Read? Investing vs Trading (5) - Key differences???
Frequency of Risk Taking
In investing or trading, you are required to take risks to deploy your capital. You must be RIGHT in your direction to make more money from the stock market. If you get the direction WRONG, you will be punished either with realised losses or sitting on unrealised loss. For any unrealized losses, you may be comforting yourself that they are not losses yet.
For those who still strongly believe that unrealised losses are not losses yet, may be you should be learning this financial function available from Microsoft Excel called XIRR.
What lessons did Uncle8888 learn over past decade in short-term trading and long-term investing?
On Short-Term Trading
Read the newspapers or visit investment blogs which have clear commercial interests of inducing you to buy that belief that you can trade for a living or build up your wealth in the market with their "Secrets" that can be sold for $X,XXX
What you may not know or not told by the "Gurus" at their previews?
In trading, every time you put in a trade, you are taking calculated risk of losing your capital for your limited reward. All experience and successful traders will follow their Trading Rules for clear Entry and Exit point or follow some popular Stop Losses Rule e.g. 2% and 6% Rule.
When the traders are RIGHT, they will make money from the market. When they are WRONG, they will lose it back to the market.
In trading, you are in a Rat Race to make money from the market. It is endless risk taking to make money. You must win more and lose less in order to survive.
You have to make endless trading decisions, endless risk taking, and endless to be RIGHT one more time to make money.
Is this somewhat similar to those employees working in a Rat Race environment at their office?
Are you running another Rat Race in the stock market???
Can such frequency of trading really lead you to financial freedom and out of Rat Race?
Do your own thinking!!!
On Long-Term Investing
At first, it is no different from short-term trading, you have to take calculated risks and be RIGHT.
When you are DAMN BLOODY RIGHT in your direction, easy money will soon fall from the MONEY TREE into your pocket without you doing anything else to collect this money.
After X or XX years, you will be in RISK OFF positions to continue to make more money from the stock market.
It is where traders cannot never never dream of!!!
RISK OFF to make more money from the stock market!!!
In Hokkien, they called it: "KIAO KAH YO LUM PAR/K.K.Y.L.P."
What do you think???
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Posts
All traders/investors can make money.
ReplyDeleteOnly those short to very short-term traders need to stop trading this way at some time of their life. Anyway most of the very short-term traders will "burnt-out" naturally or eventually.
i think the stress is too inhuman in the long run.
Long-term investors (to me is just another form of trading) can go on for a lifetime.
How do i know?
Just look at me lol!
Sorry! No offence to anyone.
My 2 cents.
After X or XX years, you will be in RISK OFF positions to continue to make more money from the stock market
ReplyDeletecan u explain this part? i dont understand...
After X or XX years, Return of Capital from dividends. No more risks of losing invested capital.
ReplyDeleteTo put very simply, what you risk in the market now is all your ROI and some to spare.
ReplyDeleteBut i don't want to feel this way. i want to continue the story of investing for ROI.
I have traded SembMarine about 32 times this year, lost money on 5 times. And these 5 losses wipe out all the gains made. Recently do a buy right after it declared DIV of 5 cents on the day the price weakened, to average down and keep as longer term investment. It's been lucky so far compared to the short term trading I did.
ReplyDeleteCongrats on your portfolio breaking record high. Like Olympics World Record.
CH
We must remember these.
DeleteTwo of Jesse Livermore’s Money Management Rules
3) Keep cash in reserve.
The successful speculator must always have cash in reserve.. .for exactly the right moment. There is a never-ending stream of opportunities in the stock market and, if you miss a good opportunity, wait a little while, be patient, and another one will come along. J.P. reach for a trade, all the conditions for a good trade must be on your side. Remember, you do not have to be in the market all the time. The desire to always be in the game is one of the speculator’s greatest hazards. When playing the stock market, there are times when your money should be waiting on the sidelines in cash.. .waiting to come into play. Time is not money — time is time, and money is money. Often money that is just sitting can later be moved into the right situation at the right time and make a fast fortune. Patience is the key to success, not speed. Time is a cunning speculator’s best friend if it is used wisely.
5) Take the profits in cash.
I recommend parking 50 percent of the profits from a successful trade, especially when the trade doubled the original capital. Set the money aside, put it in the bank, hold it in reserve, or lock it up in a safe-deposit box. Like winning in the casino, it’s a good idea, now and then to take your winnings off the table and turn them into cash… .the single largest regret I have ever had in my financial life was not paying enough attention to this rule.