Thursday, August 10, 2006

Watch out For Offside Traps

This certainly is not bullish time to catch new highs. All the conditions to me are not perfect. I will never forget how easy it was for me to buy at the right time when everyone is making money. So far i'm glad that I have been avoiding making the same mistakes. This is still as important to me as 1 year ago when I started this website. Cut loss is a very important self defense in trading. However it is equally important to know when to trade! If you are off in your timing, you will have to cut loss often. Imagine having the discipline to cut loss but you are cutting more often than you win? Yes this is what happened to me in 2004/2005. Soon after while studying my losing trades, i spotted a pattern. The timing of the purchase was all wrong! All the books and gurus always said, you do not have to trade everyday. It is not how many times you win or lose in the market. It is how much you lose when you are wrong and how much you win when you are correct!!! That's it! Bingo! The key is how much are you winning when you are right about a stock? I look at my big runners, is it a coincidence that they run in bullish rally? So when the market isn't bullish, do you think they will fly? High chance...No! As an employee, i cannot afford the time to monitor for small gains. I need to trade in such a way that i have to catch big runners, leaders! With money management thrown in, it simply made it impossible to profit from 2 cents movement kind of trades. Hence it's important to know your risk profile too.

With HSI trading off it's all time high, Nikkei looking hesistant, Dow Jones failed to clear resistance and STI being flat to downwards biased, it may be time to turn bearish short term. Afterall what goes up must come down. It's good to pull back for a healthy rally. Now that my anticipation of the market is coming true, where we are down today as i wrote down on 7th Aug 2006, it has become a case of market showing me where it is heading. It's time for me to take actions. I will be looking at Put warrants for the next 2 weeks. Please scroll down to read my article abt trading warrants if you are interested.