In response to a thread on a Singapore Value Investing forum, i posted this piece:
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Trading is akin to fighting fire. How are firemen different from the rest of us folks? They are highly-trained, well-protected & well-equipped. They have a strategy - a map of the building - even before they head in, and an exit plan. And perhaps most importantly, they are very brave. Even then, some perish. They know who they are, and they chose this path in life. They take calculated risks to save other peoples lives.
I will not bore you with the comparison to trading, it is pretty obvious. Now consider a civilian in his silk suit rushing into a smouldering building with no idea & no game plan? The only trait he shares with the fireman is... he is very brave, and some might say foolish. He may get lucky, but chances are he may add to the evening news count.
Contra/Margin or any leveraged trading is akin to a civilian(with the silk suit) dousing oneself with a bit of petrol, and running into that building. I exaggerate, but you get the idea!
However, before we paint trading as a mortal sin & as someone who trades frequently, allow me to share my philosophy. I consider all investing a form of trading , and thus a risk/gamble(no risk/no gain). What separates them all is the duration. Some use Fundamental data, others Technical. Both have their pluses and minuses. And then, there're also the valued techniques of gut-feel and rumours, among others.
But it takes real hard work and patience to pick solid fundamental companies in the right growth areas at the right price, just as it takes effort to pick the best chart setups, and formulate an entry and exit.
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Comments?
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Trading is akin to fighting fire. How are firemen different from the rest of us folks? They are highly-trained, well-protected & well-equipped. They have a strategy - a map of the building - even before they head in, and an exit plan. And perhaps most importantly, they are very brave. Even then, some perish. They know who they are, and they chose this path in life. They take calculated risks to save other peoples lives.
I will not bore you with the comparison to trading, it is pretty obvious. Now consider a civilian in his silk suit rushing into a smouldering building with no idea & no game plan? The only trait he shares with the fireman is... he is very brave, and some might say foolish. He may get lucky, but chances are he may add to the evening news count.
Contra/Margin or any leveraged trading is akin to a civilian(with the silk suit) dousing oneself with a bit of petrol, and running into that building. I exaggerate, but you get the idea!
However, before we paint trading as a mortal sin & as someone who trades frequently, allow me to share my philosophy. I consider all investing a form of trading , and thus a risk/gamble(no risk/no gain). What separates them all is the duration. Some use Fundamental data, others Technical. Both have their pluses and minuses. And then, there're also the valued techniques of gut-feel and rumours, among others.
But it takes real hard work and patience to pick solid fundamental companies in the right growth areas at the right price, just as it takes effort to pick the best chart setups, and formulate an entry and exit.
- Do you know who you are in a crisis? Did you liquidate during the recent crash, when you thought you were a long lerm investor?
- Have you trained yourself? Have you researched enough? Studied the risks involved?
- Have you protected yourself? Holding power, Spare cash, Insurance, etc
- Have you a plan before the trigger? What's a good price, a good setup? When do i stop-loss/take profits?
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