Risk

slack

2005-12-30T20:47:00.000+13:00

yes, i've been slack at posting here...

but its the end of the year and there's so many better things to do.

saving the planet can wait :-)

trade: OCO.AX - ORIEL COMMUNICATIONS

2005-12-21T20:30:00.000+13:00

its been a while since i posted a stock trade, so here's another one.

my previous trade examples were done using candlestick charts.
this one uses a closing price line chart.

often different types of charts give slightly different pictures.
but as long as you are consistent with each trade, you can use any method you choose.

i like to vary my trades.
perhaps this is because i am still only learning. I've only been doing this about 5 years.
perhaps it is just my nature.

anyway this trade of OCO.AX is a typical breakout.

I bought today at $0.02, my stop is previous resistance at $0.017.
i have limited my position size because this is a highly speculative trade, and the initial risk/reward target is not the best.
but these breakouts usually have a high success rate.

Code	Buy	Stop	Target	Risk/Reward	Comments
OCO.AX	0.02	0.017	0.025	0.5c/0.3c	line breakout

almost anything is possible

2005-12-20T20:03:00.000+13:00

in life i believe almost anything is possible.

technologically just about anything people can imagine, people can eventually make reality.

dreamers 500 years ago imagined man would reach the moon, cure diseases, fly in airplanes, communicate over vast distances etc.
this is now our reality.

500 years from now will be even more different than today.

i say 'almost' anything is possible because i know some things are impossible.

it is impossible that i did not exist.
it is impossible you did not read this post.
it is impossible to not be influenced by ideas.

Risk on...the mind

2005-12-19T20:15:00.000+13:00

your brain is the most important tool in the universe.

your mind creates you.

you are self aware.
in other words your mind is aware that it is a mind.

the mind is a tool because it can use language to think and imagine.
it can control your limbs, to bring imagination to reality.

you create your own reality.
your mind interprets the universe around you and interacts with other minds.
everyone's perception of reality is slightly different.

remember, i am an atheist...
but the body is just a vessel.
it is a vessel for the mind.
that's where the true self lies.

time stops

2005-12-18T16:34:00.000+13:00

I've mentioned stop losses and trailing stops before.

there's another type of loss I sometimes use.
this is a time stop.

when a company's stock price goes sideways for a long period of time, its sometimes better to sell it and put that cash to better use.
the opportunity cost of not doing so can add up.

ING properties has not yet reached my stop loss of $1.16, but has been going sideways between $1.17 and $1.18 for 2 weeks now.
I entered this as a long term trade, so am not too concerned, but i wouldnt like it to keep going sideways for another month either.

so if it doesnt trade at $1.19 within 2 weeks, I'll be selling it.
thats my time stop.
the trailing stop at $1.16 remains.

time flies

2005-12-17T16:42:00.000+13:00

time is relative.

sometimes it seems that time goes by so fast, that i find it hard to keep up with myself. ;-)

the month of december always seems to me to be the fastest.

so much to do, so little time. so many queues.

G-java

2005-12-16T16:31:00.000+13:00

i mentioned Gememaker a few posts ago, and i'm still playing around with it.

i came accross G-java, which is a utility that converts gamemaker games to java.
and since java can be added to web pages, that means that games developed in gamemaker can now be played on the web.

i get very exited about things like this
must be the passionate programmer in me :-)

Risk on...luck

2005-12-15T16:25:00.000+13:00

I believe luck is strongly linked to the choices you make.

different choices have different probability of success.
so the more choices you make with good probabiliries behind them, the luckier you will tend to be.

but there is still an element of luck that is random.

to win a big lottery, you must buy a ticket...
but the lucky prize will only go to one person...
that person could have improved their chances by buying more than one ticket,
but if they bought too many they are not lucky, just foolish.

to be lucky consistently you also have to be a realist.

observation affects results?

2005-12-14T14:36:00.000+13:00

as you've probably gathered by now, I dont blog on all my stockmarket trades...i just like to show different types of trades, from range trades to breakouts...from day trades to long term ones...and all of them posted more or less as they happen...in real-time.

this introduces a little extra risk.
when i post my stop loss, someone could read my post and manipulate the market so my stop loss is reached.
this is unlikely and i dont belive it has ever happened to me.
but its a possibility...at least in my mind ;-)

the reason i mention this is that today i remembered reading somewhere that in science the mere fact that you are observing something may be influencing the results of that observation.

for example, if you are investigating how often ducks "quack" by standing in front of them, you may get a totally different result than if you use a microphone instead, and both results could be different than if you didnt observe at all. (eg even a hidden mike could be interfering with the sound waves and make the ducks "quack" more or less than without observation)

There's no way to know If observation affects results,
because There's no way to evaluate results without observation.

just my thought for today :-)

Risk on...teenagers

2005-12-13T20:29:00.000+13:00

the teenage years are probably the hardest in your life.

when you are a baby, you grow and change the fastest.
but your brain is not yet self-aware.

when you reach puberty there is also a lot of physical, and biological change.
but your brain is now self-aware,
and it is also full of new chemicals released in preparation for you to becoming an adult.

the physical changes are not half as bad as the emotional ones.
most teenagers feel they are too different, they dont fit in, everyone else is more talented, I'll never get a girlfriend, etc etc.
insecurity and teenagers go hand in hand.

but eventually the hormones settle down and most teenagers do come out ok.
most of the pimple scars heal and disappear
and so do most of the emotional ones.

if my children only read one of my posts when they are teenagers i hope it is this very one.

be strong.
everything will turn out ok.

rotavirus

2005-12-12T20:11:00.000+13:00

one of my children is sick.

he's got the shits.
not ordinary ones either...but bright green jelly-like shit.
that goes well with the orange vomit he had the first day.
nice.

we found out its probably rotavirus, wich has been going around here.
its a common cause of diarrhea...mainly for the under 5's.

my kid is pretty healthy, so he's coping fine and still running around.

but I learnt today that an estimated 500,000 children die from it each year...
mainly in poor countries.
thats a lot of children.
a lot of families.
a lot of pain.

sometimes it pays to keep life in perspective.

milk

2005-12-11T20:06:00.000+13:00

i find it amazing that all you need to survive as a baby is milk.

thats if you dont count oxygen, sleep, warmth and stuff...

breastfed babies are supposed to be healthier than formula fed ones too.
i suppose evolution knows best what we need to survive...
and many of the chemicals in formula fed to babies are just not natural.

i'm a firm believer in keeping it natural...keeping it real

i still drink milk

weekends

2005-12-10T20:23:00.000+13:00

its the weekend, and i normally spend an hour or two reviewing my week's trades, and planning some new ones.

this is a good habit to get into...and it should even be written down in your plan.

interest rates

2005-12-09T21:35:00.000+13:00

everything that happens in an economy affects stock prices in one way or another...either directly or inderectly.

New Zealand has had another interest rate increase.

normally i would expect that the sharemarket will suffer as a consequence.

but since i trade with momentum, and usually short term, its not so bad.
there are ALWAYS stocks going up.
the only difference sometimes there are more than others.

sharetrading books

2005-12-08T21:30:00.000+13:00

i mentioned before that I have read many books on shraetrading...i would estimate at least 300.

however there is no need to read so many.
there is much repetition in what the authors say, and the truth is that trading is really very simple.

i read because i enjoy reading and because i am passionate.
not because i am looking for a trading holy grail or foolproof plan.

there is no holy grail. just common sense.
you buy, cut your losses, and let your profits run.
good trading is simplicity.

Risk on...passion

2005-12-07T21:24:00.000+13:00

when it comes to love, most people are passionate...and rightly so, because love is most important.

but it is also good to be passionate about life itself
everything you do should be done with passion.

i enjoy fishing. i love it. it absorbs me and i am absorbed by it.
so it is with all my interests: my family, computers, camping, cycling, reading, learning, and the sharemarket, just to name a few.

everything i do thrills me.
life is exciting and anything but boring if you have passion in your blood.

ING update

2005-12-06T19:57:00.000+13:00

my open trade of ING is currently at $1.17 ...getting close to the trailing stop at $1.16.

I could have had a more generous stop, but the NZ market is not doing great, and sometimes its better to take money off the table early.

i chose $1.16 as its just below support, and with the $0.025 divie, it still means the trade ends up with a very tiny profit.

game maker 6.1

2005-12-05T19:44:00.000+13:00

i've done a bit of commercial computer programming in the past, and still like to program occasionally....most of it in java, PHP, or some other web language.

but today I came accross a cool little program called Game Maker which allows you to create games quickly just by drag n drop.

I spent about an hour and produced quite a good little game for the kids...using their own faces as graphics. :-)

if you ever wanted to program but didnt know where to start, this makes it a lot easier...
and you are not just limited to games...

balance

2005-12-04T17:06:00.000+13:00

I believe that you should strive to balance most things in your life.

as the chinese symbol of Yin-Yang profoundly illustrates, our universe is constantly changing but there is a natural balance to this change.

there are times to be active, there are times to rest.

just like the seasons move in cycles, so does the sharemarket.

the market bulls and bears are in constant battle, and they take turns at being in control.

the bulls have clearly been winning these last few weeks, bust just like every high tide is followed by a low, remember that no uptrend lasts forever, and dont become complacent.

GoodMan Fielder IPO

2005-12-03T20:56:00.000+13:00

I just received the prospectus documents for Goodman Fielder, which will list in both the New Zealand and Australian markets from late december.

my first thought is that this is a HUGE new listing...market cap will be at least $2.5 Billion dollars.

the prospectus is also the biggest I have seen...260 pages...most if it worthless as is the case with most prospectus documents I have seen. :-)

Because of the size of the company, they want to get as many mum and dad investors as possible...the offer has been advertised widely. and of course many fund managers and institutions will have no option but to add it to their portfolios.

my personal view is that this could be worth a quick 5% to 10% gain, and that 30% to 40% is achievable in 2 or 3 years.

so this is not one to suddenly make you rich, but should do better than money in the bank.

not much trading

2005-12-02T14:53:00.000+13:00

i havent done much trading lately...just some looking.

my open ING trade is doing ok.
As i expected, this one was good for a dividend strip. Price touched $1.22 a few days after the divie record date...and recent support at $1.18 was not broken. Im still holding

I looked at WHS - The Warehouse Group recently too, but then there was an announcement that they are selling their Australian side, which should be positive medium to long term, but has had a negative impact to start with. so I'll look at this one again seriously when it settles a bit.

SMM still looks like a great trading stock because of its volatility. I did a daytrade on it (which I didnt post about) and walked away with a tiny profit. you definetely have to get to know the rythms of this stock and be prepared to jump in and out quickly.

Risk on...happiness

2005-12-01T22:32:00.000+13:00

happiness is a state of mind.

two people can have similar lives and circumstances, but that doesnt mean they will share the same state of happiness.

I always feel happy on the inside.

if you are optimist and look at the bright side of things, have realistic expectations, and remember that life is what you chose to make it...then there is nothing that can destroy your happiness.

happiness is internal, but it is also a great thing to share.
the more you share it, the more it comes back to you.

happiness and love go hand in hand.

starting as a trader

2005-11-30T17:57:00.000+13:00

I was recently asked if $200 is enough to start a trading portfolio.

thats a good question...how much is enough?

there are many ways to answer this, some people would say $100,000 is the minimum if you want to make a living from it, others think $20,000 can get you started etc.

I think the answer depends on each individual's circumstances, but I would say the Absolute minimum is $2000, but even then you are making it extremely difficult for yourself.

here's some of my thoughts on it.
-whatever the amount is, it should be money you can afford to lose when you start out.
-you must remember that you pay brokerage on each trade.
-if you make 20% in your first year you are doing great...in fact if you make any money in your first year you are too :-)

so lets assume you do have $200.
20% of that is $40, so at the end of a good first year you may have $240.
but if your brokerage is $10 per buy and sell, thats taking most of your profit away.

if the amount is $2000, your target for year one is $2400, and the brokerage of $10 per trade is more manageable as long as you dont trade often.

so if you only have $200 to start with, I suggest you keep saving, and in the meantime do some imaginary "paper" trades...thats when you go through the whole process of trading on a piece of paper, do some imaginary buy one day and an imaginary sell another, and see what lessons you might need to learn before you start using real money.

New Zealand

2005-11-29T20:43:00.000+13:00

I live in what I think is the best country in the planet, a relatively little set of islands known as New Zealand.

why is it the best? here's a few reasons:

-The government and its people are against nuclear weapons
-there is little pollution...the sky is blue, the air is clean
-most of us are friendly
-we dont needto carry guns for protection
-we are not overpopulated, there's only around 4 million of us
-the fishing is great
-its pretty

sold SMM - Summit Resources

2005-11-28T19:20:00.000+13:00

one thing some traders forget, is that you can get out of a stock anytime you chose.

just because you have a trailing stop set at a certain level, doesnt mean you must stay with the trade until then. if you see signs of weakness, it is sometimes better to get out early.
trailing stops should not be moved lower, but they can be moved higher at any time.

SMM has been trading lower for a few days now, and i had a generous trailing stop since it is often volatile. however, this morning i looked at the depth and there were few buyers. I decided to pull the plug and SOLD at $0.71 with the expectation of buying in lower.

this turned out to be the correct decision, as my stop of $0.70 was reached shortly afterwards and the stock closed at $0.68.

now this goes back to the watchlist and i can get back anytime if there are signs that the buyers are returning.

trade updates

2005-11-27T09:53:00.000+13:00

SMM.AX - Summit Resources Ltd, has had a bit of a retrace as expected.
the good thing is that this has been on declining volume, which means that the bulls are still willing to hold. the next few days should make it clear where this one is headed.

ING.NZ - ING Property Trust, had a divie record date on friday, so the closing price of $1.20 should see it open around $1.175 on monday. I expect the recent strength to continue, and wouldnt be surprised if it trades around $1.20 on monday anyway. I have raised my trailing stop to $1.16.

RISK on...religion

2005-11-26T08:55:00.000+13:00

speaking of xmas, i should point out the following:

I am an atheist.
I do not believe in god or the church.

i believe religion was a necessary step in the evolution of human beings.
religion still helps many people to get through tough times.

many religious ideas are worthwhile.

the idea of love is most important...whether you believe in god or not.

xmas

2005-11-25T20:17:00.000+13:00

christmas is not too far away, and by the look of things it seems that people are still spending lots of money on it.
I read somewhere that the average New Zealander will spend about $800 on xmas, so i think a lot of retailers will benefit from this season.
Im having a look at the warehouse this weekend for a long term investment.

Risk on...love

2005-11-24T08:49:00.000+13:00

the most important idea, is the idea of love.

as the song says "love is all you need"

become aware of the love you feel within you, and you will see love surrounds you.

love will inspire you, energise, and strengthen you.

as long as you have love in your heart and mind, you will have happiness.

be happy :-)

(ps. today is my wedding anniversary)

Risk on...ideas

2005-11-23T17:19:00.000+13:00

ideas are imho the most important things we can have as human beings.

ideas occur everywhere, from political and religious ideologies, to fashion trends, to technological and medical advances...they all start off as ideas...usually by a single individual.

unlike animals, we are able to communicate our ideas, we are able to share them and others can adopt our ideas and also adapt them to suit themselves.

blogs and internet chat sites are popular because they allow individuals to share their ideas and ideologies.

it is very important not to close your mind to new ideas.
once you do that, you become like the dog that cant learn new tricks: old.

limited time

2005-11-22T19:58:00.000+13:00

some days i like to spend watching the markets and daytrading.
you can learn a lot that way.
other days i like to go outside and play.
playing is more fun, so i do it often. :-)

today i did the latter, but on checking the markets on my return i see that both my blog open trades did well.

ING traded at $1.20 to close at $1.19. i am tempted to move my stop up, but since this is now a longer term trade, i shall leave it for now.

SMM reached my target of $0.77 but i did not sell as all my targets i trade manually and i was away.
in fact SMM traded at $0.78 at one point then retraced to $0.735 to close at $0.765.
this shows a ot of buyers are still around, this share remains volatile, so the stop remains at $0.70 until we get a new high.

remove stoploss fast

2005-11-21T20:01:00.000+13:00

although it can sometimes work against me (see my SEN trade), i like to replace my stoploss level with a trailing stop as soon as the trade is profitable.

that way a winning trade is not converted to a losing one.

once i have set a trailing stop, i am usually slower in moving that up.
that way i can give a winning trade a bit more room to breathe than a trade that i have recently entered.

today SMM traded around $0.695 most of the day but then moved to $0.725 in the last hour. the range it was on was truly broken, and hopefully this trade will be more profitable than the range trade i never entered.

a breakout trade usually has lots of momentum as it gets started, but SMM is a speculative stock so you have to be weary of wild swings.

I have removed my stoploss and created a trailing stop at $0.70.

trade: ING - ING Property Trust

2005-11-21T13:32:00.000+13:00

as mentioned previously, my original intention for ING was a dividend stripping trade, but after a trading halt and a positive placement, this becomes a more attractive short to medium term breakout trade.

as you can see in the barchart above, ING has traded at $1.18 today.
the buy depth looks very strong, with large orders between $1.17 and $1.15.
therefore I have just bought at $1.18 and have a medium term target at resistance around $1.28, with a stop loss at $1.14

Code	Buy	Stop	Target	Risk/Reward	Comments
ING.NZ	1.18	1.14	1.28	4c/10c	breakout

RISK on...this blog

2005-11-20T17:09:00.000+13:00

welcome, my child... :-)

the first thing you should know is that you are the first real person ever to visit this blog...everyone else is busy doing something unimportant.

this blog is just a place to put some of my beliefs and ideas on paper.
(yes i know its not real paper, but its the best i could do.)

as i write this, i hope that when my children are older, they accidentally stumble upon this blog, and quickly learn some of the things that took me a lifetime to learn.

of course i'll also teach my children these same things in "real life"...
but it always pays to have a plan B.

i have not told anyone about this blog...not even my children.
i've left it all to chance.
thats what RISK is all about.

ING placement

2005-11-19T10:02:00.000+13:00

ING seems to have a lot of institutional support.

the placement intention was for $25mill to $30mill, but they were able to place $35million in no time at all.

this is very positive for the company, so i'm considering adding ING to my long term portfolio.

my original intention was to use this as a dividend stripping example, but now i may buy more stock and keep some longer term.

wisdom: follow hot sectors

2005-11-18T20:40:00.000+13:00

not all stocks are the same, and neither are the industry sectors.

sometimes mining stocks are hot, other times its technology, property, biotech, etc.

even within sectors there are subsectors that can be hot.
in mining you might have everyone trying to buy gold shares, or uranium for example.

it pays to keep an eye on whats moving as a sector, especially when you are doing short term momentum trades.

you must always remember that it pays to follow the trend and be part of the crowd rather than to fight against it...but it also pays to jump ship BEFORE everyone else gets the same idea.

trade: SMM - Summit Resources Ltd

2005-11-18T18:06:00.000+13:00

technical analysis is more of an art than a science.
different traders can interpret the same chart in different ways, and both can be correct.

my previous charts of SMM showed a trading range.
I was waiting for an ideal time to enter, but the lows were getting slightly higher and the highs slightly lower.
in other words the trading range began looking more like a triangle pattern.

today this was broken on the upside so i entered a trade of the breakout.
there is still the possibility of the range resistance at $0.70 cent, so i will use a very tight stop around that level.
my entry was $0.665, my target is $0.77 and my initial stop is $0.64.

Code	Buy	Stop	Target	Risk/Reward	Comments
SMM.AX	0.665	0.64	0.77	2.5c/10.5c	breakout

the unexpected

2005-11-17T19:59:00.000+13:00

the markets are always throwing up unexpected events and nothing should surprise you since everything is possible.

today ING - ING Property Trust went into a trading halt pending the institutional placement of $25mill to $30mill units.

my order was already waiting to buy at $1.15, but sometimes unecpected things happen after a trading halt, so i'll have to step back a little and see how it resumes.

my other property dividend stripping share is MGP - Macquarie Goodman Property Trust, and that chart looks a bit more positive so i may buy that one instead.

remember there are always opportunities so best not to rush things. :-)

ING - ING Property Trust

2005-11-16T07:40:00.000+13:00

here's yesterday's closing chart:
as you can see ING is technically still in a downtrend (lower high and lower low), but there are signs the stock might be about to turn (it has broken the confirmed trendline).

i have drawn a tentative range between $1.13 and $1.17. this gives me a stop loss of $1.12 pre divie. i want to get in at $1.15 if possible, but the closer we get to the divie record date, we want to be closer to the top of the range so that we dont fall below it ex-divie. (i expect it to drop $0.02 to $0.025 cents ex divie)

dividend stripping

2005-11-15T19:29:00.000+13:00

one technique which i sometimes use for buying short term stocks is known as "dividend stripping".

this means buying the stock before its dividend record date, and selling not too long after.

the idea is that often after the record date, the share goes down in price less than the dividend amount, thus you gain a little bit for nothing. of course it could also go the other way, but its a technique i have used succesfully in the past, so im looking for another one.

for this i have looked at the NZ property sector. this sector tends to be less volatile than others, and it pays good dividends.

I have narrowed my search down to ING.NZ - ING Property Trust , which is currently at $1.15, and has a divie record date of 25th of november. which means i have just over a week to find the best time to buy.

position size

2005-11-14T20:19:00.000+13:00

while the 2% rule shows you how much you risk per trade, you need to have a method to calculate the position size of each trade.

most stocks are unlikely to fall to zero value overnight.
so if your risk is $2000, you could buy $10000 worth of shares as long as you sold once you've lost $2000.

the way you work out the number of shares to buy depends on the type of trading you are doing and where your stop loss level is.

for example, if i range trade SMM, and buy at $0.58, with a stop loss of $0.56, then i am risking $0.02 per share. $2000 divided by $0.02 is 100,000.
which means that if i use a 2% rule and my initial capital is $100,000, i can buy 100,000 SMM shares at $0.58.

using position sizing and the 2% rule, along with sticking to your stop loss levels and planning each trade, is the bare minimum you need to survive as a trader.

wisdom: money management

2005-11-13T22:10:00.000+13:00

to trade succesfully in the long run, you have to do anything possible to preserve capital and avoid the risk of ruin.

the way to do this is to manage your money, so that you limit the negative effects of any losses.

the best way to do this is by having strict rules to determine how much money you will risk for each trade.

a common rule is known as the "2% rule" which basically says that any single trade will not put at risk any more than 2% of your total capital. SO if your capital is $100,000, you will not lose more than $2000.

personally I use a variant of this rule. I only risk 2% for longterm trades, 1.5% for medium and short term, and 0.5% for daytrades.

some people believe that in a long term trade you risk losing more than in a short term trade, but the reality is that short term trading is riskier.

Risk

2005-11-12T08:00:00.000+13:00

most worthwhile things in life involve some amount of risk...from trivial things like crossing the road, to starting a relationship, and trading in the markets.

wherever there is risk, there is also often a reward...sometimes its emotional satisfaction, or a goal achieved, or a physical reward.

in trading, if we wish to be successful, we must always remember the goal is to make money in the long run. we can only do this by sticking to a realistic plan.

the purpose of the plan is to minimise risk and maximise the financial reward.
the reward must be financial, if you are after thrills or excitement, or other emotional reward, make sure you get that from some other aspect of your life.

i like to focus on managing risk, and the rewards take care of themselves. hence my name "risk".

risk management is money management.

chasing stocks

2005-11-11T21:24:00.000+13:00

the sharemarket is always full of opportunities...both to make money and to lose it.

sometimes it is wiser to wait for stocks to reach your price, than to chase the stock price up.
however, sometimes you have to be flexible and chase it up a percent or two...the market always knows best and some opportunities wait for no man.

I still have not bought into SMM although it has been close to my buy price a few times. (a couple of times my order would have been met if i hadnt pulled it due to my feelings about the market in general).

a range trade offers limited reward, so you have to be careful about how much extra risk you take on.

if SMM broke above that range, i would have no hesitation in chasing the price up a cent or two, but at this stage im still on the sidelines watching the bears and bulls struggle for dominance.
fascinating, we are getting lower highs, and higher lows...I feel something is about to give.

hindsight

2005-11-10T18:29:00.000+13:00

hindsight can be a wonderful tool.
whenever you complete a trade you should review that trade sometime in the future and see if there's anything you can learn from it.

today i reviewed my Senetas daytrade.
SEN closed today at $0.61, thats an 8% increase for the day.
if i had daytraded SEN today instead, my trade would have been much more profitable than it was.

but you should always remember that things were different at the actual time of the trade than at the time of the review.

I made the right decision in selling SEN because it stopped me turning a winning trade into a losing one. yesterday there was no way of knowing that SEN would go up 8% today. we only know that in hindsight.

trading is all about probabilities. there was a change that the triangle target of $0.64 might be reached, but when the buyers disappeared and SEN traded at $0.57 and below, the probabilities changed.

todays increase happened mostly in the last half hour, the stock was going sideways most of the day, and my plan said to stay in only while it was going up.

sometimes hindsight will show you that a stock you sold keeps going up. you have to accept that reality and move on happily. :-)

completed trades here

2005-11-09T19:50:00.000+13:00

for the record, i'll keep a history of my trades in this post.
this page last updated on 21/12/2005 NZT

Open trades
Code	Buy	Stop	Target	Risk/Reward	Current
OCO.AX	0.02	0.017	0.025	0.5c/0.3c	0.019
ING.NZ	1.18	1.16	1.28	4c/10c	1.18

Closed Trades
Code	Buy	Sell	$	%	days	Comments
SMM.AX	0.665	0.71	+0.045	+6.76%	11	breakout
SEN.AX	0.57	0.575	+0.005	+0.88%	2	daytrade

the perfect trade

2005-11-09T14:34:00.000+13:00

i believe any trade that goes according to plan is a perfect trade...
and if you stick to your plan, by definition that trade must have gone to plan.

sometimes i get trades that dont meet my targets, but as long as i stick to my plan i consider that a succesful trade.

my daytrade of SEN didnt meet my target expectations.

today it opened with a 500k sell order at $0.58, and although it briefly traded at $0.59, after an hours trading it was still at yesterdays close of $0.58. i got ready to pull the trigger.

then all of a sudden i noticed a lot of the buy orders at $0.56 and $0.55 began to disappear.
the time to act was now, so I SOLD my holding at $0.575. this trade ended up with only a half a cent gain, or just +0.88%.

once SEN lost momentum, there was no point in staying on this trade.
pretty soon after i sold it was trading at $0.555...when you trade volatile stocks you have to be quick on your feet.

trailing stops

2005-11-09T11:32:00.000+13:00

yesterday I bough SENetas at $0.57 and it had an intraday high of $0.595 (+4%) closing at $0.58 (+1.75%).

since my target of $0.64 (+12%)wasnt reached, and the buy depth still looked strong at the end of the day, i decided not to sell. this morning I will watch this one closely and use a manual trailing stop at breakeven of $0.57 or higher if I see weakness.

i think trailing stops should always be used, and you should never turn a winning trade into a losing one.

my general rule with "daytrades" is to only hold while there is good momentum going forward, and sell at the first sign of weakness. there is no point in selling if its still going up.

SEN still has momentum. it closed on a higher high and the intraday high was also higher. $0.60 might prove to be a bit of resistance and if this is not touched today I shall sell regardless, but if this is broken we may yet see my target reached.

wisdom: plan each trade

2005-11-09T10:25:00.000+13:00

the success of any venture often depends on having a realistic plan.

in a future post I will cover creating a general trading plan, but as well as having an overall plan, your chances of success are greatly improved if you have an individual trading plan for each and every trade.

each stock is different, even the same stock can act different at different times, so it is sensible to tailor a plan to deal with each different scenario. in daytrades i am only interested in trading a short rally in price.

the plan for SEN was to buy and get out quick. this is currently a fast moving stock and we only want to be in it while the momentum remains strong.

on the other hand SMM is in a trading range, so we must trade it as such. we cannot assume it will break from this range just because we buy into it. once we reach the limits of the range we are aware that there is the possibility of a break, but we must trade the market as it is now, not how it might be in the future.

daytrade: SEN - Senetas corp ltd

2005-11-08T12:30:00.000+13:00

SEN - Senetas Corporation Limited has had a good run for about a month. This stock keeps making new highs, and yesterday it made an intraday high of $0.575, with a close at $0.56 which is also the highest close.

This morning the depth shows there's more buyers than sellers, especially around the $0.55 mark.
it opened at $0.565 and quickly went to $0.57. I watched the depth and sellers at $0.57 seemed to be drying up, so I bought at $0.57.
I will use a stop of $0.55 which was the previous high, and my target is $0.64 which is a projection from the triangle shown below.

In future, I'll summarize each open trade in a table like this one:

Code	Buy	Stop	Target	Risk/Reward	Comments
SEN.AX	0.57	0.55	0.64	2c/7c	open daytrade

types of trades and timeframes

2005-11-08T11:30:00.000+13:00

i wont post all my trades in this blog as that would take too long, but i'll try and include a variety of them.

there's lots of different ways to trade the markets.
there's range trades, trend trades, and pattern trading to name a few.
there's also different time periods to trade.

my own definitions are something like this:
daytrade - anything from 5 minutes to about a week
short term - from about one week to a month
medium term - a month to about six months
long term - anything over six months
these definitions can differ between traders, but now you know what im talking about.

the SMM setup mentioned before is obviously a short term range trade, i wouldnt expect to be holding longer than a week or three, and i can afford to wait another week or two for the right conditions to buy.

for day trading there is no such luxury.
hesitation can mean the difference between a profit or loss.

to select a daytrading stock, i find it easier Not to have a predetermined watchlist, but to just follow the news and see where the action is on any particular day.

so im off to read some news and chat sites to see where the action might be today.

range trades

2005-11-07T08:15:00.000+13:00

when a stock begins trading in a range, the longer the range continues, the more significant it becomes.

a range is a sign of equilibrium. buyers are accumulating the stock, once it reaches the lower support, they just cant help but buy. sellers are just as equally keen to sell once the higher resistance level is reached.

when a range is broken, this equilibrium is disturbed, so the price can change markedly until a new equilibrium point is found.

here I have drawn a range inside the original one for SMM. i believe this inner range is much more significant. it is also a more realistic one to trade. My plan now is to buy around $0.60 with a target of $0.66 thats a 10%gain. if I miss out on buying then, there is still the possibility of a breakout above resistance which should provide an even better trade.

Rod Donald dies aged 48

2005-11-06T19:27:00.000+13:00

I just heard that Rod Donald has died. He was co-leader of the Green Party of Aotearoa New Zealand.

I think he was one of our better Members of Parliament.
An intelligent man of principles, he was committed and inspirational.

New Zealand will be the poorer for the loss of this great man.
Thanks for caring Rod.

you can read more about him at the Green's Blog

wisdom: patience

2005-11-05T13:20:00.000+13:00

sometimes one of the best things you can do in trading is to sit on your hands and wait.

patience is often rewarded.
patience is also often its own reward.

time taken to think and deliberate can be relaxing.
the less stress you feel the better your trading will be.

the original chart of SMM was posted when the current price was $0.62, now a week later the price is still $0.62. The stock has gone nowhere, but our patience has been rewarded. the trading range is even clearer now, and we can narrow our plan on how to trade it.

exactness

2005-11-04T16:03:00.000+13:00

I think people in general like to see things as black or white, and most traders are no different.

But the reality is that most things are no so clear, there are many shades of grey.
the closer you look, the less exact things become.

sometimes it is better to forget about being exact, and take a look at the bigger picture.

I have mentioned before that SMM went from $0.30c to $0.90c and is now at 50% retracement at $0.60c. If you look closely you'll notice this isnt exactly true...there are a few cents difference either way. But my inexactness is deliberate. I am looking at a 6 month chart to get a bigger picture than my intended time period.

this picture tells me the crowd became highly motivated to buy SMM for 3 months. but since then it retreated to a less exhuberant level. the trading range shows there is currently a concensus of the worth of SMM shares.

more on SMM - Summit Resources

2005-11-03T19:40:00.000+13:00

I have been succesfully trading in and out of SMM since May 2005 and it remains in my watch list.

In those 6 months it rose 200% from $0.30 to $0.90, mainly due to Uranium being a hot sector, and a good recommendation in The Dines Letter

I identified SMM as being a speculative stock, with lots of potential.
They have a lot of Uranium resource but cannot yet mine it due to a Uranium mining ban in Queensland. However, there is a lot of pressure to allow mining at some stage, which would be very positive for the company.

Because of the speculative nature of this stock, I decided to only trade it Short term, only holding it anywhere from a day to a month. Like most speculative stocks, SMM can become very volatile and 10% moves are not unusual.

The trading range I identified earlier is about 20% wide, which is a reasonable reward for a speculative short term trade, especially if you can buy towards the bottom of the range, hopefully limiting your risk.

wisdom: keep it simple

2005-11-02T12:55:00.000+13:00

I have read everything I can lay my hands on regarding share trading...and have come to the conclusion that a lot of what is written is not necessarily useful in "real life" trading.

But amongst all the different opinions, there are a few very useful ideas, and its these ideas that can make all the difference to success. So I'll highlight some of these under the "Wisdom" heading in some of my posts.

One of these ideas, and one I have followed even before I started trading, is the concept of KISS - or Keep it Simple Stupid. This means if something is not complicated, there is no point in complicating it...to do that is just silly.

In trading, the goal is to make a profit overall.
Its all about dollars and cents, in other words, its all about price.

What the price does is what affects our bottom line, not what the chart indicators, or even the volume do. It is only the price that makes a difference.

Sure some of these tools can give you an indication of what price action might do...but when it comes down to it price action does that all by itself.

In the chart of SMM I posted earlier, I only included price and some simple trendlines.
That is all you need to profit from trading.

SMM - Summit Resources Limited

2005-11-01T12:55:00.000+13:00

SMM seems to have settled into a trading range.
It rose from $0.30 to $0.90 odd cents and there seems to be some support around the 50% retracement level of $0.60cents.

Current price is $0.62 -
My plan is to BUY at around $0.57-$0.58 depending on the indexes, and add to my position if it breaks above $0.70 - will post more details when/if I trade this.

why now?

2005-11-01T10:43:00.000+13:00

...because the time is now right.