Sunday, 2 March 2008

The Trend Is Your Friend


(FS STI chart)

The Trend Is Your Friend. If there is anything of value which i can share with you, this will be one of it. Always respect the underlying trend in the overall market. This is one of the longest correction which the market (STI) has experienced (from early Nov to end Feb) 4 months and it is still counting. The previous corrections are in August 07 (one month), March 07 (one month), May 06 (2 months). It seemed like the overall market has already embarked on a downtrend. When the market trend is down (where all the moving averages are pointing and sloping downwards), the trading strategies will be to either short the market using futures, warrants, CFDs or Share borrowing, or to play quickies on the long side nimbly.

If there is another lesson which i can share with you, it will be to cut your losses quickly, especially when you have the advantage of being a small trader. If you are not in the league of Oei Hong Leong, then my suggestion is you cut your losses quickly when you are wrong. Investors like Mr. Oei really have my respect. He is really one of the best market timers around. I remember Mr. Oei getting out of his positions way back in 2007 when the market picture is still rather rosy. He has to do that early because he holds huge positions and need to get out while the market is bullish and liquid. I still have his article advising people to sell stocks and hold cash tightly lying somewhere around...
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