Great Day Out
I couldn’t believe yesterday Australian stocks went on freefall, I was having a day out with my kids so I firmly told myself, no trading for that day – I was still checking the prices though, it has become a habit I guess. But one thing I feel thankful for, that while I had a “prediction” and even having the “itch” to trade since early this week – wanting to go “Long” or buy in BHP and even my pet stock STO in anticipation of their Reports, I stuck to following the core principle of my trading : Low Risk – High Reward, and observing Position Sizing rules . For one, I was looking to trade BHP but I was not sure of the Report (on production, sales)- I knew the numbers will be somewhat OK, but may not be enough to push the stock higher in the light of the recent China GDP and weak metals prices. I was right – that day it only changed less than 10cents. But what happened yesterday was totally jaw-dropping. A fall of $1.41 or 4.3% in one day. I thought someone with a big position hit the panic button and sold when their stop was hit. These days, such “stops” can just be automatically triggered (by computer programs or conditional orders from your friendly online broker). At this time I reserve my thoughts on this kind of stops but you can be sure, stops are supposed to protect your capital, but also the purpose is to give you room for the trade to work in your favor. One would think it is simple to design but could be one of the hardest to develop or decide on. I know my friends who are following me get confused, but it is through study of the market, consideration of timeframe and objectives that you get to get the right one. I offer in-depth discussions of Stops in my Retirement Investing webinar. Anyway, I was glad I honored my position sizing rule and that the first order of that is for me to get out of my current trade – get liquid first before dipping my toes in BHP.
Oil was similarly on a free fall, but then again, why would this happen at this time (after the “worst” is over), and with consumption getting stronger in Asia as I mentioned in the earlier post, plus the US Fed stimulus continuing designed to bring down the unemployment rate — I felt that was an overreaction. See today, the oil prices went up nearly 2% back to 88.33 with a $1.65 gain after yesterday’s more than $2 fall. Some wild ride we are having. That’s why managing risk is important with position sizing. More on position sizing in my Retirement Investing webinar and here is the free intro.
Now today with STO, the oil prices achieved in the first quarter is quite high, but I have been seeing that it is falling with the market so I thought I’d wait for the Report for confirmation of move up and investor sentiment on this stock. It was quite a wild slide in the financial markets, so if you are committed to invest for your life goals, step up in your mastery of this business. I offer my knowledge, experience and insights in my book “High Heeled Traders”. Get it here.
