Saturday, March 19, 2005

Decipher on Trading the Stock Market

I'm a trader who has been trading since Mar'04. Along the way, I found that the same mistakes have been re-occurring and these must be avoided! Hence I started to blog my trading experience. My objective to trade is to achieve financial freedom. Job security is a thing of the past. I learnt the truth after having seen my own job being outsourced. I asked myself, how am I to compete with young graduates when I’m 40 years old. What skills do I have to survive on if I lose my job tomorrow? Then I found trading. This is a level playing field where even PhDs or scholars might not make a good trader. Trading is a lifelong skill which I must acquire. No office politics, no pay freezes, no datelines to meet, just me against the market. I get rewarded when I’m doing a great job and I will be punished if I am lazy on the job.

If you have followed by blog long enough, you should have seen how I was bleeding from over trade. I trade far too much and randomly picking stocks that I anticipate its share price will appreciate. This style is suicidal. My last straw came when I dump HGM on 4th August 2005, it was my turning point. You can read about it in August Archives. After selling my losing stake in HGM, I step aside from trading and read 3 books. I came back 1 month later and am now sitting on paper profits. Lessons I learnt were recorded on my website. I learnt that money in the stock market is not easy to scalp. Growing money slowly works better for me.

There are 3 things you can do in a stock market, buy, sell or hold. There are also times when you should buy, sell or hold. I learnt to sniff and decipher the general market mood every night before I decide to trade. The most important of all, I don't lose money unnecessary anymore which is psychologically important to me.

I shared my mistakes. By avoiding my mistakes, you are avoiding a trap. Think of the stock market as a life long journey with many booby traps along the way. By knowing what I done wrong, your journey will be 1 trap less.

When I first started out in June'05, I traded rashly and was showing on my blog more losses than wins. I even joked to rename this blog to how not to lose money blog instead of grow money blog. 3 month later, finally GrowMoney blog has become a good place for stock picks.

I have tested many trading systems along my journey. So far I like breakouts the best. I am never good at picking bottom. It never fails to show me that the low gets lower. Cosco Corp & Hyflux were good examples of what was perceived as expensive, continued to get more expensive. Price of the counter is just a number. I rather spend more time thinking if it is going up then be bothered by if I could have bought at a cheaper price. This is human psychology where we are tuned to buying at cheaper price. Who doesn't like a discount? If you are an investor, getting cheaper is good as you can increase your holdings. But if you are like me, a trader, I rather am sure that the moment I buy, it will be going the direction I anticipated. Otherwise, sitting on paper losses affects me psychologically and also illiquid my funds. To win in trading, you have to separate yourself from the crowd. This is what I always heard and read, so this is what I’m trying to achieve.
Trading breakouts require 2 conditions, the patience to wait for it to happen and the discipline to cut loss if proven wrong. Also, I only use technical indicators to judge the buying/selling sentiment of the stock. I would never buy blindly when the indicators are shouting to buy.

I noticed many people had a similar problem. They are only concerned with "Have you make money overall?" It is not how much you lost in the past that decides your future. Rather, it is how much you are going to make! Be forward looking, why bother to look back and sulk?

If you are not making money and hoping that your dead stocks rebound, I was just like you. Then, I was tied down by my HGM and while my friends were making money, I was covering my losses. That is when I decided enough is enough and started to get serious. If you are like me, I advise you to change your whole trading methods and psychology. Get a book and read it. When market rallies, as a trader you should be making money.

In 2004, it was a bullish year yet I had my worst time in the stock market. I think the timing of buying even in a bullish year is important. I then read my own archives and saw my own journey from June'05 to 2006. I tried to find a magic formula that will give me almost 100% trades. Of course, I failed, there is no such thing in stock market. Then I began to read a lot and scaled down my risk and begin to note down what I did wrong when I lost money. From Sept - Oct '05, I missed out some of my own picks which became big runners. I had 20% to 50% paper profits reduced to 10% or less. Again I noted down why I missed so much of my paper profits. During the sideway and quiet trading months of November and December, I made some good stock selections and made some money here and there. Fast forward to today, again I am sitting on paper profits. Although luck is important, I believe my hard work in learning from my mistakes and avoiding them plays an important part too. I'm not telling you these to impress you or to make you come back to my site everyday. Rather, my wish is for you to stop losing unnecessary money. Learning from mistakes is very important in the Stock Market.

When I lost money in 2004, I did made 2 good wins of 20% ROI... Junma and HGM...of course along the way, they took back everything from me too. But the point I’m driving at is these are the reasons why I never gave up trading. I knew the books were right, all I need is a few big winners and I can have massive wins! Now closing my positions on Ho Bee and Capitaland, I had effectively recovered 50% of my total losses! This is achieved in just Jan'06. If I continue to trade the way I am now....I’m sure 2006 will be my most satisfying year! Not because I win back my losses but most importantly my trading skills improved! As a trader, do not think of profits first. Learn to Survive in the market and then go for profits...then massive profits!!! Learning the skills is more important for the benefit of the long term. Again I wrote all these not to impress you. My main objective is to get you to learn with me, stop all the mistakes that are re-occurring. They are hurting the pockets!
I read some very good books on trading and will re-read them up to 5 times until I can understand the concepts at times. Through the years of practicing charting, I have managed to present some of the best trading opportunities on my website at . This website serves as my trading journal which I will write down my psychology, money management rules and trading systems experience.

I am also very lucky to meet some of the greatest people on the internet and they shared unselfishly their wealth of knowledge to me. Hence my blog has been kept free for anyone who wishes to learn technical analysis as a form of returning what I received.

Many a time, visitors wondered how Decipher had this energy to keep his blog updated with free information each night. The truth is that it is monetised by Google Adsense program which motivates me to continue this free sharing. GrowMoney blog is an affiliate of Google Adsense program where Google will deliver related advertisements to my website and Decipher gets paid if visitors’ are attracted to the advertisement's value and would visit them.

Yours truly,
Author of