Trading Techniques   

Common mistakes most investors make

Yea... elfin & bunbun...



I feel you both have the making of true traders,



Though Bunbun is relatively new in this game, Elfin is more of the pro , as evidenced by the sophisticated tone of your posts. I have no doubt Bunbun will continue to improve under the 'tutlege' of great people like Elfin, etc...  :) 

 

hm...in reply to ipunter's post: i believe in taking profit when you're comfortable with the profit level, rather than waiting for some recommended target to be hit.

i'm more of a psychological analyst; if i can suss out the FA reason behind the TA trend, i'll move accordingly. If i believe levels are unsustainable, i'd out, even if the market appears to be moving up. (since it could very well crash the moment your eyes move away from the screen)



'cos if you look at it long term, that you'll be in the market for the next 25, 30, 40 years, then really, be it short or long term holdings, what's the rush? For me, i prefer small consistent profits per trade, rather than a few spectacular sizzles (which may very well end up as fizzles haha). so yea bunbun, for me, it's greed i havta control too. :)

 

if i may combine bunbun's and giantlow's posts: the 'compulsion' to trade actually comes from greed, or herd instinct. that you see everyone making profit, so you rush to join in since you want to make it too. that's why it's so hard to get out, i guess. which is why we tend to cling to our losers in vain hope.



and giantlow, there was some other post somewhere abt the PE ratio (can't find it): what i meant was target price: 'cos most target price is calculated based on PE ratio, NAV etc. mathematically that's fine, but if you think about the _idea_ of it, how are such ratios and premiums derived, but from sentiment? I mean, why does the construction industry have one ratio, and others have others? in that sense, sometimes, i think FA is just an extrapolation of TA, a prediction. which is why, i think one common mistake investors make is to look at 'target price, recommended: BUY' and just jump in. dunno, what do the ppl here think?



btw, thanks for that correction abt PE ratio, much appreciated. and yes, always feel free to disagree, that's how we learn. :)  

 

hi ipunter, u have this experience too? sama sama. but in my opinions, i always coupled this with greed. if one is not greedy to have more profits, one would not need to 'let profits run' (so as to make more $$$). and if one is not greedy to lose as little as possible, then he/she would not hope, pray,cross fingers that tides will reverse (ten4one's post).

so, me don't care to learn 'let profits run' ruling. me just need to learn to curb my greed.

 

Good to have you back! Cheers!

 

Yea... Singaporegal...



Went for a break...  for some rarified fresh chilling cool air and also inspiration in the Himalayan Mountains...   hehe...  :)

 

Hey iPunter! You're back!

Glad to see you posting again. Went on holiday?

 

This question was originally asked by a student of the stock market... :) and I put it up for the benefit of educational comments by others.

 

ten4one,



I agree with you quite a lot on this.



As a stock market student, I find it so very confusing, the many, many apparently  contradicting rules and advice.



Take for exampe the oft-repeated admonition of stock market experts to beginenrs not to take small profits... they all tell you that in order to succeed, you must "let your profits run". But many of my friends tell me everytime they do try to do that, their profits always "run away" and they end up losing.



It's all so very confusing to newbies like me... anyone care to comment further?

 

Time to get back to the subject matter - mistakes investors make.......

It is very often Traders encounter in their tradings when it is time to exist the Market and take profit, they're tempted to ride the tides a little longer (like the market now); or in the case of 'paper losses', they tend to comfort themselves and hope for the tides to reverse., and very often submerge and suffocate themselves in deeper water or wash away by the currents.

Therefore, it vital that Traders stick to their strategies and learn to avoid all the 'noises' in the Markets. I know this is extremely difficult to do - who doesn't want to let the profits run! Cheers!

 

It is 'silly' to even compare trading in the stock market to National Service. The later is consitituted as a law and avoiding it is illegal whereas the former is just like any Markets where anyone is allowed to participate within the frameworks except for criminals and bankrupts. To compel to trade......of course you must be joking!

I do agree that one must be careful when committing a trade to maximize your CHANCES of winning. ANYway, as long as you're in the Markets, there isn't any free lunch.....hahahaha! Cheers!

 

hahaha, yes giantlow, good advice! will definitely be heeded by this elf. :)

the charts are actually favourable, but when you look at the insane vols, and the RSI/Williams (the latter's more accurate act, since it's a trending market), i'm smelling manipulation and irrational exuberance all over the market. but heh, mebbe i'm just a coward. :)

 

i agree with singaporegal, we should not feel compel to trade.

its is not some national service duty to let your broker or SGX earn your commission by trading

should trade only the conditions are in your favour and when u are confident of positive results

 

Hi elf,

When you say the bull - do you mean the stock market in general? If so, actually I don't really care if its a generally bear market or bull market. I just apply TA all the same.

But what I find is that in a bear market, the number of stocks that pass my buy-filtering rules become very small. Sometimes, I find that there's nothing to buy at all. So I just sit out the market, have a coffee and wait for better times. :)

 

hmm...something related to the topic qn, perhaps another big boy that retail investors might like to watch out for: private equity/hedge funds.

these are the new kids on the block, but they're flush with money and they move fast. Things to note about them:

1)Lots of liquid cash

2)they're looking to invest in asia

3) they regard SEA as one entity.



the last is impt, since most of these fund managers can't differentiate s'pore from malaysia or thailand, for instance. What this implies is Chaos Theory in action--a butterfly flapping its wings in New York creates a storm in Shanghai. Or in local context: bird flu breaks out in Vietnam causes a stock market collapse in s'pore. You cannot track their movements save by TA volume/related charts, since they're not answerable to legal authorities here (to the best of my knowledge). Gotta watch out for these big boys in 2007.

 

hi singaporegal...abt market manipulation: yeah, interesting. esp the shortselling. like we have rumors that insiders shorted the thai market on that flipflop day, and then bought back long. if so they'd have made a killing...



actually, my question is, how do you tell when the bull will stop running?

 

Hi elf,

Thanks for your reply. Interesting indeed.

 

I think the Bull is running now. Most stocks are overbought. That's a sign of a bull run.

 

Short now and you'll be shock! It is still too early in the new year to 'stop' the Bull momentum. 2007 is more or less a year for consolidation and the Market's consensus is it is still ok; but, hard to beat 2006. Should see some sign of weakness around the 2Q. If the 1Q reports are bad, SHORT ALL THE WAY till sign recovery. It is so simple isn't it.............................who want to work ....? Hahaha!  Cheers!

 

hmmm. do u think that the market is moving into the "who is left carrying with the baby mode"

any potential opportunities to "short"?