Too Much Hype Can Kill You: Idea on How to Consider a Trade

Here we go, another reading about stock hype. Just re-sharing in my blog.

Whenever we go to groceries to buy pork, fish, vegetable or canned goods. We always do meticulous check whether it’s in pristine quality or not. When we go shopping may it be new for a new shoes, shirt, bag or gadgets. We make sure that it’s in 100% mint condition, no dents, no defects whatsoever. But, why is it that when we buy a stock. We just buy what we we’re told to without even raising a question.

This story goes to all who doesn’t know what their doing here in the Market.

Months ago when i just started trading, I literally have zero knowledge of what i was doing. So i just searched for companies that i am familiar with like Puregold (because Eat Bulaga hyped it #lol) So there goes all my equity allocation, All in with that stock. Yeah it’s too much fun because the next days and weeks i’m up 2% the feeling was great, I was proud and i feel like a genius even though i really don’t know my Target Price or my Cutloss Point, and i don’t know what made that stock’s upward movement. So to make my story short, like how the saying goes, “what comes up, must come down.” PGOLD  went down and i got squeezed then i sold at a loss. Switch to another stock got squeezed and sold at a loss. rinse and repeat. Now my capital is messed up.

Then there goes my journey to finding facebook groups like, Investing in the Philippine Stock Market, Traders Apprentice Pilipinas, Tsupitero, Bohemian, Faceless Trader, Merkado Spotter, Zeefreaks, etc. and with their help and the stories i’ve read, i regained my confidence, now i go trade with FA (facebook analysis) i buy what they recommend to BUY. But everytime i buy a stock reco, it goes down, and everytime i sell, it goes up. I then begun to look at the mirror if i have a scar on my butt. (I also asked my mother and confirmed that i have a scar on my butt cheeks.) Everything then sinks in to me, superstition is one thing, but maybe there’s something else wrong with what i’m doing. Then Coco-crunch happened. I was doused with this technical analysis stuff that i’ve been longing for. Suddenly i’ve found myself following certain rules and looking out for technical setups before engaging on a trade. Suddenly i became this person who accepts mistakes and cut my losses quick. Suddenly i just found myself regaining what i previously lose, and below are the details on how i made the coco-crunch. ***Not that detailed, but just to give you an idea on how i engage on a trade.

Phase 1 : Stop trading and start studying

+ Your ports maybe Red right now, so better stop trading and start studying. Study the basics of Technical Analysis, Fundamental Analysis (if you like), and the psychology of trading.

This was just some of my losses before i stop trading and begin reading things about technical analysis. The trading code book by Jason Cam is a good start, everything i learned over google was simplified on that book.

Phase 2 : Create a system

+ This will be the heart of your trading process. This is your personal workflow on how to scan a good stock, how to spot potential baggers and to look for good buys and goodbyes.

This is one of my friend, this is top gainers/losers charts of COL, here is where i monitor trending stocks that made significant move. I look for volatile stocks that has volume into it, after that i check the chart.

I just put down what i see with the chart using my favorite indicators to give my overall bias for this stock. (for this example i use MACD + RSI)

Intraday chart gives me a detailed look about the stock behaviour. My indicator is telling me that this is opt to bounce and can be played. So let’s begin to set parameters such as Bias, Type of Play,Time frame, Entry price, Target price, cutloss, risk/reward ratio, equity allocations.

Bias = Daily chart bullish consolidating
Type of Play = Day Trade
Time drame = Day only
Entry Price = 2.63
Target Price based on near Resistance = 2.74 / (3.05%) 1,609.17
Cut loss (base on previous low) = 2.60 /  (-2.22%)  -1,168.57
Risk/Reward Ratio = 1:1.5 (not even decent trade, i only enter with 1:2 or higher and adjust my volume with the risk factor)Equity Allocation = 20,000/shares or 52,755.17
***Sometimes i go check Facebook groups about the sentiment,hypes and news. 

Phase 3 : Make yourselves a Rule of trading

Are you just hyped or what? Look at the market conditions then apply your rules and plan before taking into action. And be very sure that it’s not just hype.

Phase 3.5 : Beta testing

+ Always test or do some back test with your newly built system.

Before engaging, try to put small amounts of money and record your results, write it down and analyze yourself on where your strengths are. Focus on that and make a killing!

Phase 4 : Trade with joy

+ Trade the market as if it was just a game. Enjoy!

Some of my trades this month.

then last month

Phase 5 : If all else fail

+ Return to Phase 1

To summarize it all, everything boils down in you and your effort. Do you have time to study at this scope. Do you have the time to monitor your stock picks. Do you want to discover yourself and learn a new skill. Learning how to trade takes time, effort and lot of Hard work. But the result of that is an overflowing amount of Joy and lots of cash. This may work for you, This may not. It’s about your self discovery. Just remember this always, Nobody cares about your money, but you.

Source: https://epistleoftheseed.wordpress.com/2015/10/21/too-much-hype-can-kill-you-idea-on-how-to-consider-a-trade/