A Trading Strategy about Retracement, Regression and Risk Management to Move with The Market

Simply Using Fibonacci Retracement, Regression Channels, and Risk Management

In the ever-evolving world of financial markets, traders continuously seek effective strategies to maximize their returns while minimizing risk. One such method is the combination of Fibonacci retracement, regression channels, and robust risk management techniques. This comprehensive approach provides traders with valuable tools to predict price movements, follow the market trend, and ensure that losses are kept to a minimum. In this post, we will explore how to use these techniques together to develop a well-rounded trading strategy.

1. Understanding Fibonacci Retracement: A Key Tool for Identifying Market Corrections

Fibonacci retracement is a technical analysis method derived from the Fibonacci sequence. These ratios are believed to reflect the natural proportions that influence financial markets, providing a framework for identifying potential support and resistance levels during price retracements.

  • How to Apply Fibonacci Retracement: To use Fibonacci retracement effectively, first identify a significant price move (a swing high to swing low or vice versa). After identifying the start and end points of the move, plot the Fibonacci retracement levels between the two points. These levels often act as potential zones where price may pull back or reverse before continuing in the direction of the overall trend.
  • Practical Use: Traders use Fibonacci retracement levels to find entry points after the market has corrected or retraced. A common strategy is to enter a trade at a retracement level, with the expectation that the market will resume its primary trend after the correction. For instance, if the price retraces to a certain Fibonacci level, a trader might look for signs of a reversal to enter a long position (in an uptrend) or a short position (in a downtrend).

2. Using Regression Channels: Visualizing Trend and Predicting Future Movements

A regression channel is a powerful tool that helps traders identify the direction of the market trend and potential future price movements. The channel is constructed using linear regression, which fits a straight line to historical price data, showing the overall trend. The upper and lower bands of the regression channel are drawn equidistant from the regression line, creating a boundary within which prices tend to fluctuate.

  • How to Apply Regression Channels: To draw a regression channel, start by selecting a series of price points over a given time period. Apply linear regression to these points, which creates the central regression line. Then, draw the upper and lower channels based on the standard deviation of price from the regression line.
  • Practical Use: The regression channel provides a clear visual representation of the market’s trend. Prices typically move within the channel, so traders can use the channel boundaries to spot overbought or oversold conditions. If the price approaches the upper band, it could indicate that the market is overbought and might reverse downward. Conversely, if the price reaches the lower band, it may suggest that the market is oversold and could rebound.

By integrating Fibonacci retracement with regression channels, traders can predict where the price might reverse after retracing. For example, if the price is near a key Fibonacci level and also approaches the lower boundary of a regression channel, it could provide a strong signal to enter a long trade, expecting the price to bounce back in line with the overall trend.

3. Risk Management: Position Sizing and Growth-Oriented Risk Appetite

While traditional risk management often relies on stop-loss orders to limit potential losses, an alternative approach focuses on dynamic position sizing and adapting to market conditions, especially in sideways or range-bound markets. This strategy involves adjusting the position size based on the trader’s risk appetite and the market’s prevailing structure, rather than setting a hard stop-loss.

In this risk management model, traders avoid using stop-losses and instead accumulate positions gradually as the market moves sideways, while maintaining a focus on managing the risk-reward ratio according to their growth objectives and market conditions. Here’s how you can implement this alternative risk management strategy:

Accumulating Positions in Sideways Markets

In a sideways or consolidating market, the price tends to oscillate within a range, forming predictable support and resistance levels. These conditions provide an opportunity for traders to build positions incrementally rather than committing a full-sized position at once.

  • Gradual Position Scaling: Rather than placing a single large position at a specific entry point, traders can start with a small position size and accumulate additional positions as the market fluctuates within its range. For instance, if the price is bouncing between a well-defined support and resistance level, a trader might enter with a small position near the support level, and as the price approaches resistance, add more to the position in anticipation of a breakout or a reversal back towards the support.
  • Building a Position over Time: The idea is to gradually scale into a trade as long as the market remains in a range, increasing exposure when the risk remains contained. This allows traders to increase their overall position size while minimizing the impact of potential drawdowns. If the market ultimately breaks out of the range, they are already positioned to benefit from the new trend direction.

Risk-Reward Based on Growth Appetite

Instead of relying on stop-losses to limit downside risk, traders following this method focus on aligning their position size with their risk-reward ratio and appetite for growth.

  • Adjusting Position Size for Risk Appetite: With no hard stop-loss in place, the key to managing risk becomes position sizing. Traders with a higher risk appetite may decide to accumulate larger positions in the expectation that the market will eventually break out, leading to larger potential profits. Conversely, those with a more conservative approach will scale into trades more slowly, limiting their exposure to any one market move.The risk-reward ratio can be adjusted based on the trader’s confidence in the market’s future movement. For example, in a low-volatility sideways market, a trader may set a more conservative risk-reward target, aiming for smaller, more frequent gains, but with lower position sizes. In contrast, in a volatile or breakout-prone market, the trader may increase their position size and target higher reward-to-risk ratios, banking on larger price movements.
  • Growth-Oriented Risk Management: The concept of growth-oriented risk revolves around adapting position size to the overall portfolio’s growth targets. A trader with a more aggressive growth target might aim for higher position sizes and broader risk tolerance in pursuit of larger profits, understanding that this comes with the potential for larger drawdowns. Conversely, a more conservative trader would maintain smaller position sizes and focus on consistent, incremental gains over time. By staying attuned to the overall market dynamics and adapting position size in real-time, traders can ride the market’s natural ebbs and flows without overexposing themselves to sudden market reversals.

Managing Volatility and Market Range

Even in sideways markets, volatility can cause prices to move sharply within the range. The key here is to monitor market volatility and adjust position sizes accordingly. When volatility is low, you can afford to scale in more aggressively. However, if volatility picks up and the price begins to breach the support or resistance levels, it’s essential to pause accumulation and reassess the market conditions.

  • Tuning Position Sizing to Volatility: In low-volatility periods, where the price action is calm and the market is trading within a tight range, you may want to increase your position size gradually as risk is contained within the range. On the other hand, if the market shows signs of increasing volatility, you may choose to reduce your position size temporarily until the price action stabilizes or breaks out of the range. By dynamically adjusting the position size to market conditions, you avoid exposing your capital to sudden shocks while still staying engaged in the trade.

Example: Accumulating Positions in a Sideways Market

Let’s say you’re trading a currency pair that has been moving sideways between a support level at 1.2000 and a resistance level at 1.2200. Rather than placing a large position at the support level and setting a stop-loss, you begin with a smaller position at 1.2000, anticipating that the price will bounce higher within the range.

As the price moves toward 1.2100 and shows signs of holding steady, you might add to the position, building your exposure as the price stays within the range. If the price retraces back to 1.2050 after reaching 1.2100, you can add yet another layer to your position, continuing to increase your exposure as the price fluctuates within the range. Throughout this process, you’re monitoring the volatility and ensuring that the positions remain within your risk-reward appetite.

If the price breaks through the resistance at 1.2200 and begins trending upward, you are already positioned for the breakout and can take advantage of the momentum. At this point, you may want to reassess the trend and adjust your position size or risk-reward targets based on the new direction of the market.

If the price breaks downward and breaches the support at 1.2000, this signals a potential change in market dynamics. Rather than having a stop-loss to limit losses, you would assess the move carefully, reduce your position size if necessary, or decide to exit the market entirely, based on the overall market conditions and your appetite for risk.

In this alternative risk management strategy, traders adapt their position sizing to market conditions and growth targets rather than relying on stop-loss orders to control risk. By scaling into positions in sideways markets and adjusting position sizes based on market volatility, traders can manage risk without the need for traditional stop-losses. This approach allows for flexibility, enabling traders to remain engaged with the market while staying aligned with their overall growth objectives and risk tolerance.

However, it’s crucial to maintain discipline and manage leveraging, as increasing position size in anticipation of breakouts can lead to significant exposure in case of false breakouts or prolonged sideways action. By aligning position size with your risk appetite and market dynamics, you can ride the market’s natural fluctuations and position yourself for growth, while also protecting your capital from unexpected price movements.

4. Staying on Top of the Trend: The Key to Consistent Growth

The core principle of this trading strategy is to always follow the trend. The trend is your ally, and it is essential to trade in the direction of the prevailing market movement. This helps to avoid the risk of trading against the market, which is often a losing proposition.

  • Identifying the Trend: A clear uptrend is characterized by higher highs and higher lows, while a downtrend is marked by lower highs and lower lows. A trend can be confirmed using tools such as moving averages or regression channels. When the price is above a rising moving average or within the upper band of a regression channel, the trend is likely bullish, and traders should focus on buying opportunities. Conversely, when the price is below a falling moving average or near the lower band of a regression channel, the trend is bearish, and traders should focus on selling.
  • Adapting to Market Conditions: Not all market conditions are favorable for trend-following strategies. In choppy or sideways markets, it is important to be cautious and avoid taking unnecessary risks. During such conditions, traders may choose to reduce their position sizes, focus on shorter time frames, or temporarily step away from the market until more favorable conditions emerge.

5. Combining Fibonacci Retracement, Regression Channels, and Risk Management

By integrating Fibonacci retracement, regression channels, and solid risk management, traders can create a strategy that is both technically sound and practical. The key to success lies in using these tools together, ensuring that each element reinforces the others.

  • Trade Setup: A trader might first use Fibonacci retracement to identify a potential entry point after a market correction. If the price reaches a key Fibonacci level and is also near the lower boundary of a regression channel, it could signal a high-probability trade in the direction of the prevailing trend. The trader then places a stop-loss order just beyond the next key level or swing point, ensuring that losses are minimized if the market reverses unexpectedly.
  • Trade Management: Throughout the trade, the trader should continue to monitor the market and adjust the position if necessary. If the price reaches a target, a trader can consider scaling out of the position or moving the stop-loss to breakeven to lock in profits. If the market shows signs of reversing early, the trader can exit the position quickly, adhering to the principles of risk management.

A successful trading strategy is built on a combination of accurate analysis, disciplined risk management, and a clear understanding of market trends. Fibonacci retracement, regression channels, and risk management tools provide traders with a well-rounded approach to navigate the markets. By always following the trend, cutting losses quickly, and using well-defined entry and exit strategies, a good strategy can definitely position themselves for consistent growth and profitability in the markets.

The information contained in this website is not intended for distribution to anyone in any jurisdiction where such distribution is not authorized or to any person to whom it is unlawful to make such distribution. There may be restrictions on the distribution of this information in certain jurisdictions and persons are required to inform themselves about and observe those restrictions. The information shall not be reproduced or passed onto a third party. The risk of loss in trading financial instruments can be substantial. Investors should be aware that any investment involves a high degree of risk, including the loss of the entire amount invested. Past performance is not necessarily indicative of future results and the value of an investment may fall as well as rise. The high degrees of leverage that are often employed in trading financial instruments can quickly lead to large losses as well as large gains. Investors should therefore carefully consider whether such an investment is suitable in light of their financial condition. This website is only directed at qualified investors and the services or investments referred to herein are only available to qualified investors. Retail clients should not rely on the information herein. This brief statement does not disclose all of the risk and other important aspects of investing in the financial markets. The full disclosure documents for the relevant investments can be obtained and should be carefully studied. The performance represented is historical; past performance is not a reliable indicator of future results. Investments may be subject to significant fluctuations which may affect the value of an investment.

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Leading Innovations in Singapore

Singapore has established itself as a thriving hub for innovation, attracting foreign investment from around the world. With its strategic location, strong infrastructure, and supportive business ecosystem, the city-state has been successful in fostering groundbreaking innovations across various sectors. In this article, we will explore some of the leading innovations in Singapore that have been instrumental in attracting foreign investment.

1. Smart Nation Initiative

At the forefront of Singapore’s innovation drive is the Smart Nation Initiative. This government-led initiative aims to harness technology and data to improve the quality of life for citizens and enhance the efficiency of various sectors. The development of smart infrastructure, digital services, and initiatives like the National Digital Identity and Smart Mobility have positioned Singapore as a global leader in smart city solutions. Foreign investors are drawn to the opportunities presented by Singapore’s advanced digital infrastructure and its potential for creating innovative solutions.

2. Biomedical Sciences and Healthcare

Singapore has made significant strides in the biomedical sciences and healthcare sector. The establishment of research institutes, biomedical parks, and partnerships with leading global pharmaceutical companies have created a conducive environment for innovation. The Biopolis and the upcoming Health City Novena serve as hubs for research, development, and commercialization of biomedical technologies. The availability of world-class research facilities, a strong talent pool, and supportive government policies have attracted foreign investors seeking to capitalize on Singapore’s expertise in precision medicine, medical technology, and digital health.

3. FinTech and Financial Services

Singapore has emerged as a prominent FinTech hub in Asia, attracting foreign investment in the financial services sector. The Monetary Authority of Singapore (MAS) has implemented progressive regulatory frameworks, including the FinTech Regulatory Sandbox, to facilitate experimentation and innovation in the financial industry. The establishment of innovation labs, accelerators, and FinTech-focused initiatives like the Singapore FinTech Festival have further bolstered the ecosystem. Foreign investors are enticed by the opportunity to tap into Singapore’s robust financial infrastructure, strong regulatory environment, and access to a diverse and tech-savvy consumer base.

4. Advanced Manufacturing and Robotics

Singapore has embraced advanced manufacturing and robotics as key drivers of economic growth. The development of initiatives like the Advanced Remanufacturing and Technology Centre (ARTC) and the Advanced Manufacturing Training Academy (AMTA) has fostered innovation in areas such as additive manufacturing, robotics, and automation. Singapore’s focus on research and development, coupled with its strong intellectual property protection, has attracted foreign investors looking to leverage the city-state’s expertise in manufacturing excellence and automation technologies.

5. Sustainable Solutions and Clean Energy

As sustainability becomes a global priority, Singapore has positioned itself as a hub for sustainable solutions and clean energy innovations. The Sustainable Singapore Blueprint and initiatives like the Singapore Green Plan 2030 demonstrate the city-state’s commitment to environmental sustainability. Singapore is investing in research and development of renewable energy technologies, waste management solutions, and sustainable urban planning. Foreign investors are drawn to Singapore’s commitment to sustainability, favorable regulatory environment, and opportunities for collaboration in developing innovative clean energy solutions.

Singapore’s leading innovations across various sectors have played a significant role in attracting foreign investment. The city-state’s commitment to creating a conducive environment for research and development, strong government support, and advanced infrastructure have positioned it as an attractive destination for innovation-driven enterprises. As Singapore continues to foster groundbreaking advancements in areas such as smart cities, healthcare, FinTech, advanced manufacturing, and sustainability, foreign investors can look forward to a wealth of opportunities to collaborate and grow their businesses in this innovation hub of Asia.

13O 13U

Singapore Tax Incentive Schemes for Fund and Fund Managers

Singapore’s status as a prominent Asian hub for fund management can be attributed, in part, to its comprehensive tax incentive schemes. Many global fund houses have recognized Singapore as an ideal regional hub, choosing to establish their portfolio management, trading, and research operations within the country.

To solidify its position as a leading Asian fund management and domiciliation hub, the Monetary Authority of Singapore (MAS) is strategically leveraging its external fund management program to enhance asset management capabilities within Singapore. Concurrently, MAS collaborates closely with industry stakeholders to position Singapore as a prominent regional hub for fund domiciliation, an objective facilitated by the implementation of the Singapore Variable Capital Company (VCC) framework. Moreover, Singapore’s attractive tax framework and incentives for funds and fund managers serve as key catalysts in these endeavors.

It is important to note that funds managed by Singapore-based fund managers may be subject to tax in Singapore due to the investment management activities performed within the country. The income and gains derived by these funds could be deemed Singapore-sourced and thus subject to taxation, contingent upon the onshore or offshore classification of the fund and its taxable presence in Singapore. However, Singapore’s tax incentives aim to alleviate such tax obligations, provided that specific conditions are met.

Singapore’s conducive regulatory environment, extensive array of service providers, and favorable tax incentives have collectively contributed to the sustained growth and attractiveness of its fund management industry. By offering these enticing features, Singapore continues to establish itself as a premier destination for fund management within the Asian region.

Singapore Tax Exposures for Funds:

Funds managed by a fund manager in Singapore may be subject to tax in the country due to their investment activities. The income and gains generated by these funds may be considered Singapore-sourced and taxable, depending on whether the fund is based onshore or offshore. However, Singapore offers tax incentives that can eliminate these tax liabilities if certain conditions are met.

Tax Incentive Schemes in Singapore for Funds:

All fund management companies in Singapore must be licensed and registered with the Monetary Authority of Singapore (MAS). This requirement is necessary to qualify for the tax incentive schemes.

Under these schemes, certain income derived from funds managed in Singapore by a fund manager is exempt from taxation. The investments covered under these schemes include stocks, company shares, bonds, notes, commercial papers, treasury bills, certificates of deposit, derivatives, and more. However, immovable property in Singapore is not eligible for these incentives.


MAS Announces Stricter Criteria for Singapore’s 13O and 13U Fund Management Tax Incentive Schemes

Singapore’s Monetary Authority of Singapore (MAS) recently announced significant changes to the criteria for the Section 13O and 13U fund management tax incentive schemes. These changes are targeted at fund vehicles managed by family offices. The new criteria will take effect from 18th April 2022, and it is important for potential applicants to be aware of these changes and consider their options promptly.

Cases Covered by the New Criteria

The new stricter criteria will apply to cases where the first “preliminary submission” is made from 18th April 2022. However, cases that have already been granted the Section 13O or 13U awards by MAS or are in the process of application will generally not be affected. It’s worth noting that if a pending application has been stagnant with no communication with MAS for six months or more, MAS may require the application to be restarted under the new criteria.

Enhancements to the Award Criteria

For Section 13O Cases

  • The fund must now have a minimum fund size of S$10 million at the point of application and must commit to increasing its assets under management (AUM) to S$20 million within two years.
  • The family office must have a minimum of two investment professionals (IPs), with a grace period of one year to employ the second IP.
  • The absolute minimum total business spending annually remains at S$200,000, but this is subject to a new ‘tiered business spending framework’ pegged to AUM size.

For Section 13U Cases

  • The existing minimum fund size of S$50 million at the point of application remains unchanged.
  • The family office must have at least three IPs, with at least one IP being a non-family member. A grace period of one year may be given for the non-family member IP.
  • The absolute minimum local business spending annually is raised to S$500,000 (from S$200,000) in any basis period, and is also subject to a new ‘tiered business spending framework’ pegged to AUM size.

Common Requirements for both Sections 13O and 13U

Both Section 13O and 13U cases now have a new requirement for the fund to make local investments. This must constitute at least 10% of the fund’s AUM or S$10 million, whichever is lower, at any given time. Local investments include equities listed on Singapore-licensed exchanges, qualifying debt securities, funds distributed by Singapore-licensed/registered fund managers, and private equity investments into non-listed Singapore-incorporated companies with operations in Singapore.

If you’d like to read the full article and get more insights into the changes announced by MAS, you can find it here.

Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. Professional legal advice should be sought before making any decisions or taking any actions based on the contents of this article.




Business Incorporation

OTHER JURISDICTIONS ▶

What requirements do i need to incorporate my company in Singapore?

Your company name needs to be approved before registration.

You need to appoint a minimum of one resident* director. An unlimited number of additional resident or non-resident directors can be appointed as well. Both resident and non-resident directors need to be at least 18 years old, not bankrupt, and free of any malpractice charges in the past.

You can have anywhere between 1-50 shareholders, which may or may not be directors. Shareholders can consist of both local and non-local individuals or companies, and 100% non-local shareholding is allowed. After a Singapore company is incorporated, shares can be freely issued or transferred at any time.

You need to appoint a qualified resident* company secretary within 6 months of your Singapore company’s registration. Sole directors and/or shareholders cannot act as the company secretary.

You need to possess a minimum of S$1 worth of paid-up capital (also known as share capital) to register your Singapore company. This amount can be increased any time after your company is incorporated.

You need to provide a local, physical Singapore address as the registered address of the company. The registered address can be either a residential or commercial address, but not a P.O. Box.

Singapore-registered companies enjoy attractive tax exemptions and incentives. Your company pays less than 9% for the first S$300,000 you make in annual profits, followed by a flat rate of 17% flat thereafter. Singapore companies do not have to pay capital gains or dividend taxes. For further information on taxes, refer to our Singapore corporate tax guide.

*Refers to a Singapore Citizen, Permanent Resident, or holders of Singapore work visas (EntrePass or Employment Pass)



If you are not a Singapore resident and would like to incorporate a Singapore company, what requirements do you need?

You must engage a professional firm to register your Singapore company – under Singaporean law, non-resident individuals or entities cannot self-register a company.

You are not required to obtain a Singapore work visa to incorporate a private limited company if you are operating your company from overseas. You can visit Singapore on a visitor visa when you need to attend to company matters on a short-term basis. However, in such cases, you will need to find a local director to fulfil the minimum one resident director requirement. We can elect a nominee local resident director on your behalf – visit our services page to find out more.

All Singapore company registration and work permit formalities can be handled without you having to physically visit Singapore – unless you intend to open a bank account at a Singapore-based bank.



What documents are required to register my Singapore company?

To register your company in Singapore, you’ll need to provide the following documents:

Company name

Brief description of business activities

Shareholders’ particulars

Directors’ particulars

Registered address

Company secretary particulars

Constitution



If you are engaging the services of a professional service firm, they will typically require these documents from you in order to prepare the necessary paperwork:

For non-residents: Copy of passport, proof of overseas residential address, as well as other Know-Your-Client (KYC) information such as bank reference letters, personal and business profiles, etc.

For Singapore residents: Copy of Singapore identity card For corporate entity shareholder(s): Copy of registration documents, such as a Certificate of Incorporation and Constitution

Do note that officially-endorsed translated versions must be provided for any non-English documents.