Melynn Investment experience
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Melynn - Experiment
1. Stock Bought
i) Tat Hong - 14 lots Long (Listed in Singapore market)
ii) Tat Hong - 28 lots Long
2 Reason for making the trades
My first transaction was made because I believed Tat Hong was still relatively cheap at the point of purchase and also it started to gain momentum.
I subsequently bought more of Tat Hong and doubled my first purchase. The reason why I doubled is because it is starting to show strength in its trend with good momentum and even though, it may not be as a good bargain as the previous buy in terms of value but still, I believe there will be more upside.
Downside is limited as I have set a trailing stop loss for the above trades to protect my profits or minimize my loss. This will be discussed more later.
3. Holding period
A total of only 18 days. I didn't expect the price to hit my stop loss so soon but I have to stick to my system so have no choice but to sell it.
4. Selling Point
Set a trailing stop loss whereby it is calculated by deducting (3*ATR) from the stock's high since purchase.
6. How much was the stock sold
In total, I have made a profit of 1347.85 and total commission incurred was like about 10% of the profit. This is the price to pay for holding short term.
Self Assessment
Even though I have made a profit from this trade but still, I think this system wont be sustainable for long term. Reasons being
1. The profit gained from this trade is probably due to luck or merely just pure randomness where the market rallies at the point my purchase , So how many time can I be that lucky? Is my perception of "strong momentum" correct?
2. By following the momentum strategy is like playing the fools game so how sure can I be that I wont be the last to hold on to this?
3. The trading period is just 18 days.. This might be due to my tight stop loss set but assuming this is a losing trade, I will be still incurring the costly commission cost.. Might not be worthwhile on a long term basis
4. The tight stop loss is a double edged sword. On one side it can prevent me from losing more but on another side, this might be just "noise" causing me to get whipsawed.
Downside is limited as I have set a trailing stop loss for the above trades to protect my profits or minimize my loss. This will be discussed more later.
3. Holding period
A total of only 18 days. I didn't expect the price to hit my stop loss so soon but I have to stick to my system so have no choice but to sell it.
4. Selling Point
Set a trailing stop loss whereby it is calculated by deducting (3*ATR) from the stock's high since purchase.
6. How much was the stock sold
In total, I have made a profit of 1347.85 and total commission incurred was like about 10% of the profit. This is the price to pay for holding short term.
Self Assessment
Even though I have made a profit from this trade but still, I think this system wont be sustainable for long term. Reasons being
1. The profit gained from this trade is probably due to luck or merely just pure randomness where the market rallies at the point my purchase , So how many time can I be that lucky? Is my perception of "strong momentum" correct?
2. By following the momentum strategy is like playing the fools game so how sure can I be that I wont be the last to hold on to this?
3. The trading period is just 18 days.. This might be due to my tight stop loss set but assuming this is a losing trade, I will be still incurring the costly commission cost.. Might not be worthwhile on a long term basis
4. The tight stop loss is a double edged sword. On one side it can prevent me from losing more but on another side, this might be just "noise" causing me to get whipsawed.
Points to ponder
How should I align my system to a longer time horizon and at the same time, not seeing my profits getting eroded by holding a stock too long?
Considering the scenario whereby the stock dropped 10% or 20% upon my purchase, should I take the loss or hold it? Instead of just relying on a stop loss defined based on purely technical indicators, I should step back and try to make an objective decision based on
1) Fundamental factors : Can it be over valued ? Can it be caused by short term detoriration of fundamentals (i.e oil and marine sector tend to slump when oil prices are low) . Assuming neither of the mentioned factors are the cause, should I still hold on to it cos a prolonged plunge in stock prices will affect the fundamentals too.
Considering the scenario whereby the stock dropped 10% or 20% upon my purchase, should I take the loss or hold it? Instead of just relying on a stop loss defined based on purely technical indicators, I should step back and try to make an objective decision based on
1) Fundamental factors : Can it be over valued ? Can it be caused by short term detoriration of fundamentals (i.e oil and marine sector tend to slump when oil prices are low) . Assuming neither of the mentioned factors are the cause, should I still hold on to it cos a prolonged plunge in stock prices will affect the fundamentals too.
2) Technical indicators indicating down trend even when fundamentals are intact. Should I still hold on to it by going against the crowd? If it is a strong down trend, should I sell first and buy back only when its starting to gain momentum since I don't know how low will it go.
The above 2 should be judged based on a longer time horizon.. i.e, I should not judge a stock's 1 week trend or so.. Should use a longer time frame like 6 months..
3) The above needs me to make decision on an objective basis instead of simply following rules thus I will easily be succumbed to greed and fear. For example, I might sell of the stock when it plunged 20%(fear) and sell the stock once it surged10% profit(greed)..
4) Preparing myself mentally for scenarios like
i ) Stock surge 100%
ii) Stock plunge 50%
iii) How probable the stock price can double?
There are only 3 available choices.. Buy,Sell or hold. This can be answered by going through on a checklist to decide on the action.
I will try to improve my system based on the above points mentioned and experiment it again.
The above 2 should be judged based on a longer time horizon.. i.e, I should not judge a stock's 1 week trend or so.. Should use a longer time frame like 6 months..
3) The above needs me to make decision on an objective basis instead of simply following rules thus I will easily be succumbed to greed and fear. For example, I might sell of the stock when it plunged 20%(fear) and sell the stock once it surged10% profit(greed)..
4) Preparing myself mentally for scenarios like
i ) Stock surge 100%
ii) Stock plunge 50%
iii) How probable the stock price can double?
There are only 3 available choices.. Buy,Sell or hold. This can be answered by going through on a checklist to decide on the action.
I will try to improve my system based on the above points mentioned and experiment it again.
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