Bought Wilmar at 6.28

Wilmar had a day low of 6.11, before bouncing up to the 50MA support. I identified my cut loss price at 6.24 with price acceptance of half a day, meaning I must see Wilmar going below 6.24 and staying below 6.24 for 4 hours before I will cut. This is just a guideline. Of course I will see other markets as well before I make a decision.

Target is 6.9 thereabouts, definitely a reward:risk of more than 3:1.

Latest news about Wilmar IPO China :

Thomson Reuters

UPDATE 2-Wilmar seen delaying HK IPO amid volatile market

http://www.forbes.com/feeds/afx/2009/09/30/afx6947127.html

Exited Wilmar at 6.49; Nikkei falls off 10200 support

Nikkei falls off the cliff this morning, so before I went for my Guo Da Li or Chinese Engagement, I sold Wilmar off at 6.49. I bought at 6.47. To re-cap, last week, Wilmar reached a high of $7. In the past I would have felt very stupid. But I have gotten used to it. The market likes to make fools out of us once in a while.

Two things made me exit:
1) Nikkei falls off 10200 support into open space. Like falling off a cliff.
2) My rule to not let my profit turn into a loss. This profit must be >2R to be counted. So once it is > 2R, it is counted. Another rule is a trailing stop to preserve 80% of the profits once my profit is >20%. Well it has not kicked in, so I did not took profit earlier. Anyway, Wilmar dropped from $7 to $6.5 in 2 days, which is pretty fast.

Discipline is there to keep us in the game. Discipline can sometimes feel stupid, but it is necessary to long term, consistent profits. I will do a review of my approach after 20 trades. I am still learning, so feel free to share and discuss. Thank you for your readership.

The purpose of trading

Give yourself some purpose to your trading. Making money, having an extra stream of income, having an extra stream of excitement, having an extra stream of risk to manage, having too much streams of money...you can be more creative than me, come on, there has to be a purpose to your trading. Maybe it is to support an ethical company, but do get real. Investors talk about ethics in investing. Yea sure, as if the ethical company needs your money no matter how small. Love yourself first, then you can better love an ethical company. So invest/trade/gamble whatever suits you for your own wellbeing. The ethical company will not take care of you that well. Financially yes sometimes (but rare, and what if they are lying), but do they also care for your personal health, wealth and peace of mind? So there, that is why thousands of investment/trading books say 'do not say I love you to the stock' and 'do not say I want to marry that stock'.

Okay, so we got that point settled. Now I can more easily say go long and short your stocks. Is shorting unethical? (Meaning you sell first then you buy back later. Google it, that is what it is for). You want to make money out of your due diligence in analysis and research in your stocks. You believe by doing that, you can ensure that you make money from the market. No, no I do not think so. Lots of hard working people do that. 95% failed. Hard work in this sense has no basis for success in the markets. Think you are smarter than 95% of the market? IQ has also no basis for success in the markets. Why? The market and stock price movement has no rules other than what the collective consciousness in the market determines. Why? The collective consciousness ruling the markets on Earth are largely human in nature. Spock, my Vulcan friend said so. He also said in the planet Vulcan, markets are orderly and rational, and all prices are fixed because all the potential of the company has already been factored into the price. The stock price stays the same for decades. So there is hardly any excitement and profit in the markets. Prices go as predicted by the masses and hence no one is selling a good stock. 95% of Vulcan traders are just waiting for decades to buy from the 5% of Vulcan traders who went bonkers and decide to sell their good stock. And they buy good stocks and shun bad stocks. As a result bad companies are simply bad and Vulcan CEOs delist their bad company almost immediately upon listing and close down soon after. Spock simply do not understand the markets on Earth. Earthlings are simply irrational and incorrigible. Spock says he will go mad trying to trade the markets on Earth.

So ethics do not a good company's stock make. Of course there is some fundamental truth in fundamentals fundamentally telling the fundamental direction of the stock price. But these are more long term. And in the short span of 1-2 years, irrational behaviour rules, because it is just human nature. Meanwhile the fundamentals do change. Not to mention, all company reports always try their earnest best to look hansome or beautiful or simply just appearing earnest.

So I do both long and short positions. But always with the clear trend. If the chart is obviously trending up, I go long. Trending down, I go for short positions. Sideways? Then I look for a bigger picture until it is either clearly trending up or trending down. Will banning shorts reduce the uncertainty in the markets? No. The human element always comes in to introduce more complexity in one form or another and hence uncertainty. Is it unethical to profit from a short position? How about a long position? In the end is making money unethical? Not if the company is ethical? 

Therein lies the importance of knowing your purpose of trading or investing. Know thyself, know what you want from the market, be real. 'It is costly to find out who you are in the market'.

Bought Wilmar at 6.47

I was excited after lunch to see STI at 2700. I noticed Wilmar kept testing upwards towards 6.5 for the last four days, so I felt Wilmar could finally break 6.5 after lunch. Thus I bought Wilmar at 6.47. Right after that it went down and ended at 6.36 for the day. So I am not a genius, not a guru. Just an ordinary guy that preaches risk management. I feel only those who have suffered somewhat from the market's irrational temperament will truly appreciate and understand my teachings here on risk management.

'When the student is ready, the teacher will appear'. So it was often that the right teacher will appear in my life when I was ready and I have benefited from their teachings. Let me thank my teachers and benefactors right here, right now. You know who you are. Thank you! May you in turn benefit from this blog.

Staying out for now

I am staying out of this sideways market for now. Normally I would determine a channel for a sideways market and scoop up the bottom, but this time, the channel is too narrow for a reasonable reward/risk ratio. After scanning the STI, Capitaland, Wilmar, OCBC, UOB and DBS, I found no favourable conditions for entry. All of them have a reward/risk ratio that is less than 3:1. Some have noticeable dwindling volume over a period of 3 months, suggesting exhaustion of the money inflow.

So now I will be looking for a breakout, which will broaden the trading range before I consider coming in again.

August MRT (Monthly Review of Trades)

16 Jul - 4 Aug: Wilmar bought 5.4, sold 6.07. Profit/Loss: +2.1R
11 Aug - 17 Aug: UOB bought 16.28, sold 16.3. Profit/Loss: -0.4R
19 Aug - 28 Aug: Wilmar bought 6.28, sold 6.43. Profit/Loss: +0.4R

August P/L: +2.1R

R is my planned risk per trade.