Risk Management – A lesson to be learn

Morning everyone !!!

Today STI drops further and everyone starts to panic right ?

By right, you should try to keep yourself calm. The best way to keep yourself calm is to open up the charts and chart them.

Therefore, this morning, I opened up more than 40 charts and browse through them observing their trend and support and resistance.

Guess what? Last week, many of them are uptrend, but because of past few day’s drop, many of them turn to downtrend stocks.

DOWNTREND !!!! Jay how ??? Will it go down further??? (If you are asking these question in your mind, means that you have not been diligently charting and practising TA)

Yes, market is downtrend. And I am rather happy that downtrend is formed. Why? Because based on TA, it had warned us that the upside is getting more limited as bearish divergence is forming. This help us by not aggressively looking on the long side and also consider to have some short positions.

Market did went according to the expectations and I am glad that I had trade according to the plan. Not too many long positions and have some short positions to “hedge” . Cutting loss for long positions became less painful as the profits from the short position can cushion the losses. On top of that, cautious long positions means much lesser losses to undertake.

I hope that I can share my lesson learn over this time round. Never get too confident on one direction. When there is warning signs in the chart, do take the warnings and do not ignore it. When there are warning signs, do not be agressive in the market and really really adhere to the money management techniques. Always respect the power of cut loss. (Really can’t imagine what will happen if I did not cut loss on monday)

So don’t cry over what has happened, learning from mistakes is more valuable than crying.