Friday, December 12, 2008

Bernstein on hesitation

I have always liked Peter Bernstein, one of those Wall Street gurus whose names you can always find plastered in any finance bookshelves. Somehow he seems different from all the rest who practically scream, "LOOK AT ME! I AM RICHIE RICH!" while jamming their books with bland MBA-lingos exhorting you to worship themselves above all else. Probably through his eloquent writings, his reverence towards history and his sensitivities towards the arts and literature, Bernstein has managed to distance himself from the MBA pack.

And this is what he had to say about hesitation in the face of uncertainty. Common knowledge has it that "he who hesitates is lost". Going on to quote Hamlet "the native hue of resolution is sicklied o'ver with the pale cast of thought, and enterprises of great pith and moment lose the name of action.", he went on to debunk the consensus:

Yet once we act, we forfeit the option of waiting until new information comes along. As a result, not acting has value. The more uncertain the outcome, the greater may be the value of procrastination. Hamlet had it wrong. He who hesitates is halfway home.

My trigger-happy fingers have caused me much grief in the *past.I need to get this drummed into my head.

*(only last night) I had been trying to get into BAC, but I knew the market was very choppy. The ticker was bouncing between 16 and 16.2 for a few hours. Hindsight and common sense is to stay away tonight, but at that moment, when it rose, I was filled with dread that it would run away, and when it fell, I was filled with anticipation to buy. And when it went down to 16 again, I just had to buy at 16, all because I thought I had stayed up all night, and I deserved some action. Almost immediately after the order was filled, it plunged drastically down, closing at 14.9 for the day. The instantaneous reaction from the market was surreal, almost as if some higher being out there was observing you with glee. That sickness in the stomach, familiar eh?

Thursday, December 04, 2008

Trading tips for NYSE

a list i mentally compiled to myself along the way...

1. If you find yourself 15% up in a day, you can also be 15% down tomorrow. It's called volatility. Liquidate.

2. Do not trade pre-market. Do not trade in the 1st 15min. Have a feel for general sentiment of the day before committing.

3. Asia lags US. Do not use Asian markets to predict US movements. Not even for identical company stocks listed across different exchanges.

4. Do not worry if a trading strategy is sound. If enough people use it, it is sound. E.g. moving averages technical analysis. Just use it as another indicator.

5. Do not be worried about low volume declines.

6. US stocks can be very volatile. Be careful with the stop-loss. If you do not have a stop-loss, justify it. If you have a stop-loss, justify it too. Move on.

7. In general (only for buy), do not queue for stocks at a price a few notches lower than market price. It's completely pointless. If it decides to fall, it will fall through your queue price, and you are wasting time and effort monitoring the stock. Better to have your button on market order once the price stabilises.

8. Try to time the market if you can. Some days you get it right, some days you get it wrong. Plain wrong. Do not over-obsess over the difference of a few ticks. Feel you could have bought at US$0.20 lower? Yea it sucks. Learn from your mistakes and compile a list of WHAT-NOT-TO-DO, like this one.

Now for a real test of my mettle. To the frontline...
2:00am Las Vegas Sands Corp. LVS 5.39 +0.75 (16.16%)
LVS is up 16% in a day. According to Rule No 1, I should sell. Should I?

2:08am Las Vegas Sands Corp. LVS 5.27 +0.63 (13.58%)
Indecision...din sell.

2:15am Las Vegas Sands Corp. LVS 5.09 +0.45 (9.70%)
Ok. The ship has sailed. Queueing to sell at 5.40. Goodnight.

2:20am Las Vegas Sands Corp. LVS 5.04 +0.40 (8.62%)
That's what i get for NOT following my own rules!!!

3:00am Las Vegas Sands Corp. LVS 4.87 +0.23 (4.96%)
*nothing to say*

3:13am Las Vegas Sands Corp. LVS 5.25 +0.61 (13.15%)
Beautiful play of geometric brownian motion here.

3:35am Las Vegas Sands Corp. LVS 5.41 +0.77 (16.59%)

4:09am Las Vegas Sands Corp. LVS 5.03 +0.39 (8.41%)
a foolish game of randomness, but seriously's bouncing up and down like a yo-yo, almost predictably, dare i say?