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Trading Fearful bargain hunters there only!

Discussion in 'Shares' started by wdongli, 25th Jul, 2012.

  1. wdongli

    wdongli Well-Known Member

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    What do think now about the stock market? Not too much but how could I reduce the cost for my portfolio as a whole. Why do you do so? No losses!

    Just look around there are no one except the fearful bargain hunters who try to pick up something for tomorrow's meals. Both of day traders and investors have been consumed in the attrition war. Few of them have the experiences to deal with the depression for so long. It is about 5 years. They have been kicked around as the useless rubbish bag with the depressed and gutless souls.

    There are sprites and ghosts after any dismal disasters. GFC and the attrition wars since the beginning of 2011 could not get rid all of them. They are very fearful too. They snap quickly and dump quickly with the hope for tiny profits.

    ***
    Don't blame them. They make the ghost town alive. Whom are you? What do you want?

    I don't want to be a ghost but a old man who could run under the early Sun slowly but profitably. I want to rebalance my portfolio so that my corner could be safe if not stronger.

    Having known the word, rebalancing for years I never grip up on its logic onto the earth. I am happy I could sell PPX at $0.05, which made me very painful and bought in GAO.

    ***
    Why have all of traders and investors quit? Why is it the days for bargain hunters who run for tomorrow only?

    They lost the shirts already and they could not afford to wait for next year. They have lost their guts to stand in the volatility and uncertainty any longer than a day! Human needs the hopes and then he can make the days, months, and years. Without seeing the good things and vision for future, they do what they should do.

    Give up or run for tomorrow but forget what would happen the day after tomorrow. You could not blame them since instinctively we all would do the same. I just don't want and I have to change.

    ***
    Few can really get the lessons and no can use the logic and wisdom under all of conditions and context.

    So wise man tries to set up some very basic rules to stop them leaving the toes on where he would die! They could not control the stock market so they want to control themselves. There are two basic rules:

    1. Avoiding losses that are bigger than they can live with.
    2. Keeping the ups and downs within a range that they can stand.

    ***
    Warren Buffet goes very far: No losses; never make the losses; and never and ever forget no losses.

    Do remember all of asset and profit, if would be destroyed, should be destroyed in the crash and attrition war in the stock market!

    Livermore committed suicide after 1929 great crash! Could you figure out the reasons? Me? I made money the booms and lost all I got in paper in the crash and contrition war!

    Don't hit your head against a rolling down stone until it very slow and never could hit you down!
     
  2. wdongli

    wdongli Well-Known Member

    Joined:
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    No losses: simple to know eh?

    No losses seem rather simplistic but most of retail traders and investors completely misses this simple fact.

    We are emotional beings and emotions will play a factor in every decision we make, so we should take them into account from the start. We have to be comfortable with the ride of the vehicle or we aren’t going to keep it.

    1. It is one thing for a car to have a nice ride when the weather is nice outside,
    2. but how does it do in the midst of a bumpy patch of road?
    3. Does it quickly lose traction in a snow storm?

    Do remember that it’s how the vehicle responds when conditions are bad that has the biggest impact on our ability to keep going.

    ***
    Successful and wise people(success could be made by lucks even rare), recognize that minimizing losses is essential to staying in the game, so most of them have developed sophisticated risk management systems to do just that.

    The average traders might think they are controlling risk by having a stop loss, a predefined price at which they will sell if the money goes down. Then what?

    1. If you ever want to recover that loss, then at some point you are going to have to buy back in.
    2. And the market can go down again so that you have another loss.

    Using a stop-loss can slow down the rate of loss, but it may not keep you within your pain tolerance. Once this tolerance is broken, the trader would run away or trapped in the ruins hopeless. It is not always happen under the Sun but it does in the storm or tsunami!

    ***
    We need to control risk at multiple levels providing them multiple fail-safe mechanisms.

    We may use a stop-loss on an individual stock but we may also reduce the size of their position as the value goes down. We may monitor risk and losses at the sector level so they are considering how a group of technology stocks is doing instead of just one.

    There are a lot of options:

    1. We may use controls that would alter the amounts invested in stocks versus bonds versus options or managed futures.
    2. We might control risk at the currency or country level.
    3. We may only invest in certain types of markets–for instance.
    4. We might only invest in stocks if the market is in a defined uptrend.
    5. And, if all of those measures fail, we may have a level at which they go to cash.

    ***
    You have to tell yourself that you can begin the transition from being a frustrated traders or investors to a successful one

    You have to recognize the vital importance of minimizing losses. The best way to do that is to employ consistent risk management processes at different levels.

    You might feel frustrated in the way to do what you should do but you would harvest in the boom and lay the seed after the crash!

    You need to work in dance to update your mental framework!
     
  3. wdongli

    wdongli Well-Known Member

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    SIR: Sold at $0.27

    SIR announced it has discovered a new Nickel-copper province and its price shot to $0.28 at maximum this morning.

    I sold all of my SIR at $0.27 to lock the profit, which I would be very painful if I lose later. I did feel it would move up further but the whole market has been in very bad mood and try to find any troubles as the excuses to sell.

    The profit locking in this dire time is very helpful psychologically. I will keep to rebalance my portfolio so that locking more profit, reduce more cost, and get the position for market turns up!

    ***
    Sold too early and didn't recognized the response of the market could be so marvelous.

    I was stunned!

    However ponder for a while, it seems obvious that no one is not fearful and then some good things must come in to give us some hopes.

    Good things come in surprise.

    [​IMG]

    ***
    More surprises: DOW now raises more than 200 points and Europe's shares raise up too. Why?

    All are moving largely on European Central Bank President Mario Draghi’s pledge to take all necessary steps to keep the euro zone afloat. Draghi said “within our mandate, the ECB is ready to do whatever it takes to preserve the euro.” “And believe me, it will be enough.”

    More good news came from the U.S., where jobless claims fell by 35,000 last week to a seasonally adjusted 353,000. U.S. jobless claims.

    Could XAO follow them? Not sure but usually it would. I am at the position to brace the raising Sun if it raises up in surprise!
     
    Last edited by a moderator: 27th Jul, 2012
  4. wdongli

    wdongli Well-Known Member

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    Pdy: Bought at $0.005

    Is a turning point appearing at horizon? Not 100% sure but do feel it should be not too far.

    I missed a 10 bags, SIR, but just only locked about 3 bags. However it gives me the chances to reduce the cost further and rebalance my portfolio without worrying about the losses.

    Have to say I was gripped by the fear too after XAO have run its destructive forces on the bargain hunters.

    ***
    Cannot say PDY has been bottomed at $0.005 but it should not be too far. In the dire, the crowd needs lead.

    [​IMG]

    I do feel politically EU should fix its default structural faults. I do agree that EU has another one month to tell everyone EU would be better rather than collapse. There are too many conflicts in Europe. If it could not fix EU, Europe would slowly but definitely become second continent.

    All of bad things the market could image are there. Actually the current crisis is the extension of IT boom and the corresponding excessive bulbs. It is a phase no one could tell what would be there so that disbelief the bust has gone enough is understandable.

    ***
    I would like to make honest errors in the stock market. I should not let the fear hold me in the hell.

    I want to be ready when the Sun is over our heads. I want to run under the early Sun as I did after GFC crash.

    Life is good and will be good if it is bad enough!
     
  5. wdongli

    wdongli Well-Known Member

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    What happend and what's its meaning for future?

    It is long time if America sneezes, the rest of the world catches a cold. BRIC let people believe this concept would have broken but it doesn't. We all link together in bond. Aussies are affected by everything in this world.

    Chinese growth has been tilted Aussie economy along for years now and its rolling cheer or hurt Aussies' heart too. GFC let Europe's problems appears, which turns worse and worse and Aussies started believing we would be all in the hell again.

    Everything changes so quick but actually the basic are still there. Doom and gloom is gone and most of us would be stunned time by time even we are not ready to see the root causes.

    ***
    One thing we have learned that despite the lessening role of the US in global economic affairs, the country does remain a powerful force. It is still amazing to see its innovation and its consumption.

    If economic growth is as much a question of confidence as it is of activity, a resurgent America, China's soft landing, assurance of EU's future, could be the kick-start the global economy needs.

    Perhaps surprisingly, it could be to see US, China, and EU become better but once it happens and could be seen by the crowd, they would act simultaneously by the new cakes in the sky. They tend to see the cake at the same time and then the market never crawls but jump.

    ***
    There were a lot of sudden and unexpected turns in the past couple months.

    America has managed to come out of the recession with a leaner, more powerful economy, and is quietly becoming an energy superpower on par with Saudi Arabia. It has huge shale oil or gas reserves. America has begun paying down its debts, closing its trade gap, and was the first to clean up its banking system.

    Doom and gloom is gone, and US is setting up a surprisingly positive view of America's future, tassles and all. EU? It would take a longer way to recovery but it would fight for its life. China has trouble but it would land somewhere.

    The world is better than in GFC and after IT bust and the stock market is priced as it was in ruins, which means recovery could happen in surprise.

    ***
    US' GDP dropped down to 1.5%, which actually was worse than last year. DOW goes up with this news. It is strange, eh?

    No, actually it is rational for the market. The whole world actually has been held by the EU crisis and the market has pushed it down much worse the the US economies performed. The market seemed believed that the US economies would be much worse than that. It is surprised by the GDP and then this surprise let it run to come up to reveal what the economies is going as it images.

    Economies are huge and even the advanced market could not touch the pulse accurately. It senses, prices, and adjusts itself and sometimes in big scale.
     
    Last edited by a moderator: 27th Jul, 2012
  6. wdongli

    wdongli Well-Known Member

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    Buy at lowest end of probability distribution

    What's the lesson since IT boom I should not never forget?

    “Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results,” Buffett said based on his lessons. If you pay too much no sale or stop losses can save us!

    Most of us have been beaten hard by the stock market, but good buy at least end of price probability distribution does provide a necessary buffer for those who do so would most likely thrive in flat or down markets and lag in bull markets.

    Once this strategy works with diversification and time average plus due-diligence of qualities, you would go along the road much better than most.

    ***
    In hindsight, from April 2011 to now, the market has been very terrified. I didn't make any money from trading but lost $180,000 paper profit.

    Most of pennies have lost more than 70% of their market value. But buying at the least end of the probability distribution did help me to avoid a disaster as it did in GFC. Actually if I was not so scared that I sold SIR one day earlier, I could get 10% of the lost profit back.

    However I do feel the pain even they were the cost to get my lessons to “mentally modify” my expectations. I should know what I should take from others' words. I should be very selective for what I would take for my mental framework updating now.

    I should know my limitation and run safely and profitably.
     
    Last edited by a moderator: 28th Jul, 2012