I was invited to a friend's wedding dinner and happened to meet up with a few seniors in the market.
So we were talking, and suddenly got onto the topic of trading.
"Today you buy at $1, and you're telling yourself that my cut-loss margin is around $0.90. True enough, tomorrow it hits $0.90. You thought, "okay, I will hold for 1 day more, MAYBE it will go back up, so I can limit my loss." Again, the market reacted to your way and it hits $1. You thought, "whoa, since market's so volatile these few days, MAYBE it will go a bit higher, so I can gain a kopi money.""
This friend of mine calls it "Hope Analysis".
The mind boggling question now is "You wanted to buy this company at a target price of $0.90 and today's at $1. Tomorrow the moment the market open, its at $0.90 cents, a total 10% drop in share price, could be due to weak market sentiments or due to bad fundamental results released. Would you buy it now?"
If you believe in stop losses, then obey it.
ReplyDeleteHi Uncle88,
ReplyDeleteso for the second question, would you buy it now?
Hi CJ,
ReplyDeleteLet me guess. Charlesming said that. ;)
Hi Chong Jun,
ReplyDeleteI've added your blog to a list of Singapore Investment Bloggers.
http://sginvestbloggers.blogspot.com/
Would be great if you can add a link back as well.
Cheers,
Royston
Who are you? Disciplined trader? Confident Investor? Emotional trader? Who will buy? You know the answer. Right?
ReplyDeleteHi AK,
ReplyDeleteyeah, he mentioned that i thought its a very creative way to call it. haha! you know him personally?
Hi Royston,
Thanks for the add, I'll add a link back now.
Hi Uncle88,
sometimes cutting loss can be a pain when it eats into the hard earned winnings from the previous few rounds, I've personally tried it myself. lol.
Hi CJ,
ReplyDeleteHaha.. I coined that phrase and, yes, we are good friends. ;)
Stopping loss can be painful but it must be instilled as a natural reflex for the trader. For example, when you touch a burning surface, you withdraw it immediately by way of a command from your brain. It's painful - yes, but it also prevented further damage to your body.
ReplyDeleteQuestion 1 - yes, I will sell once my stop is touched.
Question 2 - I have not had the chance to see this happen. I make it a point not to turn a trade into an investment although i had definitely traded my investments. ;)
Hi AK,
ReplyDeleteyeah. no wonder i somehow has the impression that he mentioned. (:
Hi Patty,
I agree with what you said that stopping loss must be instilled as a natural reflex, and its probably gonna take a real lot of discipline to do it.
I think the dilemma is that we'll never know if this is a big bear or just another correction. If its a bear, of course cutting loss would be the best option, but if its a technical rebound, wouldn't be averaging down be better? (: