Saturday, 3 November 2018

A terrorizing month of trading and some lessons

My school fees are due.

In the month of October, my trading account took a dent as Mr market got volatile and swung in highly unpredictable manners. The swings were rough enough to send those who are not nimble enough or not patient enough (yes both, even though they seem contradictory) flying off their seats in all directions.

Even VXX has now broken its trend. No more trend to ride. :(


Lesson 1) When Stop loss = Sure loss

Should close position for the day and NOT just set a stop loss for next day when the market is mad volatile and gapping is rampant. Even though my (limit) stop loss is set exactly at my bought price, I still can get forced stop out with the gap difference at a much lower price the next day when market opens.

Conclusion? My stop loss is practically useless.

Then Jedi warrior SMOL reminded me that each time frame has their own stop-loss rule. I am probably not so sure of my 'time frame' and thus set all the wrong stop loss points.

And must remember the No 1 trading rule -
"Never let a short term trade turn into a long term investment."


Lesson 2) Do not try to prove the market wrong

Do not long (catch falling knife) till there's signs of rebound. Just the same as what I have told myself time and again for long term trades / investments.

The problem all lies in the psychology. When the price drops below the price I sold it for, I will think 'Eh cheap ah. Maybe it has bottomed out." then I buy only to see it continues plunging...


Lesson 3) Some high volatility counters cannot be sold short. Bewarned.

And you will feel shit when you cannot enter the other side of the trade. Like you got slapped but you can't slap back kinda feeling.

Lesson 4) The higher the volatility, the bigger the losses

When the price of the stocks move faster than you can react, there is only 1 outcome - you will always be left behind. When doing pair trading, take into account the volatility of the 2 stocks, if they have different beta, then you might get caught off guard during big price movements (like getting stopped out when you do not want to and close the other position 'too late').

Stocks with lower volatility often give you more time to react but also means you have got to be more patient in the entry and exit.

-----

On the bright side, my SG portfolio took a mini ride down then went back up yesterday to an overall +5.9%. Too bad that I did no buy in, as I had expected the plunge to persist for a while longer.

Trading the US market allows me to see how SG market correlates and reacts to it.

December SSB is out and its return doesn't look too shabby. I shall continue to subscribe for the Multiplier acct hack.



Next week to start on a clean slate. Lalala...


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3 comments:

  1. Rainbow girl,

    I merely "nudged" you to face a certain direction. I no Indian Chief :)

    How to set different stops for different time frames you have to discover and determine on your own as we are different ;)

    Anything you developed on your own from WITHIN will stay with you for the whole journey.

    "Inspirations" from WITHOUT that we "steal with pride" from others are usually not sustainable unless we can internalise them and make them our own.

    I'm sure you have learnt about stops from books or workshops. But reality in practice is not the same!

    LOL!



    ReplyDelete
    Replies
    1. Hi SMOL,

      Thanks for your nudging!

      You are right, a lot of things we learnt from books / theories turned out to be quite different when we try to put into practice.

      There's no easy way out to finding 'the right way'. We got to get our feet wet in the water and at the same time don't play too dangerously. Stake only what we can afford to lose.

      Delete

  2. Thanks for sharing such a useful and informative post like this. Keep updating more updates like this.
    Intraday stock tips

    ReplyDelete

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