Saturday, February 7, 2009

A story

In the share investment market, My nickname is Losing Manager. I am always lose in the share market because too smart and too stupid.So, today I had analyst how I was lose. Few days ago, I found that one stock lower price at 0.635 per shares, and achieved the higher price 0.705. When it from 0.705 fall to 0.680, I decided bought in at 0.680. These particular counter volumes done are top 10. Seem like everything is proper but it finally on the day closed at 0.655.

What should I do now?
Usually based on the above, next day I should hold it until the force selling day only sold because I found that:
a) Closing price difference with lower price has 4 bits difference, that is 0.64,0.645,0.65 and 0.655.
b) Volume is high.
c) My purchase price at 0.68 when compared with 0.705 has 5 bits difference.
d) I have 3 days more to due date.Based on the above reason, I think it is impossible I can lose.
But in the next day the shares price reach 0.67 and start down turn. During the first session, it also broke the 0.635 level.Losing Manager now start panic. I quickly sold at 0.62 and lose about 6 cents (9%+) per unit. So, based on the above trading, Losing Manager obtained the information from this mistake trading are as follows: -
a) Closing Price Wrong- Buy in one counter should decide after trading ended. Like above example: it closed at 0.655 actually reflected only has 4 bits difference from lowest price at the day. Its means that although your are lucky buying at lowest price at 0.635, you only has 2 cents gross profit.
b) Calculation Wrong - 0.705 actually is first resistance on these counter, if buying at 0.68 and sell at high level only can gross gain 2.5 cents (3.6%). If predict the 0.635 is lower, lose about 4.5 cents (6.6%). It means chances of lose higher than profit. There is totally against theory of risk management.
c) Time Frame Wrong - Always thing about the 3-day time frame for trading. I ignore my ultimate objective is making profit.
d) Depend on High Volume per day is wrong – Because the high volume can be translate as Banker (Syndicate) distribution his stock in hand into the market.
Lose Manager also does not aware that if these counter wanted to achieved higher price, it may need double of volume only can achieved another higher price. Lose Manager concluded the above experience as record. In future, please do not repeat the above mistake again.

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