Trading Discipline A Key To Success. Proof >> KGC

Posted by Stock Online Trader in Gold, Technical Analysis on 09-05-2008

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I sold my KGC shares at the open since I didnt get the jump I was looking for. Also I didnt want to hold anything over this weekend. KGC opened at $14.25 and I sold my 1000@ KGC at $14.29 bagging 400$ profit in 1 day. Turned out to be a pretty good trade since KGC dropped all the way to $13.54 an hour later. I was tempted to buy it back, but I got conservative here and wanted lower 13s to get it back again. Turns out it didnt go that lower and infact jumped right back up, eventually closing at $14.19. Missed an excellent opportunity to bang around 500-600$ gain.

However the key thing I learnt from this transaction is that I stayed disciplined.
  • Avoid holding over the weekend: I normally avoid holding anything over the weekend. This is because of alot of price movement in the stock market is driven by sentiments. It doesnt take long for sentiments to change in this crazy market. Weekend also gives investors/traders time to do more research and change their mind/position. Some big news over the weekend can dramatically change the direction of the market. Bear Sterns opening at $2/share was the worst one…..Thank god i wasnt trading it. Check FRE and FNM after hours with the news.
  • Being conservative is not a bad strategy in this market: Its better to make no money or less money than actually losing it. Losing money breaks your morale and sometimes makes you gamble bigger to get it all back. (Eventually digging a bigger hole for yourself)
  • Dont over-trade: Just because you made good money in a trade doesnt mean you can play crazy with your next trade. Overtrading means giving away free money to your broker. Overtrading means you are sooner or later going to go wrong and probably affect your morale.
  • Always have an exit strategy: Whenever you enter a trade make sure you have an exit strategy. What point you want to get out is very important to a trade. This keeps you disciplined and controls your greed.
  • Be flexible: If your game-plan didnt work as expected, be flexible to adapt to the situation. Dont be stubborn about it. Its better to take a small loss and move on than sit on a huge loss and bitch about it later…
Sticking to these rules and actually making 400$/day turned out to be sweet deal.

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Bill Gross Makes You Just Want To Short The Market

Posted by Stock Online Trader in Economy, Finance Sector, Short Selling on 09-05-2008

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Bloomberg reports what Pimco CIO Bill Gross had to say about current markets: U.S. Must Buy Assets to Prevent Tsunami

The U.S. government needs to start using more of its money to support markets to stem a burgeoning financial tsunami, according to Bill Gross, manager of the world’s biggest bond fund.

Banks, securities firms and hedge funds are dumping assets, driving down prices of bonds, real estate, stocks and commodities, Gross, said in commentary posted on the firm’s Web site today.

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If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.

The government needs to replace private investors who either new assets or have been burned by losses, Gross said. Pimco, sovereign wealth funds and central banks are don’t have the money to buyreluctant to fund financial firms after losses on investments they made to support the companies, Gross said. The world’s biggest banks and brokers have raised $364.4 billion in new capital after more than $500 billion in writedowns and credit losses since the beginning of last year.

Since financial markets seized up a year ago as the subprime-mortgage market collapsed, the Standard & Poor’s 500 Index has fallen 13 percent and home prices are down more than 15 percent.

Gross cast a bleaker view for the prospects of the world’s financial markets than in previous notes to clients. The fund manager has previously called on lawmakers to support housing with legislation passed in July that allows lenders to forgive some of homeowners’ debt and then refinance them into government-insured loans.

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As Fannie and Freddie, banks, securities firms and hedge funds shrink, yields on all debt assets will rise compared with benchmark rates and volatility will increase, Gross said. The declines will end once sellers have depleted their assets and sufficient capital has been raised, Gross said. Unless new balance sheets emerge, prices of almost all assets will drop, even those of impeccable quality, he said.

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There is an increasing reluctance on the part of the private market to risk any more of its own capital, Gross said. Liquidity is drying up; risk appetites are anorexic; asset prices, despite a temporarily resurgent stock market, are mainly going down; now even oil and commodity prices are drowning.

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The decline in home prices hasn’t been seen since the Great Depression, Gross said. That drop translates to an even bigger decline in overall wealth as the effects ripple through markets, Gross said.

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Makes you just want to keep shorting this market.


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