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Tuesday, 9 October 2012

Reflective Mind and Listening Heart (Stop-loss)



No, this is not a religious post.


Last Friday night, I got stopped-out of my Dollar/Yen trade.

The whip-splash was so quick that the fill was at a greater loss than my stop-loss point. Ouch!

What’s worse than a loss? It’s discovering on Monday afternoon that the price action has swung back; and if I hadn’t cut-loss, my original position would now be in the money! Shssh!


Ah! But the Reflective Mind is able to calm the emotional heart:

“10 times you cut-loss, there will be 2 to 3 times where positions bounce roaring back. Now, don’t you dare say next time don’t cut-loss!

Don’t forget the 7 to 8 times where after cutting loss, you are so relieved that all you got is a paper cut - instead of a Japanese Yakuza finger cut!”

And yes, I’ve not forgotten my $40,000 Jurong Tech lesson – stocks can go to zero!


The Listening Mind nods in agreement. Focus on doing the right thing. We can’t control the outcome. 

Just like we know of people who have gone to the right schools, got the right grades, went into the right company, got married to the “right” person; and at 40, discover the outcome is not what they have expected or wanted… 

The “right” money management technique is not a 100% fool-proof solution. It’s like the house odds of a casino – but over the long term, if we adhere to it, we will come out on top. 

  
Now why is the Listening Mind sniggering?

The Listening Mind can’t help but gave the Reflective Mind a gentle kick in the you know where (not the groin lah!):

“Friend, what were you doing Monday morning till afternoon when you noticed that, instead of the price going further against you, it is slowly recovering in your favour?”

The Reflective Mind thought about it for a while and smiled:

“Touche!”

I was right to cut-loss; but I let the greater than anticipated loss shake me out of my conviction (or lack of conviction to be precise).

On reflection, two things I can improve for the future:

1)    Be more patient for a better entry price.

2)    Focus on the here and now. Yesterday is gone; while tomorrow is unknown.  

12 comments:

  1. Replies
    1. CW,

      Welcome back from your fishing expedition! Got fish?

      When coconut speaks, I take notes. Although most of the time, I only understand 10% on first processing. My pentium 4 CPU can't keep up with that spreader...

      I am lucky to have 3 holy trinity - you, coconut, and temperament - to share your wisdom with me.

      And best of all is the sometimes gentle kick/slap (not in the face and groin ok?) to help in my refections.

      In Zen meditation, they use a big bamboo stick!

      (Younger readers are welcomed to challenge and share your thoughts with me. Just don't forget basic manners. Afterall, I am Da Shu you know? LOL!)

      Delete
    2. Hi SMOL,

      Once i KK trying to be trader which i have been never good at. i decided to cut loss (Ouch!Very painful to the tune of $30K+) Because though the Company claimed they had so much cash balance in the bank, but for 2 years continuously the annual report card shown business was getting from bad to worse. And market's news was not very encouraging too. So i thought what if the bank balance was there just for show (wayang).
      So i bit my teeth and cut loss.
      If i delayed only a few weeks longer, i would have loss another $30K+.
      The company (CHINA's SHIT CO.) is still suspended until now.
      And the cash in the bank was really wayang only.

      What made me to sell all @ a loss of $30k+, i could never be sure. i am never so "smart"
      till this day.
      So you see i am very "Blessed" or "Lucky"
      It depends on how you want to look at it?
      Amen.

      NB:
      i still have some counters to consider to cut loss and accumulate the money to buy better companies. though i am not short of capital for investment.








      +

      Delete
    3. AK,

      It's "big uncle" like in the Korean dramas.

      But hey! There are some "young tooth" that like "da shu" you know? Or is it the other way round?

      LOL!

      Delete
    4. Aiyoh... Too cheeeeem... I am totally lost liao. O_o

      You be "oppa" better. I can imagine you doing this:

      Oppa Gangnam Style!

      Somehow, I can imagine you doing this. ;p

      Delete
    5. AK,

      :)

      I think I must plan for a trip to Korea next year.

      Check-out the local food, wine, and...

      I know I know, too cheem for you. LOL!

      Delete
  2. Yes temperament,

    When we are well capitalised, we sometimes forget a small paper cut - if not properly treated - can lead to gangrene...

    Glad you "saved" the other 30K :) We need all the blessing and luck we can get!

    My post is a gentle reminder to myself not to change or question my money management method.

    I did right; the outcome has nothing to do with whether the stop-loss decision is right or wrong ;) (I've grown a little bit)

    Just kicking myself for not re-entering that trade on Monday morning at a much entry point!

    I've let my previous loss affect my present frame of mind... (still room to improve!)

    The power of reflective mind and listening heart!

    ReplyDelete
  3. hello guys! really busy entertaining my relatives from china. they are here home stay for 2 weeks!

    i'm exhauted haha. my mind is still full of monkeys calling and birds crying (or was its me?) and not forgetting people shouting "PICTURE"! haha.

    got to go again.

    ReplyDelete
  4. Hi SMOL, I didn't know you trade forex!
    I just started live 2 months ago, sitting on a $50-$100 loss now :X

    ReplyDelete
    Replies
    1. Hello talesteller,

      I am into futures besides equities:

      Equity indexes - SIMSCI
      Precious metals - Gold and Silver
      Energy - Crude, Natural gas
      Forex - AUD/USD, EUR/USD, YEN/USD

      At the moment, re-reading my Geography textbooks to prepare for the agricultural complex ;)

      Now I spend lots of time in the library doing research.

      Study not for exam; but for practical application. This I like!


      As for you forex loss, we all have to pay our "school fees". Stay cool. Just don't let a good learning lesson go to waste ;)

      By the way, congrats on your Midas. This counter was my recent swing trade that pays for my upcoming Shanghai trip :)

      We win some; lose some.

      Delete

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