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21-03-2012, 02:34 PM
I always thought that Selling is more difficult than Buying.
When you sell, you either
1. Lock in a profit
2. Cut loss
Both involves Greed and Fear (Pain management) respectively.
Let's look at the 1st case of locking in a profit,
the main concern has always been,
"what if the price continues to go UP after I have sold the shares?"
I am sure most investors/punters/speculators face this problem whenever they are looking to sell.
That's greed for you.
So, how do we overcome it?
My idea is let's be greedy. Yes, greedy.
Say, you think the fair price of SGX is $9.
Set a margin of say 3% above the fair price and call it 1st trigger point.
So, in this case, the 1st trigger point for SGX is $9.27
Once, the traded price reached the 1st trigger point or $9.27, the profit will be locked in at $9.
That is, you will sell at $9 if and when the price comes down to $9.
No regret as u have allowed the price to run in the first place.
But if the price continues to go up another 10% from the 1st trigger point, u will set 2nd trigger point at $9.27*110% = $10.20
then, lock the profit at 3% below the 2nd trigger point ie
$10.20*97% = $9.90.
In this way, it allows you to participate in the madness of bull run while locking in profit at different intervals. It also allows you to get out of market in one piece if market somehow plurge.
Of course, the margins (10%,3%) are up to individual and must take into account the volatility of the shares and other factors.
That's a happy problem for you..
Now, the real problem is cutting loss.
For penny stock (ie market cap below 300m), a cut-loss trigger point must be set and strictly enforced. Majority of the penny stock goes down with general market but will remain where they are even when the market recovers.
So, don't buy penny stocks and if you really want, set a cut-loss trigger point. I learnt it through the hard way time and time again.
For dividend paying blue chips, my view is as long as the business is still viable, keep it. (Remember : Chartered Semi-conductor)
Any comments will be appreciated greatly.
When you sell, you either
1. Lock in a profit
2. Cut loss
Both involves Greed and Fear (Pain management) respectively.
Let's look at the 1st case of locking in a profit,
the main concern has always been,
"what if the price continues to go UP after I have sold the shares?"
I am sure most investors/punters/speculators face this problem whenever they are looking to sell.
That's greed for you.
So, how do we overcome it?
My idea is let's be greedy. Yes, greedy.
Say, you think the fair price of SGX is $9.
Set a margin of say 3% above the fair price and call it 1st trigger point.
So, in this case, the 1st trigger point for SGX is $9.27
Once, the traded price reached the 1st trigger point or $9.27, the profit will be locked in at $9.
That is, you will sell at $9 if and when the price comes down to $9.
No regret as u have allowed the price to run in the first place.
But if the price continues to go up another 10% from the 1st trigger point, u will set 2nd trigger point at $9.27*110% = $10.20
then, lock the profit at 3% below the 2nd trigger point ie
$10.20*97% = $9.90.
In this way, it allows you to participate in the madness of bull run while locking in profit at different intervals. It also allows you to get out of market in one piece if market somehow plurge.
Of course, the margins (10%,3%) are up to individual and must take into account the volatility of the shares and other factors.
That's a happy problem for you..
Now, the real problem is cutting loss.
For penny stock (ie market cap below 300m), a cut-loss trigger point must be set and strictly enforced. Majority of the penny stock goes down with general market but will remain where they are even when the market recovers.
So, don't buy penny stocks and if you really want, set a cut-loss trigger point. I learnt it through the hard way time and time again.
For dividend paying blue chips, my view is as long as the business is still viable, keep it. (Remember : Chartered Semi-conductor
)Any comments will be appreciated greatly.
