stock market invest trade forex money

As the saying goes, to invest in stock market is risky but not to invest is even riskier as inflation will drastically reduce your purchasing power fr your returns on fixed deposits.
I was a slow learner or rather 'gung ho' and just jumped in.
I started buying with tips from the so called 'experts' and had to pay quite a lot of tuition fees thru my losses.
Thereafter, I read tonnes of books and learn to build a portfolio of 12 to 15 counters. It got slightly better and showed some returns.
Then I was quick to take my profits and kept my 'paper losses' in my portfolio. My returns came in way below the market returns.
Then I changed my strategy and learn to cut my losses and retain my profitable trades longer and occasioally add some positions to my profitable trades. Returns improved near the market returns and at times slightly better.
To go thru the above simple processes took me almost 6 yrs. I could have just invested in an index-linked funds and saved all my efforts and sweat. But I still enjoy the thrill of investing, or rather passionate abt it and believe that I can improve and do better.
We have many stock market p­layer­s here. Do share your opinions and experiences with us in this blog and hopefully help everyone in their endeavours on this journey of investing in the stock market.

Sincerely, bert

bert wrote:
I could have just invested in an index-linked funds and saved all my efforts and sweat.

If you had done that you wouldn't be as smart and knowledgeable as you are now. Investment is not a sprint event but a marathon race. You need to be well prepared to compete and to come out as the winner.
Best wishes and happy learning.

Good job Bert.

Here s my experience - a repost from my dead blog

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http:// fusiontrader.blogspo t.com/2007/04/why- bother-to- trade.html

Why bother to trade?

WHY!!??

Why do you trade?
I often ask this question and often I am being asked this question.
Of course, the common answer is - for the money.
Some - for the adrenaline rush.
Others - for a different reason.

For those who trade for adrenaline rush, well, I could only tell you that trading is not supposed to be exciting. Its a business, not a game. And it may cost you if you re merely in for the excitement.

For money heh? Why trading?
The path of a trader is not easy, there is no easy money. Why do you trade?
For money?
There are numerous means for money - from getting an additional part time job to some Multi-Level Marketing (MLM) schemes.

Compare a sure part time income to the risk you re taking in trading. Why trade?
Compare MLMs with their "proven" marketing plans with the risk you re taking in trading. Why trade?
Want to trade for a living? Compare the security of a fulltime job vs the risk in trading - why trade?

Then some would say, trading is easier than others.
Getting a part time job is tiring. After working for 8 hours, its already exhausting. Part time job? You're kidding me!
MLM? Same with part time job. Most people are only free during the nights. So I have to meet them during the night AFTER my 8 hour fulltime job? Then every week, there is some sort of motivation meeting among members? You're kidding me!
Trading is different, every day I just buy some stocks and then sell them at a profit.

Bad news, buddy. Trading is worse than any part time job or MLMs.
I mentioned about plans - having the importance of having a game plan:
Game Plan
Being Bold and Able to Be Bold

That requires time and discipline.
Every single night (or day) without fail, one needs to prepare for the next day's trade.
If you re unprepared, my advice is - don't trade.
Why? The price movements of the counter you ve selected should not surprise you. You do not the time nor the luxury to be surprised. Act. Act immediately. And how could one act decisively if there wasn't a plan made in the first place?

Compare that to a part time job, compare it to a MLM scheme. Would trading really be better?
You would see that trading requires more discipline and is more risky. So I don't get it, why bother to trade then?

I'm curious. Do share your views. :)

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http:// fusiontrader.blogspo t.com/2007/04/why- do-i-trade-part-1- definitions.html

Why do I trade? - Part 1 - Definitions


Few days ago, I made a post - Why bother to trade?
I structured the post in such a way, which I think depicts the truths of trading and also provocative. While the total number of comments reached 18 comments, as at the time this post is being made, there is only a handful of people who commented. Which, I appreciate the comments made though, I am disappointed at the number of people who actually commented.

For the benefit of everyone, I would be putting down the definition of investing, trading, speculating and gambling. They are my definition and by no means correct, but they re my definition which I use.

Graham has a definition too. Let's look at Benjamin Graham's definition first.

What do we mean by “investor”? Throughout this book the term will be used in contradistinction to “speculator.” As far back as 1934, in our textbook Security Analysis,1 we attempted a precise formulation of the difference between the two, as follows: “An investment operation is one which, upon thorough analysis promises
safety of principal and an adequate return. Operations not meeting these requirements are speculative.”


And also, the commentary,

What exactly does Graham mean by an “intelligent” investor? Back in the first edition of this book, Graham defines the term—and he makes it clear that this kind of intelligence has nothing to do with IQ or SAT scores. It simply means being patient, disciplined, and eager to learn; you must also be able to harness your emotions and think for yourself. This kind of intelligence, explains Graham, “is a trait more of the character than of the brain.”


I dislike the definition as it does not distinguish trading from investing. Trading would include
1) A trading system with more than 50% accuracy.
2) Emotional control - much like what is emphasized by Graham as well though a slight change is needed.
3) Discipline to carry out stop loss and to trade as per the trading system.

This would satisfy Graham's criteria for as an investment which "Promises safety of capital and an adequate return"
1. Why safety - Money management techniques would safeguard the trades/trader, limiting the exposure or risk taken. This is normally in two folds - one in the form of stop loss. Another is the size of the trade, hence no overtrading is done.
2. Adequate return - The system which has more than 50% accuracy. And with emotional control to execute the system, adequate return will be guaranteed over the long run. Law of averages promises this.

So let's return to my definition. But as I ve mentioned, they are my definition and by no means correct, but they re my definition which I use.
Investment - Long term venture with intention to purchase the business or part of the business. Mindset here is as a shareholder of the company. While a shareholder mindset investor may dispose the investment in short period, this should not be an active pursuit. An investor should have the mindset of letting the business grow, otherwise, he wouldn't venture into it in the first place. Having run my own business before, I could tell you from experience, a business needs time to grow, things definitely do not happen instantly. An investor should be able to see the long term prospect of the company and ­base­ his decision on that.

Trading - A short term venture whose intention is to capitalise on the short term swings of the market. There is NO intention to be a shareholder. ­object­ive is speed - not being an owner. While a trader may go for long term, it should not be a buy and hold strategy. Otherwise, it would be an investment. Yes, a Turtle Trading strategy would be difficult to differentiate whether it is a trade or an investment.

Speculation - While many have their own definition of speculation, my definition is being an operator. By this I mean to be able to "control" or influence the prices of a certain stock and enticing others to jump in on the wagon would be considered speculation. This is a highly specialized area where enormous amount of cash meets with the highest degree of skills.


Gambling - By gambling, I refer to the 90% of the market population. By jumping into a counter just because it is climbing up or just because it has shed 60% of its value is gambling. Why? Under what basis does one know that the trend will continue or will reverse? Without proper technique, its a gamble as there is no analysis nor any work done to justify the entry.
Majority of people also merely follow a tip. That would be gambling - no analysis done on the individual's part - no basis other than following the recommendation. The gamble is that the recommendation is correct. That is gambling.
Note: Even if I give certain recommendation, do make your own analysis and then derive on your own decision - then it could be either trading or investing. If you do not conduct your own analysis to ascertain the true picture of it, you re merely gambling that my recommendation is correct. I am known to be wrong. Everyone is known to be wrong. I ve yet to met anyone to be 100% correct. Show me one person who is 100% right all the time, and I ll show you a liar.
Then there are those who claimed to be traders but do not have a trading system - then they re not trading, they re effectively gambling. Without a system that works with the Law of Averages, there is NO safety. Hence - gambling.
Therefore, if there is no money management techniques incorporated into the trade entry, its gambling as well - NO money management concept - NO safety - GAMBLING.

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http:// fusiontrader.blogspo t.com/2007/05/why- do-i-trade-part-2- best-business.html

Why do I Trade? Part 2: The Best Business


I was chatting with Mr CS Ong the other day and he mentioned that Trading is the Best Business. And I am inclined to agree. Trading should be viewed and conducted in a businesslike manner. But unlike conventional businesses, there is nothing one could just pack the bags and leave should one decides to. And once the skill is mastered, one could trade in any market. You need not be at a fixed location as like what a conventional business would require you to. And as Mr Lsb mentioned in the original post of Why Bother to Trade?, unlike conventional businesses, there is no need to manage assets and other people, etc.

And business, as we know, is somewhat synonymous to freedom. Mr Kiyosaki of Rich Dad and Poor Dad fame, has an interesting audio (Freedom or Security) which you could hear to demonstrate the point of freedom.
Somewhere in the 14th minute, the excerpt is as follows:


People who tries to find security are actually selling their freedom down the tube. Because the people that found this country, who fought the revolutionary war did not fight for job security. They fought for the right to be free. And freedom is a very, very high state...
How in the world can you say you have freedom when somebody tells you when you can eat lunch? How in the world can you say you have freedom when somebody tells you when you go to work and when you get off work? How in the world can you say you have freedom when somebody tells you when somebody have the right to fire you because they need to downsize?
when somebody has the right to tell you how much you can make? That is not what we fought for. Too many people has sold their freedom...


Of which, I am sure Mr Zewt would be inclined to agree with Mr Kiyosaki with his numerous postings on Modern Slavery.


And the key point as earlier mentioned was the mastery of trading.

When I first traded, I was mostly breaking even. There was not much gain nor loss at end of each month. Couple of hundreds gain this month only to lose a couple of hundreds in the next month. Then, I began to see the light. Somehow, they all began to fit and come together. I began to make money.

I felt like a money making machine for quite some time. I began to make the same amount that I was earning from my full time job. Then, it grew to twice the amount, thrice and on the peak of it, was five times more what my full time job was paying me. I was churning out an ROI of more than 20% per month. Yes, per month. No doubt, it was still a small capital ­base­ but the feeling was great. My trading funds just grew and grew.

You could feel the euphoria, when you finally found your own holy grail - a method that works for yourself. A method which promises you financial freedom. Finally, I see the promises of the treasures of the seven seas is realizing before me.

But then, our story has yet to end. I shall continue in the next article. Stay tuned. Hey, you! Yes you! Don't play with the remote. Haha. :)
(Marcus, yes, I m keeping the suspense alive :P)

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http:// fusiontrader.blogspo t.com/2007/05/why- do-i-trade-part-3- pain.html

Why do I Trade? Part 3: Pain


I watched Grey's Anatomy the other day (I seldom watch the television by the way), and it was this one episode about a little girl who thought she was a superhero. She could feel no pain no matter the seriousness of the injury. Of course, she was not a superhero, it was some scientific disease or something where one could not feel pain. I could not remember what symptom it was called (Hehe, I m a trader, not a doctor).
But due to this illness, the girl kept asking everyone to punch her in the stomach to prove that she has superpowers (hence no pain). And the doctors found out that she was suffering from internal bleeding.
At the end of the episode, the narrator said something to the effect of,
"We all want to live a life without pain, but we forget the very reason why we feel pain"


In my previous post, I described the euphoria of making money - of feeling like I am some sort of genius in trading. However, this was far from the truth. Very far. While I have discovered knowledge, I have yet to acquire wisdom. I was ready to make big money but I was not worthy of keeping it. I sinned.

No, not the typical sin - but trading sins. I overtraded. Would the concept of trading one lot be the same as trading 10 lots? Or 100 lots? Logically, it would appear so. However, we know its not true. Yet, when you ve just discovered your own holy grail, you feel invincible. I mean, why wouldn't you? Out of 10 trades, 9 trades are big wins, while there's one minuscule trade is stopped. What could go wrong with a superb system like that?

The trader, unfortunately. It always boils down to either the people or the system. When something goes wrong, look no further, its either the system or the people. Often, its the people. Afterall, people are the ones who set the system anyway. This is true for trading, this is true for all things in life.


The phenomenal rise, ended with a phenomenal fall.

Once I overtraded and things did not go as what I foresee, I could not be my usual self. While my system says, stop, I went on to commit another trading sin - averaging down. As I average down further, the more I could not execute stop loss. I then risk even more funds into a losing position - this is in direct violation again to not commit more than 20% of trading capital into one trade. Ultimately, when things still did not go my way, I plunged into the worst sin - revenge trade. At the end of the day, I lost much. I was barely saved from being a bankrupt. But what was worse, was that I lost my confidence to trade.


I could not look at the market. I could not see the screen. A mere mention of anything remotely similar to stock market would be tantamount to taking a knife and cutting a part of me. The pain was excruciating. I could not sleep. I could not sit. I could not eat. I could not do anything. When I talk, my voice was quivering. My knees were weak, my hands shivering. I became a living zombie. No one could console me as I could not concentrate on what they were talking. In my mind, the whole scene just repeat itself in a neverending loop. The torture of living the mistake over and over again was just too much. How? Why? How and why could this happen to me?

It was a difficult time for myself. Perhaps it was a difficult for others but it was not my concern. I wasn't capable of being concerned of anything during that time anyway. The story could have ended here, indeed, for many it would have, but this is not how the story ends. It continues...

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http:// fusiontrader.blogspo t.com/2007/05/why- do-i-trade-part-4- traders-path.html

Why do I Trade? Part 4: The Trader's Path


I am a trader. I realised that I ve always been a trader - only that I did not realise until I was tested. And someone once said, "Man are like teabags, you will never know how strong he is until he gets into hot water". How true this is. Without being tested as I had (as mentioned in my previous post), I would never have known that I am a trader.

Money is not the main ­object­ive for me now. I know for a fact that I could trade for a living. I know that once I ve conquered the pain that I endured. I know that the experience though painful was there for a reason - to serve as a reminder not to be complacent and disregard the trading rules. To follow my own trading plan. To give me the strength that I need each and every time, that I must execute the inevitable stops. I ve grown and became wiser, though I ve yet to attain the wisdom that many readers of this blog has. I ve still much to learn.

One may wonder, could I have avoided the disaster should I have met with the wise people I met on the net? Whose wisdom I ve always revered? If previously, I ve met people like Ben, Lsb, Theng and Csong? To be frank, I doubted very much. Some lessons have to learned the hard way. Some mistakes need to be learned in order for one not to forget. Some experience is needed for one to advance to another level.

Today, when I trade, I look at points, I look at percentage. I really do not have much idea how much profit or loss I ve made until I close the books. I find by looking at points or percentage, I trade better. Perhaps there is less connection with the $$$, perhaps, I really do not know. But this is the manner I trade now.

But why do I still trade - Money? Freedom? Well, I ll be honest with you, they have bearings, and weightage to it. Its like once you ve tasted the money, you re tainted. Its most difficult not to be addicted. But there is considerable risks with a mere trading for money mentality, as evidenced by my horrifying experience.

Freedom? Well, I ve long know that I cannot work for others. I m a perfectionist. Perhaps the word is too strong but consider this - when I make a decision, I placed the highest importance for the betterment of the organisation. One may think, yeah this should be the way. But then, in reality, this is not the way. When top management makes a decision, the number one consideration is being placed in satisfaction of certain parties. Yes, I am referring to office politics. I, for one, when given the authority to make decision, does not bow to these inefficient, ineffective practices. When traveling, I do not buy wine for bosses, I do not lick boots, though my crime would involved laughing at boss' stale jokes during meetings, lunches or dinners.

Therefore, with such mentality and holding such principles, I am really not suited in the corporate world, particularly MNCs. However, I am not looking at trading merely as a means to be free from what I am not suited for. While I may be unsuitable for the corporate world, it does not automatically mean that I am suitable for trading.

Some of you may have heard me mentioning about "the charts talk to me". While I do not want to give an impression that I am a mad person, or I am talking bullshit, I feel a "certain connection" when I look at charts. And it is a feeling which I could not describe other than saying that the charts speak to me. I could as if hear the charts telling me the direction of where it is heading. OK, I realised I am beginning to sound like a lunatic. So I shall not continue about it.

But the long and short, I enjoy looking at charts, deciphering the hidden meanings. While doing something I enjoy, what's more, I could actually make some money out of it. Isn't it just perfect? Doing something you enjoy while able to make money out of it? To the end, why do I trade? Its the love of the game - love of trading itself. :)

And why is this important? Otherwise, when met with huge profits, I would be overly excited while when met with huge losses, I would be overly depressed. To which, both is detrimental to trading. There should be another motive behind the money making ­object­ive to trade. That said,

Good Luck and Happy Trading!

Max,
Your article is really interesting. I didn't realize how useful and interesting it is until I learned to read between the lines.
Before I proceed further, let me congratulate you for having achieved the proficiency and capability of a professional trader. I believe you have made further progress from the time you first posted this article. I believe you have attained much wisdom as well.
I have never been a trader. I have never considered myself one although I have at times bought and sold at short intervals. Most of the time I made but these were small profits. Small though they might be, they gave me an immense feeling of competency and satisfaction.
Why do we trade? For many, I think it's because they are thinking of easy money. For me, it's the opportunity of a quick profit.
My involvement in trading has always been small. That's because I have never thought myself to be good at it.
To all aspiring traders, my advice is that you must have a well defined plan before you trade.
Max has told you about his success and his devastating loss and life thereafter. Learn from him and his mistakes; read his articles, and if there is anything you wish to know further, it's: Ask Max.

Thanks Ben for the compliments but I think you flatter me too much. While I have progressed much, I have still much to learn.
I think I nearly perfected the trading setups - I could call tops and bottoms with much higher accuracy than before. Pullbacks and continuation doesnt escape me either. HOWEVER... its still ­base­d on probabilities... hehehe...
To be in the professional league, is what I aspire , but yet to attain. Psychology is easy to preach, difficult to practice and even tougher to master.

Give me a couple of years. Haha.

Hi Max, Congratulation to u. It's really a very good article about a trader's experience n the path u have gone thru...

Referring to ur article, s u mentioned tat u have gone thru the pain in trading tat make u lose ur confidence, dun look at the market, can eat, can sleep - a living zombie. How do u recover from tat to make u where u r today?