I started my brokerage account quite some time ago, but only got to buying my first share about 1 year ago. i remembered i stared into the screens many weeks prior to clicking "buy" and keying my password, and feeling accomplished that I have joined the group of "investors". But as the weeks unfolded, was a horror story, the market crumbled and i got caught with a loss i didnt expect. Afterall DBS was then selling at a multi-year discount, but i guess i was wrong. subsequently i engaged in a few trades based on news & results and some fundamental analysis, but was proven wrong. However, i learnt from these mistakes, and with some scuffles, i can say that i'm a better trader now!
for this post, i will use the trades i have made over the last 11 months, and back test these axioms.
All the trades i have executed over the last 11 months (first 4 months of no plan trade, subsequent 3 months without a proper exit strategy), i've also categorised it into losses > 5% and losses less than 5%, gains less than 5% and gains greater than 5%.
Overall I have realised a loss of approx $1.1k.
Lesson learnt
#1 Risk management plans.
Why i say risk management plans are important? because they stop losing counters from festering this is essential for retailers because losing a large portion of your portfolio makes its doubly hard to get back into the game, and by having a stop loss, helps one become profitable. ( see illustration below, removing big losses)
If i had this wisdom of now, and i took brave steps to do stop loss, i will be faced with a better record, and of 6.1k profits instead of 1.1K losses.
#2 Pennies are too risky, Large caps fluctuate too little
Pennies counters are those, in my opinion under the price of $0.45. these counters are cheap and one can buy a large number of shares with fair amount of cash. Each bid up also contributes to a significant %. whereby often it is actually possible to scrap by a good living by having a few of such positions, earning $200-300 a day.
Large caps, in my opinion are those above $2.50, but for my case, any counters above1, as my personal preference for MAX risk allotment to each counter is $10k for my trading portfolio.
Similar to my friend, he likes to trade counters between 45 to 99cents. retrospectively looking, i find that at this counter, the numbers are the most magical, because it is not too easily manipulated, while there is sufficient fluctuation to my personal risk profile. Sorting it out for all, you can easily see that this price range of counter would have given me the better profits.
While pennies have experienced the greatests loss and for larger caps, $300 loss is statistically inconclusive. All things equal (the noobiness of my trading skill), the best price range to enter a trade is actually 45 to 99cents.
#3 Fundamental analysis , technical analysis which is better?
I personally admit that fundamental analysis sounds so cool, because that is what warren buffet does to pick value-counters. But honestly speaking, we all do not posses the same type of vision as WB, nor the personality and temperament, thus even when we utilize the same type of philosophy, our emotions (or the lack of control to it) results in very different kind of bottom line.
I've been through this phase, and actually lose quite a fair bit, and i personally feel that if one enters using TA, that will cause some sleepless (an example was LINC energy, which i traded not knowing the fundamentals, now it is suspended)
TA or FA is a personal preference, as long as it works for it, its okay.
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