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| Wednesday, November 14, 2007 |
| Take buy calls from others with a pinch of salt! |
Recently, I have scrolled around CNA forums and realized that there is a flame war going on bashing Richard Phua and his calls. He was from SI and had a rather huge following with his tips etc. Recently, market has taken a down turn and any kid will know that prices of most counters will drop. Does that mean that without bad sentiments, his calls will be good? This is difficult to say. Rumor following has always been a risky affair, as we are betting on an unknown.
But anyway, those that followed the tips have to bear the blame if they lose money.
In forums, we often see buy calls from forumers all over (also known as koyoking). We must always take such calls with the assumption that they have vested interest. In fact, even the analysts report that we see could also be said the same. The keyword here is to generate "INTEREST". Broad based interest will push the price up. It could be said that no one is bigger than the market, but if there are a couple of contra players, it could definitely surge the prices to unbelievable heights. It is usually at this time that various parties will distribute to the retailers, locking in their profits.
Even for small blogs like mine, I also tend to post stuff biased to my holdings. For example, I will say that CAO, FerroChina, AsiaEnv, PacAndes (maybe not this) is a good buy. I might be koyoking as well, who knows. But one thing readers should know is to take such calls with a pinch of salt!
If you do want to follow, weigh out that person's analysis, be it fundamentals or technicals. Understand the risks involved, allocate a comfortable amount based on your overall portfolio, devise something to reduce your downside risk (For me, it is basically cut loss triggers, not sure about how fundamentalists do though). You see, its not just as easy as "Your call is good so I just have to follow you". In the end, only you yourself is responsible for your money.
Luckily, for my case, I'm more of a hindsight trader. So my trading actions are determined by things that already happened, for example, a reversal from a correction. So its not as dubious as it could be done with a very systematic approach. I know that for my style, the crux lies in asset management rather than stock picking. So my focus is usually on honing this aspect of my trading.
Anyway, its getting late, and I need to rest. Just remember that most of the time, if the person states a buy call, more often than not, the person already holds the position. So always be wary of wolves lurking around, especially those that gives 100% certainty that it will hit a particular price in xx number of days because if such certainty exist, I'm sure he will use all his assets on this counter instead of sharing it.
P.S. a stock is pumped because there are people buying at a high price, and the most likely sellers are those that paint the rosy picture. This in my opinion, includes everyone, from bloggers, to forumers, to professional analysts. |
posted by Nenix @ 2:29 AM   |
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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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