Thursday, September 21, 2017

The Two Kinds of Traders




If you were given a million pesos today to trade one stock and were to choose between these two stocks and with only their charts as available data, which one would you pick?

Stock A



Stock B



Remember your answers because today, we'll talk about the two kinds of traders represented by Bob (A) and Carl (B).




Let's start! 

Bob is where majority of traders belong to. He focuses on stock prices and declines, and see these events as buying opportunities. A fire sale that would give him profits in the long term.

But what exactly is long term for Bob?

No one knows exactly how long it is. It could be a year, 5 years, 10,  Indefinite? who knows? For the answer to this question is very subjective. But the most common answer Bob has is this:


Time isn't much of an issue. Price is. Or more accurately, feelings are. Basta feel ni Bob magsell, then he sells. And for this example, he sees the highest price as the reward. "Pag bumili ako ngayon at BUMALIK to sa 16, makakabili na ako ng (insert bucket list item here)"

Most of the time, this is where speculation and fundamentals start to creep in and play a major role in Bob's mind. Because these two things give him the justification for his decision and the hope he needs for his long term dreams. 

A year and several months pass and we check on how Bob is doing...


. . .



"Okay lang kahit hindi na hit yung TP ko. Long term naman ako dito at magandang companya naman tong ininvesan ko, (Insert future company plans here.) Babalik din to sa 16! Buy and forget! #ProudInvestorHere"

These are the most common lines you'll hear when traders of this type end up with a stale or a losing position and do not want to move on. Add to that their collection of quotes and wallpapers from Lolo Warren to give them encouragement and strength for the coming years.



"I am a patient trader. I will hold until thy TP come."


------------------------------------------------


Let's go to the 2nd type of trader, Carl. Now, unlike Bob, he puts a premium into trends rather than prices and feelings. For him, there is no such thing as an expensive or a cheap stock. Only trending or non-trending stocks. 


Carl understands that even if prices have appreciated significantly but still follows the trend, there is still plenty of room to make money. He doesn't care about buying the stock at a cheaper price like Bob so he could feel good and feed his ego, he cares about feeding his portfolio and managing his time well.

When it comes to trading, understanding trends is as important as breathing in real life. We all know there are 3 types of trends right? 

Uptrend. Downtrend. Sideways.

Trends don't change overnight. OK sometimes it does, but that rarely happens. And Carl understands this fundamental principle : That if a stock came from a long downtrend, it first has to reverse by consolidating into a sideways trend, then slowly transition into an uptrend. Obviously, this takes time - days, weeks, months, years? Who knows?

So instead of buying into sideways or downtrends and waiting for these lengthy transitions to finish, Carl instead focuses on buying a stock that has an established uptrend. He knows that if he does this, he will save a lot more time. And as the popular saying goes: The Trend is Your Friend. 

And in just a few months, here's what happened...



91% in 115 days.





So what are you saying Zee?

I'm saying perspective is everything. If you want to make money the faster way in our market, buy stocks that are already trending up and making new 52-week highs rather than waste your precious time buying downtrends and waiting out the transition period.

Not saying you won't make money with Bob's method. But just saying... a moving train is faster than one that's just starting its engines for the day.

Exhibit 1


ATH Stock. Holding Period : 6 Trading days.



18 comments:

  1. MAC boss Zee?
    looking forward for your next inspiring posts :)

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  2. Korek! Shookt! I love it! Sapul, shoot sa banga! Thanks for sharing Sir! Buti na lang may katulad mo sa earth magpadami ka pa Sir ah! MAaraming salamat sa Blog mo! and more power!

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  3. Thumbs up sir! Trend is your FRIEND!

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  4. eye opener! hate to admit im bob for a longer time. so im in the process of mindset correction now. thank you for sharing this. keep posting good stuff!

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  5. Again! Good read boss Zee ��

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  6. idol ko tlga to c zee. lhat ng tinuro nya sa blog nya puro laymans which is napakadaling intindihin unlike sa mga ibang mga power rangers(mga bida man) ung tipong sasabihan kpa ng mga magugulong salita pra magkandagulong gulong ung port mo sa kakaintindi. This is the man to be respected as he lurks in darkness and provides light to those who encounter him. matagal ko nang gustong sumali sa tribe nyo, nahohold back lng tlga ako bka d ko mameet ung expectations ng isang ZFT. gusto ko ring maranasan ung chakrang inyong tinataglay para mka2long sa konoha at mga karatig. God Bless and more blogs to come! sarap mag aral ng libre! LEGIT PA, magbabasa ka nlng at iintindi. GGWP

    ReplyDelete
  7. Thank you for another blog entry Sir Zee! :D

    ReplyDelete
  8. wow! idol talaga zeefreaks, I'M BOB..

    ReplyDelete
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  10. This two trading methods should be simultaneously used wisely gives more profit in the trading sessions.

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  11. Wonderful example and charts to understand the investing method. But these things will rely on the type of the traders like if you are a scalper they can get benefit from both positions because all the need is short up and down. This is why forex trading signals services got good grip in the industry so traders don’t have to stick to the screen for hours to find the accurate trend to participate

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  12. Before I was into this buy and hold strategy. There were gains, pero in the fast paced world ng stock market it is still lower as I expected. I met someone who introduced me on the benefits of active trading and I can now see the difference. Now, I'm into this long term and felt luck to discover this blog. More Power Sir ZF!!! :)

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  13. Thank you for sharing such valuable and helpful information, tips and knowledge. This gives me more insights on this. I would love to see more updates from you.

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  14. Nice post. Ang tanong ko papaano malalaman kung uptrend,downtrend or sideways?

    ReplyDelete