Share market investment and trading

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I will talk more about shares. I am a long-term investor and a trader. I buy some good fundamental shares for dividends and keep the shares for potential long-term capital appreciation. However, I find that buying and holding is a very slow way to make money. To earn a lot from the dividends, I have to buy very big amounts of shares. This requires a lot of capital and also exposes me to big losses if a major unforeseen, financial or natural disaster occurs. Even in good times, I am stuck with my shares. I cannot sell them unless I want to give up the dividend income. I have to wait for the dividends, which are not guaranteed and they may not meet my expectations. Price fluctuations can also cause a lot of stress, because it is very difficult to decide whether to sell or buy more, provided there is still capital available. Then there are the nagging doubts about the accuracy of my assessments of the fundamentals of the shares. I am not good in fundamental analysis and depend mainly on reports by analysts. This has caused me sometimes to lose sleep due to worries whether I have bought at good valuations and whether I should sell or buy more.

I am not saying that value investing is useless. I have made good money from it because I did not fall in love with my shares and I had sold to take some profit and not wait for prices to plunge. I will continue to use some of my investing funds for long-term investments. However.  I do not feel comfortable risking a very large part of my funds in shares just to try to capture dividends and potential long-term gains. I am not the “gung-ho” type who can just buy tons of shares, delete the sell button and wait 10 years to take profit. I do not know what is going to happen the next day, let alone after 10 years,

Apart from my long-term investments, I use some of my funds to trade in the financial markets. I trade the FKLI futures, sometimes as a speculator and sometimes for hedging purposes. This is very much more risky than trading shares and big losses can occur if you do not have good plans and strategies.

Trading in shares is also risky. However, based on my experiences, the risks can be very much reduced and trading shares can be very profitable, if you know what you are doing. I just use a very simple method to select which shares with fundamentals to buy by reading some reports by analysts and some news in the media. However, it is not easy to decide which shares to buy as different analysts may give quite different recommendations. The news can also be very confusing and misleading. I just form my owm conclusions and pick the counters I like.

When to buy ? I find that relying just on FA can also be difficult. I often question if the valuation data, especially the intrinsic values and target prices are accurate and realistic. Will I be buying below intrinsic values ? Or do I just buy now and hope to buy more when the prices drop ? This strategy may work when the market is very bullish. But I have found that averaging down or trying to catch falling knives can result in heavy losses, when the market suddenly turns bad. It is also very important not to use up limited bullets, which roughly translates as Warren Buffett’s first and second rules, which must not be forgotten in order to survive in the share market.

I have found it is very useful to use an additional tool, which is technical analysis, to increase the chances of winning in the share market. I have tried several systems. They have their own pros and cons. There is no system which can be 100% accurate all the time. I just pick the useful features from different systems and combine them roughly to form my  own system to help me decide when to buy or sell. I am not promoting or selling any TA systems or courses. Just sharing my personal experiences.

My system just involves looking everyday at the end of day, closing prices in electronic charts to identify the likely daily support(S) and resistance(R) levels.for my shares. This strategy gives me a good idea of the likely short-term trends and potential up or down moves and helps me make my buy and sell decisions. I cannot predict how high or how low the prices will go. But, by just knowing the likely daily S and R levels and the likely trends, I was  able to avoid buying at very near peak prices or when prices were likely to fall further. I was also able to catch rebounds of some shares which had retraced from their recent highs. I also avoided some big losses by selling before likely big potential down-moves and got some big gains by not selling too early in likely uptrends.

My trading system is far from perfect but it is able to give me much increased probabilities  of keeping losses small and winning big than by just buying and selling without knowing the likely supports and resistances and the likely trends. My trading strategy is to try to get into likely early rebounds or uptrends when prices break resistances and not get off until  the prices go below the support levels. I can not predict how much prices can move or wait  for target prices because they may not be reached. Using this system, I have been able to keep losses small and have made some big gains.

I love to trade because I can take profits and enjoy them without waiting for years. I can also reload with more bullets to take advantage of new opportunities. I am a position trader, not a day trader. I do not stare at trading screens for hours . I trade shares with good fundamentals and also some  speculative ones, if there are good technical signals. I do not rely on rumours or insider tips. I rely on charts because all the action is always captured and charts, unlike humans. can not tell lies. I do not over-commit or over-trade or get into very big positions without considering the risk reward ratios. My trading style does not make me lose sleep and has helped me make money.

Feedback and constructive comments will be appreciated. You can also submit your shares for some quick TA, which may be able to help you in making decisions when to buy, sell or hold.

Comments

  1. Hi Cal

    No strong buy signal for Mahsing now. Based on yesterday’s closing price chart, support level 2.36 must hold or prices can fall again. I will wait for better buying signal.

    How are the fundamentals for this share ? What are target prices by analysts ?

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