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

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Sunday, 15 June 2008

No safety net in trading future or forex!!!

As I educated myself further by reading more trading books on future, forex, and commodities, these are books that previously, I leave them alone in NLB book shelves or just flip through.

In trading/investing stocks, I go for good fundamental stocks that at least providing me dividend yield of at least 2-3%, and this provides me with the safety net. If these stocks turned again me, the dividends collected from them is still far better than putting cash in Fixed Deposits.

In trading/investing stocks, I don't touch the profits, and all go back to trading/investing stocks for compounding effect; and the past profit also has the effect of offseting or cushioning against the current unrealized losses.

But, in trading future or forex, I must TOTALLY SWITCH THIS MINDSET.

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This what I learnt from "Winning the Trading Game, Noble Draklon"

Compounding

While it’s believed that compound interest is the most powerful force in the universe, the concept rarely translates well to the world of leveraged investing. It is easy to see people make profits over a lengthy period of time, increasing their trading volume because of their account size, and give it all back in one bad trade.

Taking Profits

Take your profits off the table. If you are going to focus on your goal of making returns, I would suggest in the beginning that you forget about reinvesting your profits or ideas of compound interest – these are greed-induced fantasies.

Look at interest in futures, forex, and options investing as “simple” interest. If you can risk one to make two, you are ahead of the most. You risk your operating capital in leveraged investments in order to gain unusually big potential returns compared to other alternatives. I am sure thee is some special mathematical formula, but suffice to say that leveraged investing, more so than any other investment, does not take kindly to compounding. Take your profits home.

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