Sunday, 26 October 2008

Trading for a Living

I attended Dr. Alexander seminar on Saturday and managed to get him to autograph his new book "Sell and Sell Short" for me. Dr. Alexander Elder is the author of the book "Trading for a Living" which sections on Mind, Money and Methodology helped me during my initial years of trading. However, my trading methodology has since 'differed' from him and it is good because as i mentioned, trading is a very personal journey which you have to walk yourself. If you fully rely on your broker or your friends to give your tips on what and when to buy and sell, then trading is not for you. You have to walk this path yourself and pick and choose a style that suits your character. You must know yourself first before you can embark on a trading journey.

The key difference in our mindset is that i prefer to trade in the direction of the trend whereas Dr. Elder prefers to do counter trend trading. Remember, "The Trend is Your Friend". Trading with the trend allows you to have wider stops and better profit potential. Whereas counter-trend trading requires strict money management and has less room for error. Why bother to catch a falling knife? You will cut yourself inevitably one way or another. The inability to cut loss is what kill most traders and investors and i have to stress that for anyone who aspires to be a trader, cutting loss is THE most important lesson which he or she has to master.

The current market is a very volatile one. It can be up 5% one day and down 8% another. DBS hit my target of $10 within one week after my posting last Sunday. What can i say? Am i a Guru? Of course not. If I am , i would have shorted DBS with all my available cash already last monday. hahaha. As you know, there are 3 positions you can take in the market. Long position, Short position and No Position. Many people failed to realise that No position is a position itself. That is one of the reasons why i dont like unit trusts. Fund Managers has to be vested in equities all the time. Even if they are 'bearish' on the market, they cannot sell the shares in the unit trust unless there are redemptions to be met. They can only keep at most 5% of the portfolio as 'cash' and hold the rest in equities. Hence if you like to invest in unit trusts, you have to know when to enter and when to exit the unit trust yourself. The Fund Manager is not going to help you with that decision.

The violent fall in market in recent weeks will result in a equally violent rebound as well. The rebound will be just as swift and sharp as shortist and hedge fund managers start to cover their positions in the market. So watch out for it. My personal view is that the markets will likely to stage a significant rebound in the coming weeks before they crashes again..... but for the nimble, if the rebound rally comes, make hay while the sun shines.

1 comment:

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