High Heeled Traders

Singapore Shopping by Night

I was walking towards the mall when the idea that  Trading is like Shopping hit me.   At that time, I keep getting asked by my girlfriends to teach them to trade and want to make it easy for them.  And there it was, “Sales” was all over the place, with a lot of women in attendance of course! 

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I thought so many  skills/traits  in trading are used in shopping  :P.  Things like  —

  • In shopping, we need to decide on what we want =  setting Objectives in Trading.

Here’s a list I’ve come up with, read the left side of the table for the Shopping skills and read to the right side for the equivalent idea in Trading.

Shopping  skills Equivalent to Trading
deciding on what we want setting Objectives
finding out about things research
Knowing how much to spend, Position sizingTM
Judging appropriateness Having rules
Making a buying decision – make the most of what we buy or satisfy need Entry and Exit rules
finding value where  results/value is high bought at low price
getting a bargain  as above
deferring big purchases until Sales wait for opportunity
getting in style (meow! Animal prints) spotting a trend
looking around and trying things   practice trades
trying new things independent-mindedness
walking away if not happy avoiding risk
returning bought item reflecting on transaction
Using credit card to get the opportunity ;p Borrowing money for leverage

 

There are lessons to learn  in a similar manner, like:

Shopping  Equivalent to Trading
Paying too much Not waiting for pullback / jumping in too quickly
Being persuaded to Buying what u don’t like Not being strong enough  or poor discipline
Losing items Loss from not verifying transaction
Making wrong purchase Incorrect market or not following rules
Taking too long to decide and missing out Indecisiveness, usually due to lack of preparation and not being able to seize opportunity
Forgetting things (no shopping list) Not having documentation
Going overbudget Letting losses run
Going overbudget – again and again! Losing  all of your capital

 

I  thought  women can use shopping  skills in Trading to make it easy, because, it is a simple thing to do.    You buy something, it goes up in value, you sell. Simple.   😛       Though  I always say “Trading is hard” – it’s because of the discipline involved   — hehehe tells a lot about me?  Don’t laugh!  You will have your chance to find out! 😛 

I bet you can think of some other similarities!   Would love to hear it , post in  “Readers Share!”page  in  the blog www.highheeledtraders.com.  

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Shopping Strategies and Trading Concepts

At the very start of this project, I presented you with how women shop and equivalent Trading concept,  let’s review “Women are Natural Traders”.

In  Fashion = Trend Following

You like to buy what is in fashion – you would only go for the hot new style.  You’re in with the Trend.   In Trading, this is Trend Following.

A trend is set when you see most people following it, like  wearing  the season’s  colors (yellow green,orange or ochre seems to be making the rounds in Spring 2011)  or designs like the military –inspired outfits.  This new thing gets so much press you really know it has arrived.

How to use in Trading:  

  • Look for the line chart  in various timeframes, visually, you would see the direction of the line, whether it is going up or down.   Looking back to see the major trend will be one guide, then you want to enter in the direction of the trend.  If it breaks through and with high volume, trend can continue. Like if   Resistance is pierced,  it will move on to new High  or if Support is breached, it will move on to new  Low.
  • If market is  moving in a narrow range, trend could be changing.
  • If market is moving sideways,  use another strategy.

 

Bargain buying   = Value Trading

Garage Sale -by Sitta Widiasty Murningtirum

Owing to the Global Financial Crisis,  “bargainistas”  have really come to the fore.  It’s really cool to see people now paying value for money, looking looking looking for that “bargain buy”.   In Trading, this is called “Value Trading”.

Bargainistas like  to negotiate, compare items thoroughly, go for “vintage”, “the art” without the price tag. 

 

How to use in Trading:  

  • Value trading   requires  looking  for shares trading at a deep discount.  You need to look into financial data.  This requires a bit of research about Graham’s Number – NCAV or Net Current Asset Value .  You can search online  for resources or check out Dr. Tharp’s book “Safe Strategies for Financial Freedom” which discusses this concept, with detailed instructions on how to find the  NCAV.
  • Value trading suits a longer timeframe – hold until the undervalued stock will rise in price.

 

Band Trading / Seasonal

You buy what is not in season  because you know it would be back.   

  • Like buying some popular designs that may  not be the rage but looks good so it is sure to come back in favour  — like  bootcut jeans, a bit overshadowed by “skinny” style
  • Buying out of season colors  like white or light shades in the winter because summer will come along again and they will be popular.  You just need to keep it awhile  that’s all  ;p

How to use in Trading:  

In trading  when you think differently about a trend ie. it will not continue or  will go sideways, you can use  Band Trading or Seasonal analysis.

Band  Trading –    I’ve talked about “rubber band”, observe how the band is stretched yet it goes back to it’s stable shape.   Look at the line chart and look for opportunity to go against the trend when it shows signs of weakening – usually with lower volatility.  For example,  a stock would normally move by 1.20 then the following day, it moved only 50 cents, then 30 cents then finally it moved only 10 cents.   You could also look at Support / Resistance level, if the price attempts to go past Support / Resistance for a number of days  but did not close past it and volume is low, the trend is fading.  You may also consider Negative or Cautious sentiment in the market.

Seasonal –   you can anticipate a rise in price when demand is slack, this is easier to observe for  Energy and Agricultural products. 

 Usually they will follow the hot/cold / wet/dry  seasons of the year.    For example,  there is high demand for Oil in the summer (due to driving holidays)  and winter (for heating).  So you would have “shoulder season”  where the demand is lower.  There is a build up to the high demand season so prices could be on the upswing in prices and  start to decline before the end of the high demand season.

You may want to review  Technical Analysis for discussion of  trends.

Snow and Sky - photo by Christopher Verheyden

 

Online Shopping : Intermarket Analysis + Arbitrage

Online shopping  is rocking  Australia.  I confess to doing it sometimes and telling my friends. Why? 

  • Online websites  almost always sell things cheaper than Australia, the difference is something like  200 to 500%.  (I think because of Australia’s pricey real estate, cost of  finance and distribution – just my thoughts, nothing official! )
  • Plus we can take advantage of overseas Sales  on “out of season” stuff that we still need – especially clothing.  Summer in the Northern Hemisphere – winter Down Under.
  • Australian dollar is higher than US Dollar, so it is a “built-in” discount.  Aussie $ may even march forward due to rise of interest rates (to contain inflation).

Intermarket Analysis  involve looking  at influences of a move in one market to another.  Australia’s economy was spared a recession largely due to the strong demand of  its commodities – iron ore, gold, coal, oil and gas —  these markets performed strongly and is on a major boom due to the need of emerging markets (esp favourite customer China).  The  earnings of the government / industries enabled  jobs to grow which let people spend confidently and Aussie Dollar.

Arbitrage is about exploiting a “loophole” or window of opportunity to profit or benefit.  The difference in the seasons and half-yearly Sales is certainly a window of opportunity.

 So if you are an online shopper in Australia, you are in fact doing Intermarket  Analysis and Arbitrage –  beauty mate!

Women and Shopping – always good together.  Women and Trading, the world better watch out!

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