Thursday, September 02, 2010

DOW up 250 points. A123 up 8% to close at USD7.12. WDC and STX closed 6% higher.

Investment Lessons by Pauline Yong

Author of "I Love Stock" and " Fear and Greed". Novices are advised to read these books. They are easy and simple to read. If you cant understand anything written there, I wont mind helping to explain. Yes, that is to help to promote a good book.

In February 2010, Personal Money, one of the leading financial magazine in Malaysia interviewed me on how to be a better investor. In order to help more young investors to know more about share investing, here, I would like to share with you part of the interview contents.

Personal Money: "Personally, how did you learnt to be a better investor? What are the experiences that you went through (mistakes you made) that taught you the “better” ways?"

Pauline Yong: I had some rough rides before but I’m glad that I started young as those experiences help me to become a better investor now.

The first lesson that I learned was back in my high school. One of my school teachers was an ex-broker in stocks, so he liked to talk about shares in our class. Under his influence I bought the first stock under my relative’s account. I had no idea what the company was doing and I didn’t bother to find out either. Then I went to overseas for my education and when I came back the value became less than a third.

So lesson No.1: Never listen to rumours. We should do our due diligent.

Subsequently the 1997 Asian financial crisis was another great lesson in my life. It was in 1996 that I just graduated from university and I received RM10,000 from my father as a gift. As a young and eager finance graduate I opened a trading account and started investing.

I invested all my money into three counters, all construction related as they were enjoying the economic boom during the “Four Tigers Era”. And soon the Asian financial crisis struck, there goes my investment. At present, one of them was de-listed, one was sold at break-even and I’m still holding the third counter at paper loss.

Hence, lesson No.2: Never invest all your money at once. We should invest in stages; and

Lesson No.3: Never invest all the money in one sector. We should practice diversification.

After all those hiccups, I was not discouraged at all. In 1998, I kept buying and I have learned the most valuable lesson in the stock market.

Lesson No. 4: It’s a cycle – what goes down will come up; and what goes up will come down!

I bought Public Bank at RM1 and sold at RM3, I bought Public Bank again at RM2 and sold at RM4, I did that to other stocks too - “buy low, sell high”. This strategy works very well when the stock market is on an uptrend.

As I was getting “hooked” on the “buy low, sell high” game I discovered the next lesson:

Lesson No.5: Do not over-trade as it will turn us into highly emotional.

I realised I was very emotional, I suffered from heart palpitation and nervousness as I was always guessing the next move of the market. That was not investing, that was speculating! Emotional investing will turn us into a loser in the long run.

It all boils down of being a better person. That means that you should improve your attitude because it does reflect or influence your performance in share investing. Don’t be afraid of making mistakes, mistakes make us grow. What is more important is to foster a positive attitude which makes you decide things objectively and to control your negative emotions better

TEH : I will write comments later based on my short 2.5yrs experiences. I admit that I m just a novice and very willing to learn. Pauline Yong's books and writing(in her blog) becoming my good reading materials, reminding how amatuer I m in trading or investing.

Knife - a very nice sentimental song which I still like it very much.

9.10 am : KLCI up another 8 points, at 1440 level now. Interesting to note that smaller caps and second liners are actually retracing and in downtrend now. KLCI up due to few blue-chip play - Sime, Tenaga, Maybank, CIMB, Genting, GenM, Axiata, AMMB and such. So, KLCI is bullish ... these counters benefited but those playing on smaller stocks have to cut off their holdings(take profits or cut losses).

KurAsia : I read that RHB downgraded her ... and target price now at 0.44 from 0.64. WOW ... like that also can ar? Well, they wont want to look stupid to place target price at RM1 anymore, right?

JCY : At 0.915 now, I m doing nothing with it today and will only buy at 0.75(lowered from 0.77) OR when the technical indicators giving me a BUY signal(I m still learn to read that).

JCY : AT 0.925 now ... I will SELL some if it goes up 8-10% today. I dont like a sudden shooting-up too fast too furious stocks. It is over-reacts from the herds again. Otherwise, if it move up or down in slow manner, I will do nothing much.

JCY : At 0.94 now, queueing to clear what I bought yesterday at 0.97-0.99. I m holding too large a portion and each time 8-10%, I will clear some while preparing to collect more at lower prices. Also, those bought in higher level will have to WAIT ... and act as a loooong term investor. Hmm ...

No, I m NOT crazy ... I m not really stupid, either. I m just naive, a newbie to investing and a novice trader. But I m very hard-working to LEARN. I take responsibilities in my learning, attending CN's meeting and courses to learn TA. I do read extensively to give me IDEA and test my theories. I'm experimenting with my system(s) and to see which work, which wont. Of coz I m wrong many of times, and also lose many of times. I do admit mistakes ... and appreciate some constructive comments. Thanks to those have helped me in my learning. I do feel thankful to my trainers in CN too, tho I do not think so they have much experience in markets to share about. They are 'young'. I think I need another 3-5 years before I know what FA + TA is about. Hmm ... in the mean time, I hope I do not lose ALL my capitals. That is game over?

SigGas : Up 10% now .... bullish.

JCY : At 0.945 now ... up 5%, helped by WDC and STX, may be. Or it is just a technical rebound. Whatever, I think my 0.97 is a bit too greedy? Hehe ... may be I should clear some at 0.960(touched 0.945 now) and believing that it will retrace later on. Stock up, I m thinking of selling!! Selling too early AGAIN??

JCY : At 0.950, I think from the rate it is going .... 0.96 might be done today? we shall watch ...

11.10 pm : KLCI up 2.7% ... with SigGas rebounding after days of profit-taking. This is another new IPO which shot for the sky(from 0.60 to 0.90. wow!!). It retraces to 0.70 yesterday ... at 0.79 now, up more than 10%. So, technically it is a BUY? I grabbed some for short punt while clearing some JCY at 0.96-0.98 to realise some profits while many more 'stucked' with paper losses.

11.50 pm : JCY cleared some at 0.96. at 0.965 now. 0.97 and 0.98 will be done too?

11.55 pm : JCY cleared at 0.97 done. Watching 0.98.

12.02 pm : JCY cleared at 0.98 done. OK ... that is 10% profits from yesterday's FEAR. So, now I will start queueing at 0.95 and below again.

Yes, If you have bought at 0.88 and 0.90 yesterday, today is time to take some profits.

12.15 pm : JCY at 0.99 now, touched 0.995. Well, it was in penny-stock world for only a while? See if it managed to climb above RM1 as it is bullish. Hmm ... I thought buying supposed to be yesterday ... huge selling yesterday, huge buying today?? That is just the opposite of what I have in mind, a contrarian?

I still have huge positions in it. So, I m queuing to clear some at 1.02-1.05 now(bought at 0.95-0.97). I wont regret IF it goes much higher later as I still have positions bought at RM1-1.05, also 1.09-1.11, at 1.13-1.15 and 1.19-1.22.

IF it dive back down later to below 0.95, I will start collecting again. Hmm ... crazy way of trading, taking so huge risk?

12.20 pm : JCY at RM1.01 ...

2.35 pm : JCY at 1.05 now . I did not queue to clear it at 1.02-1.05 as planned as the momentum is too strong ... since I m free to monitor it till 5pm later, I will watch ... SELL is in my mind(yesterday or two days ago was BUY). Isnt that what we should be doing? Buy low sell high? I dont like the idea of buy high, sell higher as what CN is teaching. I m still too novice in TA. I dont know at what level I should SELL more of JCY now, but I do know it is a SELL. Excuse me ... it is up 17% now at 1.05, ok?

WHY suddenly everyone is bullish about JCY when yesterday everyone is like asking me to CUT huge losses or whatever ... we are all different, I guess.

JCY : My fingers are itchy ... I sold some at 1.06. Hey, I sold at lower in the morning, u know. But, I think I still have huge amount of it. We wont feel comfortable with too large positions - in fact, I think I never bought into ONE counter so hugely.

Why am I selling? Because it shoot up TOO FAST for comfort. I can always buy again when it goes lower later or during correction if I love her so much. Mind u, I still have the 'high' at 1.20 level, ok? Now ... it is NOT proportion ... as it goes lower, the number of units I will buy increases. It is cheaper, of coz we could buy more, right? So, my average never in the middle-point.

JCY : Sold at 1.05 again ... I m a trader, not investor, ok?

SigGas : I punted this morning at 0.78 and at 0.810(touched 0.82), I m clearing soon for small profits - tonight's dinner.

JCY : Instead of queueing to buyback at 0.95 as planned, I m queueing to buy back at Rm1-1.02. My positions at 0.88-0.90 sold this morning, and also sold 0.95-0.97 positions. I m still up for the RM1-Rm1.05 positions which I bought last week, I think.

So, what should I do with my 1.10 and 1.20 positions? BUY more to average down or sell now to cut loss(at least not as deep as yesterday!!)

KNM : Touched 0.40, the most active babe and heavy selling. JCY is positioned no 2, heavy buying.

10.25 pm : Very tired as I played 10 games of bowling just now - injured my thumb yesterday during badminton game, so could play that well but to me that is excuse. I still maintain my 190 average today, at least.

KLCI closed 9.11 points higher. Amazingly bullish. AirAsia and UemLand flying today. While I m selling JCY, I bought some SigGas but did not clear it yet. I want to write on WHY yesterday I m a buyer of JCY but I cleared some of JCY today. Today I m a seller of JCY because I cant tahan a stock in my holding shot up more than 10% per day!!

JCY closed at 1.05. I sold it at 1.04-1.06 level. 1.07 is not done. Let us GUESS what happen tmr.

As always, three possibilities : 1. UP again(more than 10% is unlike, otherwise I will clear ALL of it!!) and will see me watching only or 2. unchanged and form a doji, that is the sign of downward again 3. Down slightly ... possible of forming a 'flag'. If so, I shall wait for 3 or 4 days of down-down before I collect again.

WHY buying again when it go lower? Hmm ... seriously speaking, I feel it is oversold due to HERDS in fear of HDD 'bad news'. Also, some syndicates using it now to gain some profits from the herds. Scare them off with huge sell-off, then place a peg of a price at bottom to collect more ... then, push it up in the morning, and watch the herds moving back into the counter, assuming it is rebounding, only to see them selling(distributing) it at the higher prices ... and profit taking comes in (after 3 days, contra players will have to take profits or cut losses) ... the syndicates will be back to PUSH or PRESS it lower ... and the cycle of the game continues ... nice play, right? HERDS ... if unprepared will be someone's dinner.

Burger King : Up more than 10% yesterday, today up another 25%. That is US or even HKSE. In KLSE, seldom we see such a jump unless those 'empty' speculative stock such as Sinotop. Err ... Linear up today, must be up in straight line, ok?

WDC and STX : UP slightly now as were initially down 1% due to some profit-taking. So, JCY will up slightly again before profit taking? I will SELL some at 1.11 level? We shall watch ...

too tired .... night.


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