- The greater the risk of huge losses, the greater the risk of huge returns
- In other words, it’s all about marginal returns.
- If you were to buy a share at a 1/10th of its peak price, you’ll get to 100% gain faster than one who buys it at a ¼ of its peak price or the laggard who buys it at half its peak-price.
- Don’t analyse (you’ll get paralysis), trade.
- Ignore brokers' recommendations. If you are cautious and nervous after the getting pounded or seeing the pounding investors took last year, imagine how risk-averse somebody whose job depends on getting stocks right is…Classic, Nomura upgrade of Barclays this week from £1.10 to £3.20.
- Once you buy, volatility will be your biggest enemy. So have stop loss in your order, but upgrade it as you go along.
- Pick nuggets. Of info and all the happenings at your finger tips. There is still a recession out there, so share could still spring nasty surprises…
- Get it right when buying is as important as getting right when you sell.
- Take profits if you think there is likely to be a dip to a place below where you bought . Otherwise, stay calm.
Wednesday, April 29, 2009
Stock trading in times of credit crunch-lessons so far…
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1 comment:
One interesting thing I read somewhere:
If a stock you bought falls in value by 50%, it needs to rise in value by 100% to reach the price you bought at.
How do people respond to market fluctuations?
Suppose you were given the option of 50/= cash or Coin toss odds of 100/= heads 0/- tails... what would you go for?
Ever wondered why we hold on to losing stocks - even when its clear that an exit would prevent even higher losses?
Ultimately, it boils down to a game of Greed, Fear and Emotions.
Every investor thinks he/she is smarter than all the rest when making a buy/sell. But at that moment the investor is someone else's "bigger fool".
"It's alll a big Ponzi Scheme" as the murdocks et al would say.
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