Being Right or Making Money – Liquidity

Casinos often always win. The house have the advantage of better odds against us. Of course, with the right strategies, you can swings the odds and line them in your favour (abeit somewhat illegally).

Likewise, we are often told the market is right, our opinion isnt. Too often, we are gulity of trying to reason with the markets. But as punters investors or gamblers traders who are addicted actively intuned with the markets…we definitely lose out to institutions or fund managers with their large armies of researchers and network of information. So what can we do?

“A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with it or ask it for explanations. Stock market post-mortems don’t pay dividends.”
Jesse Livermore

Just analyse the price patterns.

Price is the utmost important factor in trading (my opinion). It is the price that we buy and sell…not some derivation of earnings and share price or valuation of future earnings (PE, PB, EPS)

“The concept of paying one-hundred-and-something times earnings for any company for me is just anathema. Having said that, at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s?”
Paul Tudor Jones

Trading profitably and consistently is siding with the higher probability outcome, but of course that does not mean you should expect to win all the time. Better odds does not mean confirm win. You must know when to fold. Better odds doe not mean high accuracy.

“..it’s ok to be wrong. Just dun stay wrong.. “
Greg Morris

Let me try to share some of the stuffs I have learnt and picked up, and used successfully…and of course, they are all boring steps….no exciting wordy headlines like “How to spot a 10 bagger winner all the time”…”How I predicted the bottom of this stock and took profit right at the top…”, “80% accurate system”, “How I turned 10k in 100k” etc.

This is the 1st of 5 Steps.

1) What market / counters to buy

“Eh siao lian eh, knn, you always repeat the same shit…like niam keng like that”

Because we often repeat the same mistakes and get blinded by greed and hope when trading ma. Read this from another angmo…

“I always ask Nancy to read my memos … She seems to think being my wife gives her license to be brutally frank. “They’re all the same…They all talk about the importance of … theneed to avoid losers, and how much there is that no one can know.”The truth is, anyone who reads my memos of the last 23 years will see I return often to a few topics.This is due to the frequency with which themes tend to recur in the investment world. Humans oftenfail to learn. They forget the lessons of history, repeat patterns of behavior and make the samemistakes. As a result, certain themes arise over and over. Mark Twain had it right: “History doesn’trepeat itself, but it does rhyme.” The details of the events may vary greatly from occurrence tooccurrence, but the themes giving rise to the events tend not to change.”
http://www.oaktreecapital.com/MemoTree/Ditto.pdf – Howard Marks – Oaktree Capital

Haha, here is where technical analysis seems to agree totally with fundamental analysis. Look for liquid markets or cou nters. Unless you are the portfolio manager of a Ivy League fund…it is best to try to trade liquid counters. Text books will say this is liquidity risk.

If you like to buy an illiquid counter…you may find it difficult to sell if the need arises. Thus incurring unnecessary slippage (spread of the buyers and sellers). So for me, I like to only look at counters with a minimum monthly average of more than 200k or lots traded daily. I have 1 bloody exception in my pseudo portfolio…I use it as a “stabiliser”.

I prefer to add 1 more criteria here….liquid counters that moves well with the market….

“Eh siao lian eh…knn…sibei sian leh…. no tips ah? I wanna make money, fast, now!”

Told you trading is boring liao.

Let me continue tmr ok.

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