Me as a trader

Hey there, This is basically a short introduction of who I am and how I trade.

How I got started: In terms of managing money, I’ve been very fortunate to have the confidence of my parents supporting me, and they have allowed me to save my Child Subsidy Allowance and place that into an equity fund, which I have gradually taken more responsibility for. This has taught me long term investing and mental resilience no matter what the conditions, because rough seas can be ridden out. I only started trading however, once I moved to Hong Kong and at the edge of my fingertips had the opportunity to trade stocks and warrants straight out of my bank account, no questions asked. I had many long nights worth of discussions with one of the traders and friends that have made me think  the most: Tami Abadi.

Why I’m still trading: One reason, and one reason only: HKEx (388.HK). Bought in in April ’09 with a ridiculous bet of a 30% out-of-the-money warrant, and it paid off really well. Then I did the same thing again and it paid off again. I did lose a little bit more being flush with excitement at the very thought of this ATM that would just print money for me, but that was truly where I started thinking about what I was doing, and how I could make it better. I paid off 2 trips to Sweden, my tuition for a year, and one trip to Japan with that money, and ever since I’ve been on the hook for trading.

Best placement of money in my life: Buying SSAB when I was about 10. My dad wanted to buy it for me, and thought he’d hand some responsibility to me about my own money. I looked at the market, the stock (and its P/E, mostly, not old enough to really understand most of the rest of the bottom-up approach my dad had used by then) and told him to hold it. The stock went down 30%, and I asked him to buy at that time. The stock never looked back, has been a pillar of my investments all the time, and paid off way more dividends than I ever bought it for.

Worst investment of my life: Buying into Telia IPO (Swedish mostly state owned telephone and communications infrastructure company.) Lost 50%, and it never recovered. I just got into the hype, sadly. Taught me a lot about the value of information and making one’s independent analysis.

Main money management rule: Know what your money is in, and why. If not, make it happen by either studying or moving your money. If you don’t understand where your money is, you can never improve from the failures or the successes and what they teach you.

Top personal tip to any reader: This applies mostly if you’re a trader, but anytime you place your money, take fear out of the equation. If you have fears, you have doubts, and if you have doubts, you don’t know either what you’re doing or what the market will be. There is no such thing as a sure trade – the graveyard is strewn with people who have tried to look for it – but what is there is a definite risk/reward ratio. Only make trades that you can live with losing, because the R3 is worth any potential losses.

Favourite key ratio: P/S, as long as it’s followed up by historical P/E and a solid analysis of the prospect for sales growth. It’s amazing what this can tell you with a little market insight and information. Also, lately, corporate earnings have been so volatile that there is urgent need for something better than P/E to base any investment decisions on.

Favourite technical indicator: MACD, closely followed by exponentially calculated Bollinger Bands. I don’t really use the normal time frames or methodology for the MACD, but I sat one day and toyed with different combinations of fundamentally important numbers and ratios, and all of a sudden, something amazing plopped out at me. I still don’t really understand why this works mathematically, but with the right filtering it really does. I’ll leave this to another post, but basically, I am really in love with what I call the Magic-D method.

On Bollinger Bands, they’re great for trade, but it’s a little bit like reading tea leaves from the bottom of the cup: a lot of things that should not matter all of a sudden become rather important, and price action and momentum can be erratic around them for a long while. I have thought of an adjustment to this, and it helps quite a bit, but have not been able to fully implement it yet.

And there you have it, a few basics of who I am and how that influences my trading, and my outlook.

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