Friday, 17 March 2017

Trading Experience

I spent the past few months doing stock trading. 



To be exact from November till today, I have only done 3 trades.

The trading technique I used is actually no technique honestly. I totally ignored the typical technical indicators such as moving average convergence divergence (MACD), relative strength index (RSI) or stochastic oscillator which you would see in any technical analysis guidebook.

The trading technique I used was instead simply observation within my knowledge limited scope of course. Nonetheless, before I apply this technique, I did a general check on the balance sheet of the stock. This counter has more cash than total liabilities. However, its profit margin is low, and it's profits are definitely not as high as many others in the same industry as it is. To me, this company is like a mom- and- pop store that earns enough to feed everyone, while making sure they don't go bust. So if my trading hypothesis is wrong, very likely the amount I will lose is not going to be too huge. But, I am not optimistic of its growth in the near future, and so the profit margin I expect from this trades is likely to be low. 

The stock price of this counter has been oscillating over a certain range for months. The spread between the ask and bid price is also significant enough to earn some profits (after commissions). I simply queue to enter the stock at the price close to the lower of the range, and once I bought it, I queue to exit the position at the ask price as long as I will make a profit.  

To be honest, the trading volume of this counter is relatively low, and it took patience to buy it at the price I want, and sell it at a profit. All in all,I have made about slightly more than 10% or about $700 out of a maximum amount invested of $6,600. The profit may not be huge, but well, I treat it as pocket money.

Commissions definitely make a difference when you trade. I used to use Philip Capital, but it has a minimum commission of $25. With $6,600 invested (which is the maximum I am willing to lose), this commission is significant. I switched over to Standard Chartered, and with its minimum commission of $10, I make much more profit, (okay la, at most $30 more).

Most likely, I won't do trading for the long term. This exercise was mainly to test my hypothesis. I'm not sure whether I made profit due to luck or good observation. At the end of the day, the one who benefits most from all these trading is the brokerage company. 





2 comments:

  1. That's average 2% returns per month not bad

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  2. Hi Jaded,
    If you annualize it, it looks good. It's all down to return vs risk. Hahaha.

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