firm that you have chosen to open a stock trading account. Here s a list of documents required for opening a stock trading account: i. Identification card (for citizens and permanent residents) or; Passport (for non-singaporean) or; Malaysian IC (for Malaysians) ii. Work and re-entry permits (for foreigners working in Singapore) iii. Bank account number iv. CPF investment account number (if applicable) v. CDP account number (if applicable) By now you should have a clear idea of which brokerage to go for. If you haven t done any research on brokerage firms, it s time to do so NOW! Note: CDP applicants must be at least 18 years old. For more information, please go to: STEP 2: Open a Central Depository Pte Ltd (CDP) account at Singapore Exchange Center (SGX). Your brokerage might do this for you already, but if not, then you can just go down to SGX and open your CDP account yourself easily. Address: No.4 Shenton Way #02-01 SGX Centre 2 Singapore Tel: (65) STEP 3: Go to the brokerage firm website and open an online trading account. Once you start making trades, you ll find the convenience to make online transactions. Thus setting up an online account is absolutely necessary. In addition, holding an online account allows you to use Direct Crediting Service (DCS), which enable CDP to directly credit any Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 9

10 dividend payments or cash returns by the companies (you have invested) into the bank account specified by you. Furthermore, if you haven t realized, commission fees for trading online is a lot less than trading offline (0.275% vs. 0.5% with min commission of S$25 vs. S$40). Make sure you have a secure password and password questions because they are there to protect your account against thieves and hackers. STEP 4 (Optional): Electronic Payment for Shares (EPS) Although not required, it is a good idea to apply for EPS because it allows you to pay for your shares through the internet. It also transfers your share credits into your account automatically, and so is a great convenience to you. Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 10

11 Must-Know #5: Buy or Sell? Making Decisions using FA and TA There are two analytical models investors use to determine which stocks they should buy and at what price. Fundamental analysis (FA) provides the background information about a company such as its economic history, debt, health and etc. Such information gives investors a basic understanding of the company and the value of its shares. Technical analysis (TA) provides information reflected on a company s stock market. In other words it shows how the company s stocks were doing and trends that help investors predict the future market. Both models are useful in picking a stock. Fundamental Analysis When investors want to buy a share of a company, it is important for them to know its financial condition, interest rate, debt information, competitors, and markets. Those who are fundamental analysts use both qualitative and quantitative data to evaluate a company s performance, which help them to value its stocks. Factors such as revenues, interest rates, future growth, and profit margins are very useful in determining a company s underlying value and its potential for future growth. The purpose of fundamental analysis is to help investors figure out a value that they can compare with the security s current price, so they can determine whether it is underpriced, which they will buy, or overpriced, which they will sell. Technical Analysis Technical analysis is another stock analytical model in which investors use past market price and volume movements to forecast the direction of prices. Those who are technical analysts often ignore the nature of a company, solely focusing on its market activity through producing chart patterns. Technical analysis does not provide absolute predictions for the future. However, it anticipates what is likely to happen to prices over time. Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 11

12 There are many chart patterns that help investors figure out where prices are going. Check them out if you want to choose a stock using technical analysis. Double Top (Reversal) Double Bottom (Reversal) Head and Shoulders Top (Reversal) Head and Shoulders Bottom (Reversal) Falling Wedge (Reversal) Rising Wedge (Reversal) Descending Triangle (Continuation) Measured Move - Bearish (Continuation) Cup with Handle (Continuation) Rounding Bottom (Reversal) Triple Top (Reversal) Triple Bottom (Reversal) Bump and Run Reversal (Reversal) Flag, Pennant (Continuation) Symmetrical Triangle (Continuation) Ascending Triangle (Continuation) Rectangle (Continuation) Price Channel (Continuation) Measured Move - Bullish (Continuation) Visit for more information about chart patterns, indicators, and technical analysis in general. Top 5 Things You Must Absolutely Know Before Trading Singapore Stocks Page 12