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Monday, 12 January 2015

CFDs anyone?


This post is for those who have "Learn by Doing" as their predominant learning style.

You'll be amazed how many people have strong views on certain matters without personally experiencing or trying it out for themselves. 

I know learning from other people's mistakes is wise, but to go through life parroting this is what this person says, that person said, I mean do you have an opinion of your own?


Leverage is bad

How do you know? 

Warren Buffet says so. 

But he owns an insurance company. 

Is using Other People's Money (OPM) not leverage?

Did you use debt to buy your apartment and your car?

So is your fear of leverage logical? Not very consistent are you?

I am not saying you go crazy and use 5 times leverage with CFDs. Just "tikam tikam" 2 times leverage and see for yourself.

It's not about making more money. That's greed.

It's more to see if you can sleep at night using leverage. If yes, there you go! You now have confidence listening to yourself.

If you can't sleep, you confirm confirm know trading with leverage is not for you! 

The good thing is now you can tell others its because you know so! And not because Warren Buffet says so. See the difference?  



Profit from your own homework

As a long only investor/trader, you have done homework on several stocks and found one that provides the best risk/reward proposition. It doesn't matter whether you've used fundamental or technical analysis. And that's the stock you bought right?

How about the rest of the stocks you passed over?

Is there one that is so grossly over-priced or toppish in your view that you murmur to yourself only a fool will buy at this current price!

How about profiting from this conviction from the other side?

Why let all that hard work go to waste? 

Again its not about asking you to bet huge sums on shorting. That will come later when you have mastered the craft of shorting stocks.

Before mastery, you have to take the first baby step in shorting to see if it's OK for you; and you don't get struck by lighting! To hear some talk about shorting, it's like talking about blasphemy!?

No you won't die, or go to jail. The most lose money - just like buying high selling low like you already do now. Just the reversed No difference what?



Johnny come lately

If you are the type that likes to buy stocks on tips and follow the buys of others, but somehow you tend to lose money 90% of the time, how about using yourself as an indicator?

You are at the bottom of the information food chain, but if you have a mind-flip, you could be the canary in the coal mine!

The moment you are excited about a stock, it's time to sell!



You pessimist you

I can't remember where I read this story but it goes that a money manager has an analyst that consistently gave the "wrong" buy and sell recommendations. When asked why the money manager has not fired this analyst, the money manager replied if he did, where would he get the inputs to fade this analyst bad calls and make money for the fund?

Don't laugh! 

Try this trick next time you're in a casino. Spot the person who is down on his luck and bet against this person and see if this strategy works!


Some of us are more pessimistic in nature. You may have an edge in that you can spot trouble or bad news long before others.

Perhaps that's why after decades in the market, you have not made much progress. All this time, you have been trying to fit a round peg into a square hole! Silly you!

Maybe your mind works like the short specialist Jim Chanos of Kynikos Associates fame? 


Why CFDs

First of all, share borrowing is not that cost efficient for retail unless you can borrow shares directly from Prime Brokers for shorting - but that's the realm of accredited investors.

CFDs is much more cost efficient and administratively simpler.

But don't take my word for it.

Explore yourself! Own time own target.

You may want to check out this website as a start: Features and Benefits of CFDs

By the way, for those of you who will be attending the 17th Jan 2015 Bloggers thingy, I found out that CIMB CFD team will have a lady speaker at this event too. 

So if you interested, come prepared and make full use of the Q&A time.

Guys, the lady speaker is quite easy on the eye. If you are coming with girlfriend or wife and not convenient to ask, buy me coffee and I'll find out her number for you ;)

Deal?

I sad case or what? What do do? No job what? Will do anything to get a free meal or drink :)



P.S.  This is not an advertorial OK? I am not plugging anyone nor am I paid to write this post. Last time another reader asked about Futures I also "hantam bolah" gave him another broker's website to explore. You guys are adults; I trust you can do comparison between 3 shops before buying?

33 comments:

  1. CFD brokers are mostly at such seminar or talks. Can't remember one without them.

    Got gift or not?

    ReplyDelete
    Replies
    1. CW,

      I guess that's how the organiser managed to keep the ticket price so low...

      Keep expectations low ;)

      This way, anything extra will be a bonus!

      Delete
    2. Quote: " the lady speaker is quite easy on the eye."

      Got special preview for all speakers including lady speaker?

      Delete
    3. CW,

      I'm just the Joker amongst the Kings, Jacks, and Aces.

      I got no interest in men. Sorry. No previews on the male speakers.

      But if girlfriends and wives come, I believe they got ice-cream targets to feast on - especially those who like dee dee.

      I heard it's quite fashionable now!? 姐弟恋?

      Shit! I missed the boat again!

      Delete
    4. Boat is sailing to you soon. You now famous!

      Delete
    5. Ha! Ha!
      SMOL, i can't help laughing CW says, "Boat is sailing to you soon. You now famous!"
      Sorry i have to agree with him on that.

      Delete
    6. But I still look like toad :(

      Don't try to sweet talk me.

      If I get a "tok kong" question from a male audience in his 50s, I'll shout "Fisherman!"

      "Can I have a mint please?"

      Delete
    7. temperament,

      Ya, all of sudden, CW cares about my singlehood... Sob, sob. My ass!

      Hope more of the audiences will be like CW - poke, poke away!

      I am not a guru; I am "ka ki lang"!

      Who's kidding who?

      Looking forward to scintillating Q&A at the end of the session!

      Delete
    8. Mr Toad. Right?

      A boat with Princess Swan who will be singing.

      I am sailing. To be near you. To be free.

      Remember you said something like this. Right?

      Princess Swan: Shut up! Come and kiss me!

      You turn into Prince.


      Delete
    9. CW,

      Wah! You now into selling dreams!

      Now who's the snake oil salesman?

      Delete
  2. I opened a CFD before, in fact, I check few weeks ago if my account is still active.

    Hell I swear never to touch it again!

    1) Not many counters can be shorted. S chips -- many of them
    Cannot be shorted using Lim and tan CFD

    2) I super suay!!! I short genting when it is 1.8/1.9 cannot remember when. My broker call me and ask me to close position, say indicator is bullish, or top up account. I said I thought I still have some leverage space. Then he explain the leverage system which I did not understand... Hell I hate it when I dun understand. So I close position and lose a few hundred!!! Freckling hell, it had a bad quarter as I predicted and went as low as 1.6!!! Bloody hell.

    3) I super useless!! The lim and tan platform need to scroll to the right acc, one is normal and the other is CFD, the Interface don't really change. I f** wanted to take profit from from trek when I end up buying !!!! Shit!! And I did it twice!!!!! I swear the hell I am been punished for trying to gamble, I stop using lim and tan altogether and went back to my Uobkayhian long only acc!

    Call me pandan and silly. Unless I want to try hedging technique. I will never short again!!

    ReplyDelete
    Replies
    1. Sillyinvestor,

      1) To be clear to other readers, no CFD broker can "force" you to close a winning CFD position unless you have hit the margin call limit. Your broker is merely being diplomatic with you - you need to top up or close the account. Hello?

      The advantage (or disadvantage) of margin call is that traders quickly learn what they lack in the 3 Ms - money management.

      Some admit what they lack and start exploring what is position sizing, cut loss, single trade and total portfolio risk management, and so on. The list goes on and on! If easy why only 5% profitable?

      While those who refuse to acknowledge Money Management will go back to plain vanilla equities long trades. And if the trades goes against them, it will become a long term investment. See? I am in it for the LONG TERM! Yeah right!


      2) I wonder if you student gave up after one test, what would you say to them? LOL!


      3) I must give you props for testing CFDs and shorting! At least you have tried it BEFORE giving an opinion. We can definitely see the passion in your comment! Got bloody, got swear, got F word.

      Power!

      Stick with what you are comfortable with :)

      Delete
    2. SMOL,

      To be fair, I do not blame the broker. I did ask the broker to send me the formula to calculate the leverage ceiling which he duly did. I am saying I am not cut out for it, not saying it is not a good avenue to make money. Maybe I young and lazy then, that was 6 years ago? I think if I can understand DCF and look into WACC formula, I can understand the leverage ceiling.

      Just want to keeps way for circle of Incompetence first.

      Delete
    3. Not necessary CFDs on margin trading. Your broker will call you for margin call.

      For active contra players, brokers may also call us if our positions are too big for their comfort on bad days.


      Once I was called in the morning and then in the late afternoon on the same day to pay up or close positions.

      Brokers have their own risk management to follow; otherwise they may become broke and not brokers. LOL!

      Delete
    4. Sillyinvestor,

      I always knew you are a man of reason when you have calmed down ;)

      First things first. Leave aside investing and the financial freedom for a while.

      This is probably more priority:

      看山则心静,看水则心清

      Delete
    5. CW,

      Another fair word from the fisherman. If we get careless with our position sizing, who's to blame?

      That's why some institutional traders self-destruct when they leave their firms to trade on their own.

      Without a risk manager to reign them in, they become another Nick Leeson...

      You think its easy for me to discipline myself not to add funds from my investment account to my trading account?

      It's never the tools. It's always who is wielding the tool ;)

      Delete
    6. Thanks SMOL,

      About 看山看水,after the episode of inner demon, I feel much better at ease.

      I am more frugal and cheekily ask for cheaper options when dinning out. Not that difficult actually. But I do not want my wife to feel "poor" and go through what I felt. If she wants something, I will try to make plan fr it.

      In certain sense, I want enough of money, I have kiss my finacial freedom goal goodbye.

      Not that I should not work for it, happy can liao, as long as I and my wife do not become burden to children or society, which I seriously think will not be the case, letting go of that dream is 't really that painful.

      Now, I confidently say I am not deluding myself. I working for my house to be in stronger order, but no need to 强求,强求also cannot get.

      Thanks for listening!!

      Delete
  3. Ha! Ha!
    Don't CFD or short is O. K. too.
    i think CFD is quite "dangerous". i think most of the times you may be betting against the house. And of course the house will have house advantage in the end like a Casino.
    But then some peoples do make money from the Casino.
    Anyway we need all types to make the market. If only one type no market liu.
    You can go and read in VBs. i think they have a topic on CFDs. Then may be you will reconsider to CFD or not.
    Me never want to CFD. i am too slow "witted". Further more, i think you can not CFD without leverage, using your own money only. Then what the house eat?

    ReplyDelete
    Replies
    1. temperament,

      There must be "investors" out there who regretted listening to "well meaning" advice in 2009 not to invest in equities. Stock investing is SO DANGEROUS! Market just tanked more than 50% you know?

      Everything is dangerous if we no idea what we are doing ;)

      Just like some Spot Forex Brokers, some CFD brokers are no different from bucket shops of old that you were familiar with.

      There's a reason why some brokers go for cut-throat commissions to lure the "greedy". Those who go for "cheap" deserve the risk they are taking just to save a few dollars...

      Leverage instruments are DEFINITELY not for everyone.

      But the ability to fly with BOTH wings is another story.

      Especially when one has invested time and effort into the doing our own homework.

      Imagine going into a casino and the house rule states you can only bet black at the roulette table. Is that advantageous for the bettor or the house?

      Delete
  4. SMOL, i like this quote best and agree with you! :)

    "How about profiting from this conviction from the other side? Why let all that hard work go to waste? " LOL

    ReplyDelete
    Replies
    1. Thanks Mr IPO ;)

      If we can only "recognise" cheap as in value for money, but can't "spot" expensive as in over-priced, then something does not add up.

      A motto from my ex-company comes to mind:

      Much work remains to be done.


      P.S. Nice pics from your trip to San Francisco! Ah! Those Calamari reminds me of my island hopping days in Greece ;)

      A bit of sun, a dash of sea, a little breeze, plus wine, women, and song, what more does a man want?

      Delete
  5. This Guru who has the ball to show his trades on his ex-blog close to real time with details and charts.

    At that time he was Chief Trainer and Chief Strategist. (Title with Chief. No play. play hor)

    Why he later stopped blogging? Think for yourself.



    Read? Does Shorting always win in a bear market?

    ReplyDelete
    Replies
    1. CW,

      It's par for the course. Just like those who went broke going long in a bull market. Blumont, Liongold anyone?

      How about those who bought Wilmar, Noble, and Olam? OK, not broke, but not exactly happy these stocks are not participating with STI's rally is it?

      STI above at 3300 is nearer to it's all time high than ever before, but there's quite a few stocks that are nearer in price to their 2011 or 2009 lows...

      I am merely throwing a brick out to see how many are doing their OWN journey of self-discovery?

      Some after this journey may decide shorting stocks is not for them. Maybe Trading around a core position works better for them?

      A long time Keppel investor may decide if Keppel goes beyond $11 next time, if would be prudent to SELL 1/3 position?

      If Keppel goes up, make less but still make what?

      If Keppel goes down like now, hei hei! Now got the funds to wash, rinse, and repeat.

      Taking some money off the table is a variation "shorting" - if we don't let words bind us.

      Same methodology - when we recognise something is "not cheap", we "sell".

      It's just called "sell" when we have a prior position in the stock.

      It's called "short" when we don't own a prior position.

      Cookie; biscuit. Lorry; truck. They are just words ;)

      Delete
  6. Hi SMOL,

    A solid article as usual!

    The comment section is even better!

    Looking forward to your snake oil presentation and please inject, if not maintain, the same level of humor in it as well!

    ReplyDelete
    Replies
    1. L Young,

      Thanks!

      The credit must go to the sporting readers ;)

      This watering hole does not practice one way street kind of "I tell you so" or "If you believe me follow me!"

      Anyone has an idea or conviction?

      We put it to the Royal Rumble test of public opinion!

      After wrestling with CW the Hammer and temperament the Anvil, I a bit winded liao leh... These 2 qian beis give no quarter one.... Tag team me some more... LOL!


      Make a wild guess why I am relegated to the warm up opening act?

      Like K-pop groups, some are responsible for dancing, some for vocals...

      I am responsible for "visual".

      Excuse me while I do a Merlion on what I've just said...

      There is no shame in man-whoring ;)



      Delete
    2. Not lady speaker first?

      Thought normally that will be the sequence. No?

      Delete
    3. Hello!

      You implying I not pretty enough?

      Insect!

      Delete
  7. "Taking some money off the table is a variation of "shorting" - if we don't let words bind us."
    Unquote:-
    Well put.
    What are you going to do if your 80% to 90% of your capital is still in the market(Long) ? Unless you believe in B&H&F(forget) type, you will find ways to hedge your position (Short). But hedging cause money and not so easy to work out properly.
    So taking some money of the table is a form of hedging too (short). Most people may not realise or agree to that.
    Read:-
    http://trendfollowing.com/whitepaper/JM_TailRisk_611.pdf

    ReplyDelete
    Replies
    1. temperament,

      Yes! I was hoping not to be too explicit as its best for readers to discover it on their own.

      I hate to agree with the fisherman (bang my head against the wall everything I do), but just look at what he did (or rather did not do) in 2007 versus now in 2015? Which version of him can sleeping soundly in bed every night?

      Going from equities to cash is a pairs trade = long cash/short equities.

      Moving from cash to equities = long equities/short cash.


      It's all in the "Mind".

      Interested to know more about protecting profits?

      http://singaporemanofleisure.blogspot.sg/2013/09/the-3-ms-part-2-money-episode-2-of-2.html

      Delete
    2. temperament,

      I am already past Confucius' 四十不惑。

      Soon I'll reach 五十知天命。 (I am ahead here as I discovered my ikigai at 44)


      I don't go round seeking approval from others ;)

      I can do my own reflections and form my own opinions (does not mean I am right though)

      I guess that's why you, fisherman, coconut, and others like to banter with me?

      You know you are not talking to a parrot ;)

      Delete
  8. Wow!
    You really great.
    You are really doing very well.
    i just started to learn how to invest at the age of 40. Still quite blur like sotong then. i think CW (IIRC, if not who then?) or someone just started investing even later then me. i think we are late to very late developers. So be it then. It's always better late then never, so the saying goes.

    ReplyDelete
    Replies
    1. temperament,

      活到老,学到老。

      The Japs call it Kaizen 改善.

      Ang moh call it Sharpening the Saw.


      Keeps the mind active to find more techniques to limit our losses and avoid giving back too much of our profits back to the markets :)

      I'm not smart; but I very curious like the cat?

      LOL!

      Delete

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