You Need to Know Your Trading or Investing Strategies

I received many questions on whether the stock can be bought, what is the entry price, what is the target price, should I cut loss because the stock price is going down, etc. In order to help you to answer these investing or trading questions instead of waiting for my reply, I posted the following questions for you to understand what are you trying to do when you are looking at a particular stock.

  1. Are you planning for short term trading (daily trade, weekly trade or less than 3 months trade) or long term investing (> 3 months)? If you are planning for short term trade, you need to learn how to read chart patterns, candlesticks patterns and understand the technical indicators. If you are planning for long term investing, you need to understand whether the stock is under value or over value, and know how to calculate Intrinsic Value and PE ratio.
  2. Before you enter a trade, you must set up your trading plan. What are the entry price & exit price? Why do you want to buy this stock? What is your basis of buying this stock (base on Fundamental or Technical Analysis)? What is holding period? What are your criteria to exit after your target price is met?

Please bear in mind that your strategy is DIFFERENT for Short Term Trading and Long Term Value Investing. 

  • For short term trading, you need to have a STOP LOSS and CUT LOSS when the stock price direction is not in your favor.
  • For long term value investing, when the stock price goes DOWN, you buy MORE as long as the fundamental of the company does not change much and the company growth strategies are still valid and core competency are still sound.

If you mix up your trading with your investment strategy, you will probably panic and SELL a good fundamental stock when you see the price is going down.

Feel free to share your experience so that all of us can benefit from this sharing. To be frank, I made these mistakes too until I figure out and understand clearly what I am doing.

This Post Has 4 Comments

  1. Matt


    Many people started trading – want to earn money – because people say can buy – its going up… so they buy… however, they did not ask – when can sell ?
    All of sudden – they now become shareholder… !

  2. Marubozu

    Matt, good one! 😀

    I think many peoples have this “shareholder” experience!

  3. C K Tan

    Haha, count me in!

    It’s certainly comforting to know i have the company of traders who also got caught (or conned) just like myself, heehee. It’s even more comforting to know that even experts like Marubozu, Daryl Guppy, joking about their mistakes. Well, while i’m still stuck with a stockpile of shit, it just makes the holding less unbearable.

    Thanks, very grateful to Marubozu for your valuable sharing.

  4. Marubozu

    Everyone make mistake, no exception…
    Most people (including those Gurus) keep quiet when they lose money but boost themselves when make money. If you want example, go to the stock forum discussion to find them … This creates a wrong perception that it is so easy to make money in the stock market.

    Another thing to share: DO NOT believe those advertisement in the newspaper and email telling you that it is so easy to make $10k in 30 mins, make a few thousands dollar after buying their software, etc. Those are marketing gimmicks.. There is a lot of HARDWORK acquiring knowledge and practising before you can achieve an exceptional result. In addition, they are only a small % of people is successful of doing it..

    Respect the stock market and try to understand the TRUTH of the stock market in order not to get burnt. FYI. About 70% of the people lose money in stock market.

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