Sunday, May 17, 2009

FKLI- a way to go in bearish market

What is Kuala Lumpur Composite index Future or known as FKLI? It is an stock index future contract based on KLCI (Kuala Lumpure Composite Index) performance. KLCI is a capitalization-weighted stock market index introduced in 1986 of 100 companies traded on the Malaysian stock market. Now we usually refer these stocks as blue-chip stocks. In simple word when we are buying FKLI we are buying overall health of the Kuala Lumpur Stock Market. So, if we are closly monitor 20 largest capitalized stocks in KLCI, we can easily get a very good idea of how the index is acting or is going to act.

FKLI is a smart and leveraging trading tool for us if we want to win in both bullish and bearish market. Because we can buy it down or buy it up with a very small margin amount, which is normally 5% to 15% of the contract value. The amount is vary depend on which future brokerage you have. It can range from Rm3,500 to Rm5,800 per contract. It is subject to margin calls everytime if it falls below the initial margin amount you have paid for any positions still open. The margin payment is a performance bond or good faith deposit to ensure performance of the contract (i.e. cash settlement of the contract) when the contract matures. So, some of the brokage will ask you to deposit Rm10,000 into your future account then they just deduct the amount from your account to sustain your future contract.

The contract value of a FKLI contract is the price of the futures multiplied by RM50. For example, if the price of May, 2009 futures contract is 1000, the contract value is RM50,000 (1000 x RM 50). Few Investments capitalize on the power of leverage more than futures. Of course, bear in mind that leverage is a 2-edged sword. It can work very quickly against you if the market does not go your way. And it is possible that your loss in a day can exceed the margin you have on deposit. So, I would advice to use live stop in the region of 20:1, giving more bang for each $$ we spend.

We can sell out our contract at any time. The Final Settlement Value shall be the average value, rounded to the nearest 0.5 of an index point (values of 0.25 or 0.75 and above being rounded upwards) of the KLCI for the last half hour of trading on the Exchange on the Final Trading Day excepting the highest and lowest value. 0.5 index point valued at RM25.

There is a transaction fees for each future contract you buy. The transaction fees is vary depend on your future brokage. It can range from Rm60 to Rm85 per transaction or contract. For example, if you buy FKLI at 1000 and it rise to 1200 then you earn 200 x Rm50 = Rm1000 -Rm85 (transaction fees) you earn Rm915.

My advice is before you want to gear on and enter into FKLI, you must equip yourself with this healthy mind concept, that is you must learned to trade in FKLI with your spare money which you might not need it for somtimes and always put that amount of money in your future account and only take out the profit you have generated from it. Peace of mind is very important, we want to have fun in our happy trading life right! :)

Thursday, July 24, 2008

The traditional education system never taught us how to be rich but instead brainwashed us into becoming poor. We are taught beliefs like "study hard, get good grades and a good job and you'll be set for life!" , "investing is risky" , "don't act smart", "don't play with stocks or you'll get burn", "don't be so money-faced" or "don't be so stingy". As result of all the wrong anti-wealth advice, most people work hard all their lives, going around in circles in the rat race and ending up broke and unhappy.
Funny thing is none of us are ever taught how to make money, how to invest money or how to manage our wealth and yet money is the most important subject in our adult lives. Although many people say "Money isn't everything", that's only a half-truth. The truth is "everything is Money" In order to achieve excellence in the different areas of lives like our health, relationships and family, we need to be financially secure!
Now, I want you to look at the money in the different way. Tell yourself this making money is a game. Say it louder! louder again! No only saying it, you have to be truly believe in every word you just say now. If we learn the rules of this game, money will flow into our hands. If we do not play by the rules, we will struggle all our life financially despite working very hard.