Wednesday, April 1, 2009

I am experiencing pain....from not following my trading plan and now witnessing share price continue to rise

I feel like, I have committed the cardinal sin of trading - not following the trading plan, and now, have to bear the consequences of it. Share price of Sino has run up tremendously, and it pains my heart to see it so... Should I chase?

Share has run up by 68% in the last 1 month alone, and it's in an extremely overbought zone. Unless, I'm extremely confident that this rally will continue for much longer. Surely, there will be a correction soon, even if this is a very strong stock.

Sebastian Chong points out, that a new bull is beginning.
"Yes, if worse-than-expected economic or corporate news hits the US, Europe, Japan, China or Singapore, we may see a 20% to 25% downside (based on intra-day lows) but the potential upside is 100% or more over the next 24 to 36 months.Even if a piece of economic bad news or a huge corporate fraud implosion in the US or elsewhere causes the STI to pull back to 1400 (intra-day low), chances are that bargain hunters would jump in and the index could strongly rebound to above 1,600 within that same day. In my opinion, there is a 70% probability that we have already seen the bottom (and not merely a bottom) of the Dow and the STI a few weeks ago. "

However, I still feel this opinion is flawed. The current trend (at least, for most stocks, is still down), and given the opportunity that is a 70% to a downside of making $20 compared with 30% to an upside of making $100, which option would one take? Trading is really a probability game, and we always trade from the side of highest probability.

Since starting CFD account, here's a list of my win-loss ratio: 2-1
1. OCBC loss
2. Noble loss
3. Parkway win
4. China Communications win
5. S & P win
6. Sino-Ocean win

Only regrettable thing is that, I only gain about +$400, mainly due to my inability to follow trading plan.

So, what's my next step now that I have voluntarily given up on Sino-Ocean? Well, my only recourse is to wait for retracement (hopefully to 61.8% or 50%), and get in. Patience is my only recourse now.

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