advice needed, page-29

I'm not sure where the 10% down figure came from but the XJO high was around 6850 and yesterdays low was around 5800. That makes for 14.5% down since 1 November 2007.

Bearing in mind (pardon the pun) that we are due for as rally (which is not to say we will get one)the following comments are made in a general sense.

For the last four years the market has more often than not dragged those who made bad buying decisions out of the mire. This has created the expectation with relatively new traders that this will always be the case. Wrong.

I'd would also happily bet that the vast majority of newer investors that hang out on Hotcopper and other chatrooms didn't stick all their money on BHP or WOW (Woolworths Ltd).

The reason they come here is because they want above average gains and they believe those will come from a/ buying a speccie that goes from 1c to $1 in a year or b/ buying a distressed former ASX200 company like CNP that goes from $10 to 50c and then presumeably discovers that everything was actually fine all along and bounces back to $10.

Lets take the last first. Some of those 'bargain hunters' that bought CNP on the day it fell from $5.50 to $1.50 and who held waiting for the big bounce are today sitting on stock worth (according to the market) 46c. Thats a 67% loss.

Big stocks go belly up too!

Distressed stocks can make miraculous recoveries (see ALL and AMP) but just for the record - the then CEO of AMP will shortly release a book on his time there and in it I understand he will reveal that for two weeks he and the management team were not sure that the company was going to survive.

What do you know that the market doesn't know? Nothing.

When you bet against the market you do so on the basis that you know more than the major investors who have the absolute best information and analysis skills about the market in general and are in close communication with management.

They also have far more money than you and the ability to hold on far longer.

Markets can go down - and stay down - far longer than you can believe. Certainly, far longer than you can hang on.

You better believe it. Plus many of the institutional investors are making money as the stocks go down as well as up. A stock like CNP doesn't turn over 281 million shares in one day courtesy of daytraders. That is institutions rushing for the door.

When the market cools at the big end of town it turns Arctic at the small end.

Many speccies have no business nor any real prospect of one. They cannot be analyzed from a fundamental point of view because they don't have much (or any)fundamantals such as revenue or profits. They only come to life via traders in market Summers. When the winter bear arrives the traders go somewhere warmer whilst the long term accumulators arrive instead. To buy distressed sale stock. At prices a fraction of today. From distressed sellers who could hold on no longer.

Finally, a decision to hold a loss is a decision to take a mistake and bet again.


In a general sense money is made in the stock market by holding onto your winners and aggressively cutting your losers. And everyone has losers. Even the good traders. They just have less of them and cut their loses much more aggressively and earlier.

New traders sell their winners too early but hold their losses hoping to recover the loss. Notice the difference?

The more you do of what you have done the more you will have of what you have got.

Yes, that can be losses too!

Just to finish off - yes, I could have learnt all this from a book BUT like most traders I prefered to learn it the stupid way. By losing money. But those burns are the best way of remembering.

If you dont agree with any of the above that is fine. None of us can have any idea whether this is a lull in the Bull Market or the beginning of a long Bear Market. I enjoy sharing my experiences and I hope they are of some use. Best of luck in your trading. Enough of my pontifications. Its a big market with plenty of room for everyone and I wish you the best of luck.

Cheers,