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| Tuesday, August 14, 2007 |
| Lessons from it Part 2 |
Haven been blogging recently partly because of school reopening. Another reason is because I need to rethink what happened and why I reacted in that particular way. Recently, all should know about the global wide "correction". thinking back, it is such situations that I am possible to exit my trade, at profits or loss. However, during the correction I made few mistakes.
1. I bought back shares on impulse with the hope that it will rebound.
Of cos, it may or may not rebound but judging by predicted growth rates etc, it should rebound. But wait, thats me hoping that it might rebound. A good trader never hope for things to happen. I failed miserably this time because I bought based on hope and as a result, I didn't have any cut loss mechanism to guide my trades. Indeed, I am running like a headless chicken in this case. The cost of this lesson is great and I made 50% more loss than the "unavoidable" losses that I exit based on cut loss. My fund dropped from 1.7+ to todays 1.40. Thats a 17% loss. This also means that IF I didn't had itchy fingers and a weak mentality hoping that this will recover because most people say so, I would have cut my losses to about 11%. This loss is 1% more than my worst case scenario simulation.
I have now pasted an A4 size paper on my cupboard indicating my loss. This will serve as a reminder everyday for as long as I trade. Seriously, I hate myself for crumbling at the crucial moment.
2. Losing faith in the system when it matters most
It is disappointing to even state that during the correction, I have temporarily lost faith in my system. I forgot that in trading/investing, there will always be times whereby you will lose. I have stated that trend trading's main disadvantage is that it you act when a trend is clearly defined. There will be many times whereby you have to go through such periods and its at times of such uncertainty that I have to remain calm. I have failed to do that.
I have now printed a checklist when I buy shares. I must answer the questions clearly before buying. This will take out the impulse buying that I sometimes have.
If the market does rebound, it will hit my buying indicators for sure. This time round, I will buy only on triggers and nothing else. Top up will be on 1 day after rebounding on support level. I will no longer do cost averaging (99% sure). Each position will be characterized by its own cut loss point. Exit strategies need to be refined though. To wide a cut loss means that I might be too late. To narrow a cut loss means that I will be incurring a lot of transactions.
But anyway, all in all, my fund price is still a $1.40. This means that I am still having a 40% since last August. Nothing to be proud of but I think its indicative that my method does work. |
posted by Nenix @ 8:18 PM   |
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| NenixDreams Fund |
| Fund launchprice on 1st August 2006= $1
Target for 2007 = Beat STI index
Current price of NDF as of 1st Oct 2007 = $1.58
Current price of STI as of 1st Oct 2007 = $1.54
Difference with STI index is 0.04
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