As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

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Sunday, 6 November 2011

Playing The Game of Leverage (11) - Win Big or Lose Big

Read? Playing The Game of Leverage (10) - Counterparty Risk in Trading CFDs

Leverage is a double-edged sword. You can win big or lose big. Win big? Really?

Win Big if you get it right? Not necessay. But, Lose Big if you get it wrong is definite.

People seldom like to talk about their losses as it is loss of face to admit their losses and look silly too. People will like to boost about their big winning and for some winning small also talk big.

The truth is that when we are highly leverages, we are more likely to exit our winning positions sooner than expected so we are more likely to miss winning really big. Another thing is that market rarely gap up a lots but more often it will gap down a lots. When we are caught with such huge market gap down, the damage is already done and it is too late to regret.

In 2006/2007 Bull Run, on 28 Feb 2007, STI suddenly fell -4% on that day in reaction DOW overnight -3.3% plunge. I have lost $21,126 on that fateful day by closing out all positions. I have suffered the biggest one day losses since active trading and I think it will be so as I no longer believe the idea of Win big or Lose big by using leverages.

Read? Trading Performance Review

1 comment:

  1. short is less dangerous now ..... but dun leverage above 2 times


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