Lesson in a Declining Market

Ok back on my previous pick , Gallant, it went haywire as the support line was broken and naturally/immediately become a resistance. I was forecasting on a possiblilty of a technical rebound but it failed to close above the support line and thus went to the other direction. Nevertheless, I will keep on learning and find my system to follow.

In the course of reading, I have come across a valuable article and decided to blog it down so that next time I can refer back:

======Lesson in a Declining Market=========

1. EXPERIENCED INVESTORS USE FEAR TO THEIR ADVANTAGE. Only in markets where people are scared can you buy stocks cheap.

This is extremely true and majority of us have witnessed it. Typical example in 2007 is during march, august, november when panic are seen across the street, and rumours of traders recieving margin calls --->This will be the best time to enter the market as the market is over-reacting to the news and heavily beaten down offering the best margin of safety.

2. I own a private company. If I wanted to buy out my biggest competitor, I would want to pay as little as I could. Investing in stocks is the same thing. Why would I be upset if I could buy them cheaper? Shouldn't I be happy?

Ok, the above is quite irrevenlant.

3. You should enjoy declining markets. Declining stock prices... nervous investors... predictions of impending doom. It's during times like these that you have to keep your head.

BE A CONTRANIAN!!! In order to be one, Cash is IMPORTANT. This bring me to think about Capital Management where one need to keep reservation for such times in order to enjoy declining markets. I have been a victim of not managing my capital wisely and is suffereing now.

4. SCARED MARKETS ARE THE ONLY KIND OF MARKETS THAT CAN MAKE SAVVY INVESTORS VERY RICH.

Facts: Investor Guru Warren Buffet brought Kraft in January. An opportunity to buy severely undervalued blue chips or companies (Household Brands on food and neccessities) that will still have constant earnings through recession and depression.

5. The creeping anxiety most investors feel in a bad market is like a human’s internal "flight or fight" signal. But if you keep your emotions in check, it could make you a lot of money. Most people don't know how to interpret the signal correctly.

This is considered the deepest art for all newbies like me. Generally, noobs will tend to have the herd instinct where we follow the general crowd to buy and alas brought at high and suffer as shrewd traders are selling to us as we buy.

The Five Rules above has emphasis on the psychology aspects on investing and highlight the key aspects on how we should handle our emotions during price shocks in order to benefit it. I will definately keep this in mind and try to applied it in future when I am cash rich!

Hope this article helps you in your investing curve!!!

Gallant: Lousy chart with interesting details

The stock markets has surge greatly this week. Sad to say, I am not enjoying the ride. But I am glad that i did not do any contra trades for some time.

I was browsing through some charts and come upon something interesting in a downtrend chart. I think it is ideal for a short play on it. Explanation on Chart.

~~~~Accumulating Cash in Progress~~~~

I am One Year Old

Today marks my one year old in trading and conincidently Singapore also gave its budget talk.

Overall, my portfolio is heavily battled down as I cling on to my holdings ever since i loaded some of them during the peak of 3800... Total realised losses hit 3k (including ard 2.5k of transaction fees). the unrealised losses is daunting too with a figure of around 8k...

Majority of the losses are contra losses due to greed... and no holding power. The unrealised losses is deal to me holding throughout instead of cutting losses a big mistake from a trader style and became forced investor in the process.

As I grow with the market, I understand the importance of fundamental analysis and will try to apply in my investing/trading.

As for the budget small I am only concern about monetary entitlement the government are giving which all citizens are expecting it due to the its relatively good results in 2007. However, it manage to surprised me that with the plan for implementation of subsidaries for part-time students in NUS.NTU, SMU and UniSIM as it promotes continuing education of adults. I hope it will be implemented soon.

Enriching Session With Robert Tay

I had an enriching session today after I attending a session-$10 organise by ShareInvestor together with my Mentor.



*****1st part - Introduction to CMC Markets ***

This session gave an insight of the CFD firm as above. Basically I know how does CFD works. It is a very useful tools to go short in the market as it is not subjected to expiry like warrants and gave traders more flexibilities(allows them to hold their short positions longer) through their share borrowings service.



New things I learnt are:

1) You may receive interest from shorting.

2) If you are a contra traders, the transactions fees are about 50% lower than the tradition broker and not subjected to GST charges.

3) If you go long, you are subjected to finance charges.



*****2ND Part - Sharing from Robert Tay UOB KayHian Representative****

After a quick dinner, we go on to Part 2, a sharing session from Robert Tay where he gave a recap on his previous sharing session in June and the, a glimpse of the economic/market outlook for the next six months, some general FA and TA.

Recap on sharing session in June and how the market move last six months

- Highlighted that after STI hit 3500 will have difficulties moving further up and july we saw a big price shock.

- the upward trend thereafter is supported by weak volume indicating there is lower participation and the trend is weak.

********Economic/Market Outlook***********

- Japan are already in a recession. Subprime mortgages repercussion are still not over, banks still have alot that they nv declare.

- The decoupling of Asian markets from the US from the news is not particularly true as US is the world biggest consumer and China Main export's client. With the weakening dollar, US will not be able to consume as much as before. This will snowballed and affect the economic growth of India and China.

-Inflation the next big problem. Inflation has risen pretty fast and to contained it, country should rise interest rate. The US is however doing the opposite way... thus it will drive inflation higher.

With the above pointers, the economic upfront is not in a present shape.

*********Basic TA relearn**********

Vol must support price action/trend.

**********Basic FA*********

Companies with high Leverage Ratio, High Price to book, and High price to NAV will be badly hit in a recession.

We went through some examples of chart to see the volume/price relationship and the of the top 30 stocks that have High Leverage ratio, High Price to Book ratio, High Price to NAV ratio respectively. This seminar knock some sense into me as the Art of FA is extremely important

Quote of the day

Inactivity is the best behaviour

2008 second trade

====Recent Activites=====
Fed Reserve held an emergancy meeting on tuesday and announce a 0.75% cut on the interests rate. Together with the simulus package, Asian Market rallied to ridiculous height where we see HSI rebounded strongly from a low of 21709.63 on tueday to a high of 24,966.17 on thursday ( wide range of 3256.54) and STI recovered to a high of 3050 from 2746( 300 points range). During this 3 days, I saw heavy volatilies on the indexes which are swinging like a roller coasters. Many professional full time traders benefits from such volatilities.

====Jeopardizing Myself====
Again not learning my mistakes - seeing fellows traders share their wonderful profitting encounters has planted in seeds of desires to be like them earning back monday losses. I traded blindly this time and got myself into troubles again... YZJ - realised another 180 of losses as i buy high and sell low once more.... as i read through a possible bad news from our US counterparts data.

YZJ - I am condamning this stock now.... everytime i trade this counter I made losses ( 3 trades up to date mounting -1630.56 on this counter alone)

So far all 95% my losses are attributed by contra trades.... (contitutes by trading on emotions, envy, greed, temptation and stock chasing). My desire to get profits has jeopardize me and my plans. I never learn my mistakes even though I know them. I have no one to blame but myself and is getting rather sick to blame myself.

I REALLY REALLY have to stop looking the the live prices and perhaps block myself from communicating with others....

Procceeding ahead -
1) Restructure my personal finance... my last two trades has inflicted $740 damages to my saving cum expenses( had intend to put them in MMF to grow...) Life's going to be really tough ahead for me as I have to live more fragully keeping track on my expenses.

2) Need to heed fellow blogger LP's advise to keep 6 mths of expenses aside... Also need to heel mentor advices on reading up more and not get myself 100% vested. (Both had thought me alot but i failed to applied...)

3) Been too slothful on learning and my mind is always pre-occupied with other stuffs... Need to get those sorted out as well.

4) Stay out of the market for the time being....