XJO 1.70% 5,376.6 s&p/asx 200

buy buy buy - everyone makes money

  1. 1,471 Posts.

    I just thought i'd make a post, seeing how everyone here seems to be able to pick highs and lows and make tons and tons of money. I wanted to air out some thoughts and get some feedback, as I feel there is a lesson to be learnt from this.

    Just an observation on my trading pattern (I spent the entire morning analysing my trades).

    I was short at 3600 smalls, built it up to larger positions at 3700, convinced that we would get a pullback.

    10% higher later, no pullback only more strength. My short view was based on macro economic observations and the law of gravity. I now realise upon my analysis, that at some point in the entire 4 weeks I have been short (actually numerous points pending various trades) I have been in front, with a nice profit. But I didn't take it. I was still in the mindset of the cascading selloffs we got end of last year, and in February.

    As the result, I have paid the price of not taking profits when I should have and seeing positions gap up on me, doubling up, getting back to break even (even small profits in some cases) and not taking it, and gapping up again.

    It is my opinion when people are FORCED to buy, you should be selling to them. It is also my contention this rally is not due to positive economic recovery numbers, nor is it due to a massive "wall of money" everyone is talking about, but rather the LACK of sellers or profit takers.

    Why no sellers? Well, 2 reasons for this I think.

    1) Not many people have core positions left over from the days of SPX 666 (only 12 weeks ago, but seems like a year). Everyone is just buying on open, and selling on close or tomorrow's open. It's pass the parcel stuff, and the parcel gets heavier and heavier but people seem to find more and more strength....defying gravity (hence my downfall).

    2) Tax. It is but a mere 3 weeks till June 30th. Alot of people who have remaining core positions from good levels would be reluctant to sell it here and realise a capital gain payable on June 30th, but rather sell it in July 1st and roll the tax payable over to next year. This is especially true for superannuation funds, bigger players and so on.

    At the back of my mind, I think its all rubbish, but I want to learn from my mistakes. I made the mistake of not changing my perception and anticipation of the markets from a mad scramble to exit, to a mad scramble to enter. I think I picked the trades right, because 80% of trades were profitable at some point, and only 20% went the other way immediately. It was my perception of the markets that stuffed up my P&L and as the result I'm reduced to having to trade half my usual size, to claw my way back.

    The other mistake I make, all the time, is to analyse too much into things. With charts, and lunar cycles, and research, and street talk and news channels, your mind tends to gyrate to and fro. It's like a baccarat table. You will have a greater chance of success over a million hands, if you bet on one side ALL the time, instead of jumping left and right.

    Take today for example. Today was the height of my stupidity. I woke up, saw the news, saw my profits from yesterday eroded and covered all shorts, and stood back. Half an hour later, things were below where I covered them. Not that you can pick it, but letting the market breathe a little bit for an hour or so can sometimes (more often than not) mitigate a losing position greatly.

    While this market is strong and hungry, I remain the voice of bearishness, but I'm now trying to learn how to profit from everyone's mania.

    There is no doubt in my mind, the market is overbought and a pullback is coming. But I would be interested to hear other people's thoughts when they are faced with similar situations, as opposed to reading the seemingly 100% track record of successes that seems to permeate this forum.

    I also believe that luck plays a great role, and I have been a little unlucky over the past week. I had a short on the DAX at 5105, and my bid was in at 5000 to cover, and it hit 5016 overnight while I was asleep. Again...wrong mindset for anticipation of market movements, but right trade. I was short XJO from Monday at 3952, watched it go to 4031, douubled up at 4000 on the way down, rode it all the way down to 3912 low last night, and would have been way in the money if BHP had not pulled the trigger this morning, and Rio just announced the rights issue. And on further analysis of this particular trade, I would have probably NOT closed it out too, chosing to ride it lower as my mindset was still fixated on the massive slides we experienced the past 18 months. I was short CBA leading into the Dow's fall two nights ago, only to find that RBC were upgrading all Australian Banks, and there was massive rotation yesterday (which seems to have reversed today) selling out of resources into banks.

    So right trade, just unforeseen factors conspiring and lack of understanding on when to change your anticipation tracks.

    Changing your macro view is not the same as changing your mindset I have discovered. You could be moving from short bias to long bias, but get belted because you expect the sell offs to be too much.

    Any comments welcomed, if I have offended anyone apologies.



 
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