Tan Kin Lian's Blog: Insight into stock trading

Friday, May 07, 2010

Insight into stock trading

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My comment
I consider all trading as gambling. If you want to gamble, it is better to choose a product that has high liquity and low trading cost, such as foreign currency.

If you wish to invest for the long term, choose good stocks or a low cost investment fund and do not bother about the volatility in the market.

9 comments:

Anonymous said...: The right place to gamble is the casino; either you or the house loses but the guarantee winner is govt because it is issuer and the protector .; May 07, 2010 8:25 PM
Anonymous said...: I have a passion for the stockmarket. It's like a hobby. I have read textbooks, popular books, academic papers/studies and etc. on the stockmarkets for close to 30 years. It's a fun and profitable hobby about a very misunderstood and controversial subject ... investing in stocks.

I'll just make 3 points.

Firstly, the stockmarket is not a single "market". There are at least 3 types of "stockmarket".
- A stockmarket that is trending UP
- A stockmarket that is trending DOWN
- A stockmarket that is moving sideways.
Most academics and investors use just ONE strategy (e.g. buy and hold) to understand and profit from stockmarket investing. Very difficult to do. Different seasons require different types of clothing.

Secondly, it might be better to use the concept of "maximum drawdown" rather than "volatility". Just google the term.

Thirdly, before anybody uses a "buy and hold" strategy, I'd suggest that they google the term "survivorship bias". It's been a major flaw in a lot of academic papers supporting the "buy & hold" strategy.

I'm not posting to start a debate about investing versus trading.

Or whether markets are efficient (It's now the growing academic fashion to prove that markets are not efficient ... it's not yet in the textbooks, but you can find the academic papers in academic financial journals).

I just want to hi-lite that the stockmarket is a complex and ever evolving creature. It's the sum total of raw human emotions summarised into a time series of prices. How cool is that?; May 07, 2010 10:15 PM
Parka said...: I think people should go back to basics on why the stock market exist in the first place.

One of the reasons is to provide funds for companies to finance their activities. As such all investment should be made with respect to that knowledge.

You help the company, and get a return.; May 07, 2010 10:57 PM
SD said...: Gambling, investing or trading, its all a game of probability.; May 08, 2010 8:55 AM
Anonymous said...: At the risk of sounding facetious.

Buy what's going up. Sell what's going down or sideways.

When in doubt, stay in cash.; May 08, 2010 10:03 AM
Anonymous said...: Gambling: Gambler bound to lose due to house advantage, unless you're one of the rare few that can count cards and are (still) not banned from the casinos.

Trading: Good while it last. (ie remains profitable after taking transaction cost, opportunity cost into consideration.) People teaching trading techniques/ system certainly earn more than doing trading on their own account.

Investing: Historically long-term uptrend thanks to capitalism. Making money though feasible is subjected to being able to align your investment horizon and asset mix with your goals. And also not to confuse investing with trading or gambling; May 08, 2010 11:01 AM
Createwealth8888 said...: Understand the differences for gambling, investing and speculating

http://createwealth8888.blogspot.com/2009/09/gambling-investment-speculation.html; May 08, 2010 3:27 PM
investor said...: I believe in holding for the long term and earn dividends until the bank deposit rates go back up to 5%

How long is "long"? anything more than 3 years. why 3 years? it takes that long for any cycle to show up.

Once the price has increased to a level I determine as profitable, I will sell 50% of holdings, take back my capital sum + profits and let the remaining 50% earn dividends.( Provided the company still pays and has growth etc )

Good stocks will seldom disappear.
Coca-cola, Proctor & Gamble are still around after 70 years. I believe it will be the same for OCBC, UOB, CDL and Singtel.
They may restructure.. but the company will still be there.. and their stock will still be available for trade; May 08, 2010 8:41 PM
Anonymous said...: Now what abt solid Gold investment during this period of time?Can anyone here pls advise.I intend to buy gold and keep?
Thanks

a retiree 50s+; May 09, 2010 11:06 AM