April 7, 2011 – Dont fall in love. —with a stock , that is :)

I love to reflect.  As a person, I just love thinking and thinking all day.  I’m both a dreamer and a thinker at the same time.  I find myself not listening to the teacher unless I’m really interested with what he/she’s talking about.  I generally have my own thought bubble sometimes.  I’m a little bit autistic.  That’s what the traders used to call me when I first started because I have a hard time socializing.  I’m a little introvert but terribly extrovert with my peers and closest friends.  I can babble and babble all day just like what I do with my blog today.  (It’s great to blog, because in a way, I can express myself and I have readers who’ll be listening.  At least, I don’t have to do monologues to the wall anymore :D)

The Difference between Selling and Lightening

Lightening shares.  Most people think, (me included) that buying is the most important part of trading (when it comes to methodologies).  People forget the other part.  That is selling.  How do you know when the trend is over?  How do you know when the momentum is weakening?  Is there a best guess or a better system in order to stop paper gains from being drained out?  Is there a way we can protect our gains, while still riding our profits?  It’s not a nice thing to see LR drop from 12 to 11 right?  Even if your cost is 7 , that will still hurt.

The answer to those questions have been laid down before me by Master William O Neill in his book “How to Make Money in Stocks“. I urge every reader who really wants to become better in their trading to read that book.  I think it only costs Php700 and yet it contains more than 30 years of wisdom.  Talk about a real bargain!  I honestly believe that libraries are gold mines.  When you invest in your mind, you pay yourself a lifetime of dividends.  When you read a trader’s own story, and the wisdom they’ve written down and truly understand the meanings behind those words and stories, you’re on your way to the path of riches, without even knowing it.

I’d have to be honest.  Sometimes I love reading, and I forget the things that I read.  A reader asked me whether I have photographic memory because I can chant quotes, verses in my head.  I’ll tell you my secret.  Google and lots of notes 🙂  Sometimes, when I really  love something that  I’ve read, I type it down in my documents or just place a bookmark.  Chrome helps me a lot.  My computer actually reeks of so many scattered files related to trading stories from people I’ve read.  It’s rare to be close to the source of knowledge.  I’m thankful to know a few people in my life who I can talk to and learn from their own market stories, but it’s hard to be near Warren Buffet, Jesse Livermore, George Soros, Einhorn, Chanos, Rogers, etc.  I’m lucky to be part of a company with its own legendary traders but it’s really wrong for me to talk about their anecdotes.  For one, I don’t think it is right to talk about other people’s successes and failures.  I do think it is right to talk about personal successes and failures.  I do think it is right to talk about published works and published autobiographies because they’ve already been made public.

I won’t talk about myself today.  I know nothing about selling.  I actually suck at it.  My mentor Mr. Malupet has been trying to help me with the discipline of holding my winners.  I think I’ve improved but I’m far from really perfecting it.  I think it’s the hardest part.  No one perfects selling.  No one.

Let me give the floor to Mr.  William O Neill.  Wikipedia him.  When it comes to selling, he made a whole chapter dedicated to it.  It was so good I typed it down!  He even said, the worth of the entire book was in that chapter alone.

I uploaded it in my scribd.  Here 🙂  This is worth millions of dollars for him, and he’s sharing the knowledge for only Php700 in his book! Now, unless Scribd asks me to take this apart, use the knowledge for FREE!

(Hat tip to C for telling me to read this book, especially when I was just beginning to trade 😀 )

I highlighted the ones that I could very much relate with.

1.)     Buying right solves half of your selling problem. If you buy exactly at the right time off a proper base structure in the first place and do not chase or pyramid a stock when it is extended in price too far past a buy point, you will be in a position to sit in through most normal corrections in the price of your stock. Winning stocks seldom drop 8% below a correct pivot-point buying price.

2.)     Beware of the big block selling you see on the ticker tape just after you’ve bought a stock during a bull market.  The selling might be emotional, uninformed, temporary, or not as large, relative to past volume, as it appears. The best of stocks can have sharp sell-offs for a few days or a week.  You should never refer to a chart of the stock for overall perspective to avoid getting scared or shaken out in what may just be a normal pullback.

3.)     If after a stock’s price is extended from a proper base, its price closes for a larger increase than on any previous up days, watch out. This move usually occurs at or very close to a stock’s peak.

4.)     The ultimate top may occur on the heaviest volume day since the beginning of the advance.

5.) Sell if a stock advance gets so active that it has a rapid price runup for two or three weeks (eight to twelve days).  This is called climax (blow-off) top activity.

6.)     Sell if a stock runs up on a stock split for one or two weeks (usually 25 to 30% , and in a few rare instances, 50%).  If a stock’s price is extended from its base and a stock split is announced, in many instances, the stock should be sold.

7.)     Big investors must sell when they have buyers to absorb their stock. Therefore, consider selling if a stock runs up and then good news or major publicity is released.

8.)     New highs on decreased or poor volume means there is temporarily no demand for the stock at that level and selling may soon overcome the stock.

9.) After an advance, heavy volume without further upside price progress signals distribution.

10.) Tops will show arrows pointing down on a stock’s daily chart (closing at lows of the daily price range) on several days.  In other words, full retracement of a day’s advance.)

11.) When it’s exciting and obvious to everyone that a stock is going higher, sell, because it is too late! Jack Dreyfus said, ‘Sell when there is an overabundance of optimism.  When everyone is bubbling optimism and running around trying to get everyone else to buy, they are fully invested.  At this point, all they can do is talk.  They can’t push the market up anymore.  It takes buying power to do that. Buy when you’re scared to death and others are unsure.  Wait until you’re happy and tickled to death to sell.

Read Complete 35 pointers here and buy the book. (If you’re really serious :D)

By the way, I must say that Nicholas Darvas’ story ” How I made 2 Mil Dollars in the Stock Market” is a good book.  I’ll discuss him in my next posts.  He’s basically a dancer who just traded one system.  The box-breakout theory.  This means that sometimes, you really don’t have to be a genius.  You just have to have discipline in your system. Idol ko sya kasi ang galing nya maghawak.  Jesse Livermore always said the money is made in the sitting!  His box-breakout system coupled with rigid system, money management and stoploss plans turned a 10K USD pot into 2M USD. (I hope my memory doesn’t fail me).  (Buy and hold is not a strategy by the way if you don’t have a cutloss pala.  Nicholas buys and holds but with trailing stops!  Don’t intersect buy and hold versus buy and hope, for nosy readers) 😀

If William O Neill’s words sometimes rips right through the heart, don’t worry – it should.  The markets have been the same all throughout the last hundreds of years, if your primarily using psychology of the markets as your system 😀

@DimsumTrader lightened down some of her shares today, because her system told her that she doesn’t like so much volatility.  She wants to sleep.  She knows she’s never going to sell at the top, but it’s fine.   Volatility is part of the game.  My style is not the perfect style, but it’s perfect for me and I’m constantly changing and adapting it as I learn and learn the markets.

Dont fall in love. —with a stock , that is 🙂

(Hat tip to my fellow traders who are equally in love with their stock holdings)

I’m currently hearing a lot of raves with Borgias.  Can’t wait to watch!

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Comments
22 Responses to “April 7, 2011 – Dont fall in love. —with a stock , that is :)”
  1. Ben says:

    nice article as always dimsum trader. The hardest part in trading is really learning how to sell. It has happened a lot to me already. Pera na naging bato pa. I need to follow my trailing stop consistently. Greed gets in the way sometimes.

  2. ScIoN says:

    I can say that one of my weaknesses in trading is on making trailing stops. Whether it be cutting losses or exiting a stock at profit hehehe

    • mahirap tlga yan. Try making trailing stops a system. Just put a 10 day moving average. Let the profits run wild. 🙂 You can never be able to make lots of money if for every 10% gain, you’re out. My mentors tell me to do this.

      Sell half at a 5% profit (well this is an arbitrary number we just made for ourselves).
      Ride the half based on your cost, and move trailing stops using moving averages. Try if that helps 😀

  3. Samael says:

    Hi Dimsum! Hope you won’t mind me grabbing your shared file!

  4. babes says:

    nice article.

    you are very sikat na in forums. it is only a matter of time that you will become the most famous unknown, at least the female version.

    btw, goodluck on the pse game. i hope ikaw ang manalo, todo ang pusta ko sayo.

    • wag wag. mabagal mga manok ko. slowly but surely kasi ung mga pinustahan ko both personal and simulation kaya hindi ko nakukuha mga 20% gains. Simulation dapat i-arbitrage ko kasi delayed ung PSE eh minsan pag napaka-lakas ng market..mas hindi ko na natutuunan ng pansin haha. Ok lang. hindi kailangan maging first , babes. basta alam natin kaya natin kumita ng pera. Niwei, malakas markets 😀 Trade well and use those profits for good ah 😛 Enjoy ka rin. You deserve to spend those gains hehe.

    • Btw, hindi kailangan natin maging sikat. Please make sure that if you know who I really am, try to keep mum. Lo profile please. I treasure my privacy 😛

      Nirerewrite ko nga pag may time ako ung mga posts that could reveal who I am. As for market communities— ayoko nang makihabilo baka mapa-away pa ko nang di oras hehe. I’m using most of my time reading articles, watching markets and blogging na lang.

    • personally I made the smart bets. Mababagal nga pero ok lang. darating din naman sila sa finish line. Ung mga “chasing delusions” na LR, BEL etc.. ung tlgang LEADERS hindi ko sila naprofit-an. Hindi ko rin kasi kayang Todo watch nang watch. Personality ko kasi hindi ganun. Eh binabayaran lang naman ako para to make the good trades (sometimes good trades dont make money btw). So..un…kapag hindi ko kayang ichase, hindi ko na hinahabol 😛

      Impossible nang mahabol ung mga nasa psegame..pero i’ll try hehe.

  5. ei! Thanks for the heads up. That book (William O’Neill) is on my list as well. I should move it up the list hehehe ^^ Hope to get a copy of that other book as well.

    So are you buying bowls of good dimsum with your profits? ^^ Take me with you. hahaha If only there was a Din Tai Fung outlet here in the Phils.! ^^

    • Well ur true Din Tai Fung xiaolongbaos are really the best. Well CEB naman is lowering fares every so often (nahihit na ata margins nila eh) oh well… Kaya yan ng mga Gokongweis. Punta na lang ng hongkong para sa dimsum treats wahahaha. Kaya ako dimsumtrader kasi in essence I really was a Hongkong trader 😛 That’s my real job.

  6. harry says:

    That book was one of my earliest buy when i was freshman in trading…. hmmm, i should re read it again and maybe get enlightened on some vague aspects i had just disregarded on those times.

    thanks for sharing 😉

    • 🙂 Maraming insights. I think ung mga Reminiscences of a Stock Operator, How to Make Money in Stocks – mga bibliya yan ng mga traders. kahit ulit ulitin basahin, pwede…kasi timeless tlga ung mga librong un. Ika nga nila- The Classics!

      • harry says:

        agreed!

        kaya nga ina alikabok na lang iba kong books which i almost had all if not most (psychology, TA, candlesticks, etc etc) because of livermore books (Reminiscences and the black covered one) which most often find besides me in sleep… minsan napapanaginipan pa hehehehe

        hirap din maging adik 😛

      • sige. sa facebook na lang magchat. Marami na ata super comments dito hahaha. Add me up at DimsumTrader facebook 😀

  7. steph says:

    may question ako! how do you compute your trailing stops? 🙂

  8. babes says:

    dt, kahit hindi ikaw ang maging first sa pse game, para sa akin panalo ka pa rin.

    am just a newcomer in your site, not even a week old. did some passing reading of the old posts.. ketchup and lettuce etc. am very impressed by your deep knowledge of a lot of things. and if assuming we’re still in high school days medyo matyotyope yata ako but then again i remember the phrase about mohammed and the mountain. i am mohammed and … he he.

    come to think of it, parang marami tayong pareho na gusto ah! love hk, love dimsum, love stocks, same trading style. hmm.. ano pa kaya iba?

    am declaring myself as your number 1 fan, and at past 2am you cannot argue with that.

    p.s.

    i did not know you before and i’m also a low profile like you but allow me to invade your privacy. 😉

    • @babes- all the posts in my blog are open to be read 🙂 Btw, you can invade my privacy but just learn how to use it properly and appropriately. If you share stuffs in my site to your friends–just acknowledge and tell them about the site 🙂 All posts here are mostly timeless because instead of telling people to buy this, buy that, I try to educate people to understand how to look at the markets, how to invest in their minds, how to educate themselves properly. I tell them (all of you) to read books, watch the markets etc. To be sure, I know I’m speaking to a couple few people because trading is not as easy as some people think it to be 🙂

  9. Hello Dongski,

    Yup. I think this post of yours is meant only for my eyes. It breaks my heart to stop blogging but due to my non-anonymity, I have directly or indirectly inconvenienced a lot of people. Let’s not name them. Thus, although this blog has gotten mixed reactions – some were inconvenienced and told me I wasted my time, others found my posts very helpful—I’ve decided to just stopped posting new material on the blog. 😦 I miss blogging. I really do. Because of my offenses, we don’t have facebook anymore or any other social networking sites 😦 I trust that whatever I say to you will be between us. In any case, I’ll try to create a new site. This time, very private, very secret, very anonymous and I’ll veer away from talking much about specific stocks, we’ll see. 😦 Basically, it came to a point where in I had to be in “detention” office for my offenses. There’s just too much controversy in this blog that I figured I should stop.

    -DT

    • no worries. All comments between us are just ours 😀

      Hey, it would be great to know you better. I’ll try to compile the people who somehow got to comment in my blog, and maybe we can meet up in the future 😀

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