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Tuesday, 15 August 2017

The "Free" Trade/Hedge


Shorted the Simsci at 368 Thursday night.

Friday afternoon it closed in the money at 363.7 during the day session.

Weekend no armaggedon.

Monday morning got profit-stopped out at 367.7 during the first 30 minutes.


Well, that trade ended quickly... LOL!




When we returned from our overseas vacation safely, the travel insurance premium we paid is money flushed down the toilet.

Wouldn't it be nice if we can get our money back?




Review your investing diary or trading journal.

Have you noticed if your entry is good, better, best - your chances of getting out unharmed were greater?

It never was about market timing; its about risk management.


OK, not everyone trades with 10:1 leverage to appreciate the nuance I've just said.

Let's illustrate with an example:

If you have entered Keppel at $2, at the current price of $6 plus, it feels like a "free" investment. (If you let this position turn into a loss you have no one to blame but yourself)

Contrast it if you have bought Keppel at $10. 

Making less and losing money not even close to "same same".




Using dividends or entry price as panadols - your choice.






8 comments:

  1. SMOL,

    You good liao!!

    Insurance against armageddon --- Free.

    Peace of mind over weekend --- Priceless.

    ReplyDelete
    Replies
    1. Spur,

      No choice.

      I don't have a regular day job or have a side business as in giving workshops or courses.

      If I lose money, I "eat wind".


      Like I've said, markets exist to make a fool out of me.

      This morning Simsci went up to 369.85 - makes my decision to get out without a loss yesterday a prescient move.

      Now at 13:00, Simsic is 366.35 - bei kambing me in the past will say, "See! If don't sell now in the money again. Sell for what?"

      Hope is not a strategy.

      I can only control my entries and exits.

      What happens to the price after I've bought and sold I've zero control.

      One hour it would prove me right, another hour it would prove me wrong - like my trade above ;)


      STI seems to have gone independent. Rest of Asia and US futures in the green.

      Only we and our bro in KLCI in the red?

      What gives?

      Someone don't like our banking stocks today...

      Delete
  2. It is always at buy level that determine our future.

    ReplyDelete
    Replies
    1. CW,

      When I was a buyer in retail, there's an adage:

      A merchandise well bought is a merchandise well sold.


      We'll investigate a buyer who is "nonchalant" on entry prices - either he/she is incompetent, or he/she is "eating money"...



      Delete
  3. Hi Jared,

    At this point of writing, MSCI Singapore is down 0.97%. You were right but did not make enough money as you should. No no, I'm certainly not rubbing it in. I humbly admit you did far better than me. I never like to talk about personal trades but if I do, I prefer to talk about losses because it always make the audience feel better:) I recently made an initial foray into futures. I lost money in EVERY single trade(only a few, fortunately) so far even though like you, I would have made money if I had held on longer. Because of the leverage in futures compared to stocks, stops have to be tighter to manage the risk. Setting stops is like an engineering problem of choosing the best trade-off. Too narrow -> suffer many losses but each of them is small. Too wide -> each loss is big but the number of losses is much fewer.

    Experienced traders who are seasoned to taking losses know that you took a good loss. You're a good trader.

    ReplyDelete
    Replies
    1. hyom hyom,

      1) Eh... You misunderstood. It's a profit-stop; not a stop-loss. I did not lose money ;)


      2) My post was to show if we've entered at a good price, we can still get out unscathed when the market suddenly turned against us. A free trade!

      I hate to let a winning trade turn into a loss.


      3) Traders don't let what happened AFTER our exits dictate whether a trade was good or not.

      A bad trade is still a bad trade even if I made money. For eg, by not sticking to my trading rules.

      Do that enough times, my trading account will blowup sooner than later...

      So in this case, I am glad I've stuck to my trading rule even though I was "right" but did not make money :(

      Like I've said in my latest post, 7 out 10 I'll be "right" eventually.

      But to avoid those painful 3 out of 10 gut wrenching disasters, trading rules are there for a reason ;)


      4) I practice trading discipline - better entries; better exits.

      Delete
  4. Hi Jared,

    Ahh .. my mistake. Shorted at 368, closed at 363.7. That is a profit, not a loss. Small profit but still better than my recent performance in futures. Good for you. While rules may differ from trader to trader, the good ones all share one thing in common. They have rules and they follow their rules. That makes you a good trader, win or lose. I wish you all the best in your trading journey.

    ReplyDelete
    Replies
    1. hyom hyom,

      And likewise to your journey in the futures market ;)

      Have fun!

      Delete

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