Trading Thought for worst!

I know "thought for worst" in the market since IT bust but it was never so vivid as I see it now. It is very bad to lose. It is not good to feel the pain. It is only good for lessons. Hope I would never forget "Thought for worst" after this time I failed to think for the worst!

All about the position and behavior

XAO has been in anxiety for nearly 21 months and it could not sustain the pains and the uncertainty anymore. It is racing ahead in the downtrend and has made lowest point in 25 months. It is a typical reaction "sell first and think later" in panic.

1. in sideline, its irrationality and craziness are obvious.
2. in the stampede of the here, fear and pain are unavoidable.
3. how could you be in calm when the money is burnt by nearly all in the market?

What could be trusted by XAO? Nothing! Good Australia economies and low unemployment rate are nothing could calm the market. XAO is not preparing for worst case but it is calling the worst things in house!

What's the worst case?

So the panic selling raises a question to all in XAO's strampede. How long and how low will this selling be?

No one is sure. Has the damage been done or just beginning? Overoptimism in April put my feet in the valley of death and then I become a warrior in a war. The things were worse than my expectation. XAO was not anxious anymore and was not in denial, but panic and more panic than anyone in this world.

Human sentiment has linkage with the memory. GFC has told XAO that it could not be decoupled from disasters somewhere else. So this time it wants to lead the way into GFC II without matter true or false. Would XAO be 3000 when DOW is above 10000 and FTE was 4500?

Quit possible! Mass psychology is extremely powerful. It could do so!

No too many options if synchronized with the market sentiment

No study is free and the tuition fees have been paid. Could it be too expensive?

I didn't believe I could be so tightly synchronized with the market sentiment. However I have to admit it has happened to me. The wall of worries if accumulated to some size, could crash anything too. I never felt so fragile in the market even when I lost huge paper profit in IT bust.

Why synchronized so tightly?

1. cost run and used-up cash reserve has destroyed the necessary buffer for worse cases.
2. income from labor value is zero and the losses of paper profit and capital is a question mark to my behavior.
3. it is hopeless to get cash reserve in sunny day before 15 August
4. so sell on fire or hold when the herd is stampeding?

Knowing much more about the market since April after my head hit the stone one after another. Could I behave more prudently?

The most important question to myself is:

Could I sell before the market as a whole sells first and thinks later? Could I sell in the time average when market turns to be bullish as a true value investor?

How to avoid synchronization?

Reduce the average cost between the market despondency and relief and lock the targeted bottom line by average profit between overoptimism to euphoria. Learn to identify the growth as base horses for future gain.

No free money and effort-less business and life. If necessary, I should take tropo's advice seriously, reconsider how to use my labor value. When I put money into the property market I prepared to do anything to hold them.. Since I start to play in the stock market, I am generally greedy and never think I should prepare for it. Things to a market is always that if you don't prepare for the worst, you make things worse. It is not a theoretical problem but real one to me until this time I felt the pains.

I would not sell on fire, which could not correct my mistakes. It is the reaction to be resynchronized by market sentiment. I need to evaluate myself objectively for lessons and stay in the market as a prudent business people.

Feel shameful for my greed. Feel hopes due to the lessons I have got from the mistakes I have got. Feel the pain in the market run. Things can be worse than my expectation. I would like to do anything to keep me in the market. The first target is to get my cash reserve back to the level it should be.

For this goal, if necessary, I could sell my labor value again! It is the goal I have to achieve first! No this no market business!

True reasons to think for real worst cases?

When I worked for others, I never worry about the butters and milks, and the capital to keep my job! The salary for labor value provides a natural margin of safety!

It needs a buffer to replace this natural buffer when I put myself into the market as full-time student. As a employee, in our home we could be ignorant and arrogant to deal with the market. Since we have got the buffer to be so.

I quit my job. So I have to set up a buffer by myself first. Did believe myself too much and lose the necessary prudence. What was my road map to guide me in all of the time in the market? In good time it is not a problem since genius and bum both make some money. In bad time both genius and bums could be burnt on fire! I have to realize my labor value first and then get the gain to expand!

I failed to put this buffer as my bottom line goal. Once in worst time, I expose myself on the fire! I can do anything but I could not allow myself on fire. Once it happens, the only buffer is I don't lose all of the consciousness.

The first part of my business plan should be how to go though this worst time consciously and get all of lessons into my bloods.

Panic: Sit On the fire first!

XAO could lead the world in panic selling but I have to hold myself on the fire! I could not lead XAO into the hell and then the whole world drop into the hell!

In the worst case I could stop my full time study and pick up any job for living expenses. The rental incomes is little bit more than the interest for the investment houses and capital in the stock market. Two old couple, in worst case, with their right owned house, don't need too much.

Only one thing is headache: what should I pick up? I don't want to be professional Engineer any more but in worst case, what could I do? In the market you have to be survival first and then you could have chances. $25,000 a year is all for me to hold my shares in worst case, which should not be a number to get if I work hard enough to sell my labor!

 

Never run in mass stempede

You could be hurt much more seriously in mass stampede than you deserve! You could lose the chances to run under the Sun later! It doesn't mean you have done things right before but you couldn't correct your mistakes in wrong way! Do the right things right now and in future!

Tumble and synchronization

1. All tumbles like a crash
2. XAO is pricing itself as though the global economies is crashing.
3. More blood in XAO than anywhere else.

It is very fearful if no buffer behind you! You could be greatly synchronized in panic.

How deeply are you synchronized!

1. if no sync with the spiraling down market sentiment, the dropping means chances.
2. if a little bit synchronized, something wrong in behavior; Hold tightly and buy more when the market as a whole despondent, which means chances too.
3. if greatly synchronized, something seriously wrong in behavior.

• All of serious mistakes happen when individual bullish view synchronized with the market sentiment. Panic is the results you did things wrong before not now!
• The behaviors are featured careless, ignorance, arrogance, and overoptimism with the unavoidable overoptimism biases.
• The market positions are featured as cash run, over paid cost, and used-up cash reserve
• In greed and panic, all of actions are out of order and decided by the feeling
• No road map to get into market at correct timing average, with planned diversified position, and under tough and rational capital allocation
• The failure has been made and damage has been done in the circle of dirty-cheap fishes. They crash before anything else down into the sinks.

Calm down to ask right question with the pains

1. No one would not feel painful while burnt on the fire.
2. Behavior changes need sentiment decoupling between individual and market in panic and greedy.
3. No one like his own insanity and irrationality
4. If don't do right thing on the fire, all of your efforts are useless and worthless. Market needs solution not word twisting to show wisdom!

Wise solution in panic and greedy mind is impossible!

1. don't cry desperately but put probe into the mind and see it honestly and ruthlessly!
2. very tough, extremely hard, and highly unlikely to warriors
3. accept the fact and consequence, which is the cost for learning
4. start your mental inverting from one extreme end to another one until the mind is clear and the light in the darkness could be seen

Don't try to hide your failure.

1. Face it and let people know your faults even you could keep silent to your mate and friends in your social circle!
2. Pretending nothing happen or only glory with you are self cheating.
3. Any cheating will result in more and greater failure!
4. Sobering and pains are good if no panic
5. Find the mental virus and remove them away!

Remember Never run in mass stampede if unfortunately you are among the mass!

So ask a question first before you see the market today:

Would you want to buy at current price if you are completely in the sideline? Yes? don't sell! No? Wait for a few days and ask the same question in a cool mind! Don't know? You have not gone far enough in mind updating and more efforts need to be given on the mind updating for basic!

If we can get lessons in panic and know it enough, we could have chances that we are not warriors anymore. If so, this market selling is good for your future!

 

Easy to say but hard to follow!

Don't synchronize yourself with the market! It is easy to say but hard to do!

1. when market is fearful, cheer you up!

Should be but few can do!

2. when market is cheerful, cool you down!

Should be but few can do!

3. buy for margin of safety!

Should be but few can do! Don't know means and value. How can we do!

4. buy with back up capital

Should be but few can do!

5. buy before market over optimism!

Should be but few can do!

6. buy with time average and affordable capital

Should be but few can do!

7. buy with prudence and great winning probability

Should be but few can do! Market is so bullish and then we hand ourselves in!

8. sell to get the bottom line target first

Should be but few can do

9. sell in time average to lock the expected average business profit

Should be but few can do

10. hold to allow 10 baggers to be true with great reasons

Should be but few can do

11. stay in your corner and make it safe in bad time

Should be but few can do

***
Why don't you do what you should do? I am naturally optimism and then often than not to be over-optimism. I like to say I prefer the guarded optimism, which is not wrong. The problem is I take the optimism out of the guarded area and discard the guard when I feel I am guarded!

Is it problem about genius or fool? A lot of warriors believe so! It is a mental virus and must be removed by the careful designed behavior-change plan. Wrong tools to fix the problems only make things worse! You are insane and then you could use all for your insanity! You are wise and then you would find way to act wisely!

I was insane and then all turned to be the tools to get me mad! It was the fact and if I was in denial, I would be idiotic! If you are idiotic, what and who can save you?

***
What you put into the soil makes what you get!

We don't do what we should do. So genius become bums in the market! Arrogance become insanity! Ignorance turns to be the ticket for the death financially! Cowardice become the symbol of wisdom and intelligence. Selling on fire become fads in the market!

I was in denial to the reality since April! Actually it had been so since last August! In hindsight, I put the overoptimism into the soil and then it is natural and logic I harvest the pains!

What question should be asked after locking big enough profit? The question should be "Could you never let the profit turns to be loss?" rather than cheerful and expose us to the looming correction and crash! Have you accumulated enough cash reserves? Get the cash reserves in good time! The harvest in good time is the best protection for the future crash!

What question should be asked after the market turns to be crash? The question should be "could you find any thing to sell when the market is anxious and in denial? Have you accumulate enough cash reserve to service the desperate warriors? Is the market into the despondence? Is any hope or relied in the market? Could you find the light in the market?

To be humble and prudent for chances and risks

It is a war place. You have to get the process and turn what you do as your job and business! Could you be insane in the offices or workshop?

Somethings must be in our bloods and then we could act as what we should!

We know we should not be greed and panic! We get to be greedy and panic always! Why don't start to change and never allow us to be greedy and panic again?

Don't find excuses for what you should not do! Don't feel for what you will do! It doesn't work and will never work!

 

Lessons in relife

While XAO pauses its selling, market warriors feel some relief. It is not bad to think about what lessons should be remembered.

1. market psychology has been hit hard in last a few week.
2. it wouldn’t take much to stoke selling panic and capitulation.
3. it seems the best time to selling is while XAO hang over around 5,000 from where XAO turned to be anxious and in denial.

***
IT bust and GFC has made a decade nowhere to go. It is true to XAO and all of market around world. Things could be better. It looks likely. So think about the market sentiment cycle and XAO new theme are necessary. What new theme has been accepted by market?

1. Debt crises would haunt around for sometimes
2. No stimulus anymore
3. High inflation
4. Tight money and fiscal policies
and so on!

It seems sure the relief and hope need some way to go before the optimism comes back into its life.

Service plan or strategy

Different people have different parts and functions in the market. If you like to be warriors, you should get into a fund to fight with others' money. If you lose the war, no worries. I prefer to do the service business. I like the profit but not the cruel fighting. The first question is whom you are or whom you want to be!

To service warriors, you have to plan differently and act differently from the warriors. In this sense, my plan roughly is:

1. If buying, it should have good enough buffer for risks.
2. If selling, it should have the profit to lock.
3. To lock the profit you have to allow the market to realize the value or overshooting up, which means you could not buy today and sell tomorrow generally
4. However if one share just shoots up 2-5 times in half year, you have to sell, which means you have get a 10bagger for a year!

Right and decisive!

In the life and market, if anything is important, it should be done right and decisively.

Unfortunately I am not good enough as most of warriors. Before I could identify the gold ahead with 99% odds to be right, I have to be compromised to diversify and separate buying with time average.

I don't trust the rocket in the market and feel it out of my touch or if I use, it only push me into paralysis of analysis. If a system is too advanced I am afraid I would forget my focus should be the profit. Logically I am afraid to hear "stop losses."

If I could get the profit in bared hands in each half market cycle from the market despondence to the stage for it to be in denial, it is good enough for me to run for some times.

Any good things have overlay and cost. I need low cost and high return with the bottom line goals!

Volatile time is good time!

If you know the means and value with the mind of business people and statisticians, the volatile market is a marvelous place to do your business. You could get more cycles to make your profit. The catch is if you don't know value and means, you could get lost!

The trick is after you buy in correction, crash, and any kind of selling on fire, you have to sell to the cheerful market warriors in the sunny days in the market. Don't forget you need the profit for your labor value, the capital to expand, and cash reserve for the market winters!

Don't worry about the powerful system used by the warriors. All of them would be consumed by the market. Don't be distracted by their tricks and system. You don't want to be in the attrition war.

Sell for the crash or correction

If market turns into anxious or in denial, sell all to get the cash reserve back! It is the time cash is king or sooner rather than later it would be! Don't curse the market. It is fair and before you tend to touch the panic button, he always gives you enough time and chances to sell!

After you get the cash reserve, you must follow some process to check the market sentiment, value, and mean again and again. The cash in hand could let you feel invincible. Don't think you are not human and have not human instinct! You have the emotion! You could be greed if you don't have a road map to tell you what your job is unless the road map has been in your bloods!

Your rules, principles, guidelines, and process should be powerful enough, which would let you in prudence so that you could wait and then buy on the worst days when most of market warriors have lost they should lose!. Don't send all of your capital out but get the back up forces in hands.

If the trade doesn’t work out, buying more on the dips after a crash can make sense.

Be remember don't be too clever and forget you have to move just around your corner first and then buy more one after another!

 

Cheapness, quality, and so on!

Dirty-cheapness and falling knifes

I tend to buy dirty-cheap fishes. It is very risky but very profitable if do properly. The inherent problem with dirty-cheap fishes are the effect of falling knife, which seems impossible to identify until too late! It is a place where all could be black swans, good or bad.

Warren Buffett played Cigar Butts until he found he bought a sun-sank company, Berkshire Hathaway and found he had made a mistake. Too cheap but no good value and no tomorrow to run as a business. It was the time he started to buy good companies at reasonable price!

Buy good company at reasonable price

I am thinking to sell my investment property and hope I could find some harbor for them. So in this sense, I have to learn buy the shares of strong, blue chips with good dividend yields at reasonable price.

Someone said "I have stops everywhere in case I’m wrong.” Could we get the cash cow someday later when we grow up in the market.

Change mind is hard and change behavior harder!

Change the mind is hard. I would also learn how to buy the fallen angles in the storm which are strong stocks with solid earnings. Logically it is right we should focus on strong companies that have proven themselves. If the market moves higher, these leaders will move higher the fastest in a flight to quality.

Could we short? Before I could get my feet on long. I would not think it. But if we want, logically we should short weak stocks that have tried but failed to rally.

It is about personal trait. If you just could see the sunshine in the last 50 years, it would take a lot of time to see the darkness in the reality! That is my challenges!

 

Market capitulation and your choices

Global market is very turbulent. Fear and panic hold the people tightly. XAO was panic first after 22 months when it had been pouched in a narrow consolidation channel.

Actually people have sold most they worried about. Most of gains which had got in V-Shape recovery to most middle or small shares just simply have gone, which is clear after I have finished to scan all of shares that their symbols start from Letters A-S. Moms and dads have capitulated long time ago. Professionals have sold ugly, the dogs and swans with broken wings.

The panic last few weeks happened to bargain hunters mainly. Actually before XAO as a whole has been in a waiting mood to sell on fire. All of news were bad but the sale on fire need some triggers. DOW had gone up in a rate much better than XAO and if no better economy prospective, it at least needs a correction. XAO never could act independently. Decoupling was a term to let the moms and dads lost the shirt in GFC. No good leaders around the world, XAO just could follow DOW down and down more.

The selling is do deep and just a few hundreds of points away XAO would be in GFC II. The professionals not moms and dads or bargain hunters started to fear the missing of bouncing back. So today after DOW bounced back, XAO moved up dramatically.

***
Now bear takes DOW's control room again. New fear would spread among the professionals and bargain hunters. How will XAO react to the new selling of DOW? Never have this kind of chances to think about this question or never thought I need to ask this kind of questions.

GFC has changed the way the market herd to feel. Do identify one difference that is gold up rather than down in this selling season. Could the policy makers pump up the global economies into another recession? Would the global economies be in stagflation? Fed seems know this risk very well. It promises low interests for two years. What will Australia RBA do? We have the highest interest rate in advanced economies. What will affect the XAO if lower interest rate and lower exchange rate of the Australia dollar?

One thing seems sure, that gold, if not shoots up into the red hot, would keep at high price if another recession would happen. What is the most important thing to the retail market players? A minimum cash reserves to buy after all just surrender.

However the lowest points actually just could be seen clearly after it happens. If GFC selling took about 3 months to fall down to the rocket bottoms. It seems you have to buy after XAO below 4000 and have the cash reserve to buy more if XAO would be lower than 3500 and 3000.

***
When I scanned the shares of XAO tody, I just asked me a question: is it possible all of business in middle or small size would close the doors? If not, the price at GFC level or lower than that to nearly all of middle or small size shares, is irrational-exuberance.

I have made a series of mistakes since April, but I should not allow me make more mistakes. I am ready to pick up the spade to do anything for holding my portfolio!

This decision is not based on any assumption but carefully check the reality for worst cases in stagflation! So today I bought $7,000 CTO at $0.066. There are black swans and I believe my portfolio as a whole is under priced if gold ultimate bubble just comes in or the risks for the stagflation could force the policy makers to push the economies harder!

The spade would be prepared if no gold ultimate bubble or not red hot for gold hopeful, or economies move forward just a little bit better than recession for too long time. Any trouble or shameful to take a spade for what I have to do? Not at all! If genius could break their wings in the hell, it is never bad for a fool to work in this world!

A man, if can move around, has to do what he should do before falling down and could not get up again!

People tend to pretend they could predict future. History has shown all of prediction could tip off without matter what system we use. Any system could be collapsed in human's hands!

Are you a human being? Be prudent and less arrogant if you are in the eye of the storm! If you have not lost the shirt in GFC and could be in the sideline since then you have missed the V-shape recovery and don't jump in too soon!

***
It was I had to do before I bought anything in the market before last October:

If I felt market was bad enough I would
1. Check VIX to sense the fears of the market
2. Scan all of shares in XAO with Omnitrader and MetaStock to cool me down
3. Do price probability distribution analysis for the target shares for the means and buffers to the means.
4. Consider the plan to allocate the capital for buying and backup!
5. Put the conclusions aside for a few days with the believe some chances would be there!

I haven't used this process above since I locked the profit in last August. I had a excuse since my Omnitrader and Metastock don't work with Window 7.

Partitioned my computer again and installed Window 7 and Window Vista with all of new updating. Now they work in my computer again!

Prudence and wisdom need process to generate! Before I take a spade I would see if I could get a simple way to trade safely in this changed market environment!

 

Bargain hunter, despondence, and capitulation

What make the worst time?

1. bargain hunters feel great pain and cannot sustain the pressure to sell on fire.

2. no too many choices to choose as safety heavens for big boys such as the US dollars and Euros.

3. no any economies could stir the hopes to market herd.

4. moms and dads run away with the cuts and blood shedding which happened between 2008 -2009.

5. most of bargain hunters in retail missed the V-type recovery and came back to market when the recovery just finished. Now they lost the shirts too!

6. the scanning of the shares of XAO told me a truth that is most of bargain hunters in the circles of the middle and small size shares have lost the shirts.

7. the toughest bargain hunters are crying now as me, who were despondent in recent months, and are holding up the white flag.

8. market are not expecting the good news but the worst time since all of the market players if staying in the market long enough know things are too bad but not sure when the worst would happen.

9. no DOW put all of the world in panic and causes the panic selling!

10. This panic selling seems let XAO find its feet in the ruins.

The panic selling tell XAO if global economies become worse, interest rate would be down, unemployment would be up, Australia dollar would be devalued, and then all of the world would work on to push economy up and gold up and up and asset relative price would be up in the inflation globally!

XAO after touching the panic selling, become relieved. It happened in 1975 and each economy crisis in the last 100 years!

If the sky is there, we seemingly have put us at the extreme negative end, or worst case. What if the worst case in hand? It depends on your cash reserve and business skills to manage the risks!

One of my friends asked me what I thought my most serious mistakes in the correction. I said I fail to understand XAO needs the world in the crisis or bad enough. It waits for the worst case. Without it XAO just could not get the gut to do anything positively!

You have to put yourself in the corner and if you don't want to be beaten to die you have to find the way for survival!

 

what if in the storm?

If you should lose the shirt this run, you have got it

If you should sell, you have held the ashes in depression

If you are tough and have process for your business, you have got enough cash reserve in the bank

If you have cash reserves and enough buffer, you might already start to put them in use with good back up forces for the possible and likely further selling on fire.

If you miscalculated all since March 2009, you have paid enough opportunity cost.

If you feel the pains but still could use your mind to think, you perhaps have started to think how to hold what you have got!

If you worries about the sky, you have 99% chances to be wrong since we have got thousands of years in history.

If you are warriors, I would say sorry to you since I fail to do my job and could not service your at best this time!

If you are happy to see my failure for my business, you would be wrong since I would put more efforts to check myself for lessons. Failure is the mother of success if we dance on tap for the lessons!

If you pretend you are best and never lose the money, you could not accept the rule, no loss, no harm, and fail-safe and would like to think as a businesslike people in the market.

If you feel upset for words, you would be upset by the market again and again until you know you should not!

If you feel I am a fool, you are absolutely right!

If you still believe you are genius, congratulation and you should get bless from the God!

If you thought you are a fool, do your job and business in the market, which would cool you down and make you to be organized, disciplined, analytical, and self-reliant.

If you thought you could control your fool's emotion, you would be wrong.

If you put yourselves at the position to be euphoric and panic, you have to be euphoric and panic! It is the right of human kind!

If you are still quite painful, try to find some light and you will feel life is good and really good since human being never have so many choices before, at least you could give up and have butters and milks in Australia!

If you write to teach anyone else who are physical matured, you are the most stupid people in this world.

If you write to share with someones you don't know and yourself and let you feel involvement as a full-time market student, you would get the lessons and benefit since what you want are rational!

Anyway if you choose the stock market for your income and extra pocket money, you are absolutely a fool. It is the hardest place in the this world to realize your labor value! That is why so many play in the market but few dare to get it as his office and workshop!

 

Crying is not loud anymore!

After bunched for a few months, bargain-type warriors(typically the day traders) have less and less energy to cry loudly. When you go around the most popular trading forums in Australia, you would find less and less people have desires to cry loudly anymore.

For example, the traders, who have lost the shirts, around ADY, don't curse it down into the hell any more. No one could continue to cry every day for too long. Our nature would force us to accept the fact. Cursing or predict the tipping off could let us feel wise but after the tipping off or crash in price, the driving forces are gone.

The price has been in the bottom. The damages have been done. The tears have been shed too much. There are still a lot of things to do for the life tomorrow. So it is natural that the market becomes anxious, is in denial, fearful, desperate, panic, capitulated, despondent, and then depressed.

After panic selling, all of things would become slowly. Each warrior has limited money to burn; it is easy to capitulate than you curse others every day; damage has been done and the consequences is there; Feeling is not good and losing the interest in market is the characteristics; and then time by time you would be in depression when you compare what you had ever got and what is left.

However there are some, who are businesslike people with the business plan, operational procedure, and goals, would feel interest about the cheapness and try to find the discount for the raw materials of their business. Yes business could trade things but could not just trade at the cost to trade the business in. If a business could by cheap and produce some gems, who would sell what they got tomorrow? They are not bargain hunters to risk dollars for pennies but business to get the wholesale materials at the price of sale on fire!

Cheer for the selling on fire even I could not buy the absolute cheapness for great discount for the service in the coming year!

Looking back, I did rebalance my portfolio in May in one time. It was not completely wrong but did have too many fatal mistakes. These mistakes caused the cost run and nearly zero cash reserve. The cruelty of market put me in depression much earlier than the market as a whole and open the door for me to get the lessons!

If IT bust made the possibility that I could pass the acid test of GFC and rode the V-Shape recovery in full. I believe I would be benefit by what I have done since April. Now I thought I understand the words, inverting, inverting, and always inverting, said by Charlie Munger.

I have known too much in words but known too little in practice. Now I could link the worst time with the loudness of the bargain hunters and more widely market environment!

Bad gone is for good coming and good is for bad! Cheer for the less and less loudness of the crying!