Sunday, April 02, 2006

Hooray for Monday!

Day 2 - Monday
Total Account Value: $6139
Available Equity: $4892
Positions Opened: 3
Positions Closed: 0

For the first time in my life I couldn't wait for the weekend to end. Now that I'm working from home, the individual days have become meaningless. Now I can relate to my grandma when she forgets what day I'm supposed to visit. The only good thing about weekends now is hanging out with my girlfriend and the football, but apart from that Saturday and Sunday are just like any other day.

It was frustrating starting my program on a Friday, but luckily it gave me time to focus on my plan and ensure I didn't dive in too deeply too soon with rash decision-making. I also had a chance to speak with two economist friends about trading.

I graduated with a Bachelor's Degree in Information Systems. I chose this degree because I enjoyed computers and using the Internet, and economics/commerce sounded like something boring old sods do. It was only after I completed a compulsory unit of Introductory Microecomonics that I realised my initial naivete.

I enjoyed the subject because of its "mathematical correctness", application to the real world and its "common sense" simplicity. Not only that, but I'd also loved charts, statistics and graphs as a kid. I ended up finishing the unit with what turned out to be my highest mark at Uni, receiving a congratulatory letter from the professor.

Happy and picturing a change in career path, I applied to transfer into a double degree Information Systems / Commerce. However I was unsuccessful because my overall mark average, while very good, was not good enough. A chip on my shoulder formed after that, which until reflecting on it last night had slipped into the back of my memory. But at the time, because the "economics establishment" rejected me, I lost interest and focussed on my Information Systems.

It wasn't until I glanced at "Shares" magazine last year that my curiosity for trading was piqued.

The point is, I have little "proper" knowledge of ecomonics. However, I'm not quite sure that this is such a bad thing, as I'll explain later.

My economist friends have solid, well-educated opinions on world markets, foreign exchange, commodities and all that kind of thing. Naturally they see me as a lightweight. After telling one of them I had starting trading CFDs, he wanted to know which stocks I chose and why. As mentioned earlier, my selection criteria comes down to trend strength and predictability, liquidity and volatility. No fundamentals.

He was more interested in what the company was doing. He liked my choice of Macquarie Infrastructure (MIG) because of further overseas expansion. He liked Tabcorp (TAH) for their strong brand and takeover strategy. But his economist mind could not see why I liked Coles Myer (CML), because they are languishing behind major competitor, Woolworths (WOW). I agree, but I trade short-term on trends, charts and technical analysis. Most of this kind of thing, and I emphasise most, is rather meaningless.

The second economist is a final year Uni "know-it-all" type. He intends to trade CFDs long term (loose stop losses) in safe blue chip stocks like BHP. He repeatedly quizzed me on why I bought shares earlier this year in the small cap resources company Mount Gibson Iron (MGX). I believed the shares were undervalued and the chart indicated a bullish break. He smiled smugly when I was unable to reel off an intelligent sounding synopsis on the outlook for the iron ore industry. Regardless, I was in and out of the stock and made money. Doubters and economists are motivating me even more to succeed.

Onto this morning, the start to the trading week was not ideal. It turns out my CFD platform displays daily instead of total profit and loss on positions. Before knowing this, I was alarmed to see my overnight profit on LLC of $50 had magically turned into a loss of $20 after the stock gapped slightly higher. Overall though, I remained ahead.

PMN stagnated a little and began to steadily fall toward my stop loss level. Later in the day, I noticed it had hit this level and bounced back up, but the stop loss order was not executed! Yet another reason why my provider is less than capable. However, it was a very quick spike, which indicates that perhaps only one low volume trade took place at this price and my order could not be filled. For this reason, I was willing to let it slip, but if it happens again I will be complaining over the phone...

There was interesting price action with quite a few stocks today. Computershare (CPU) made a bullish break above resistance to new highs so I was careful not to miss the wave. My position finished up $206 in just three hours, making it very tempting not to add to my position. It will be interesting to see what happens tomorrow after a 4.6% daily gain.

Macquarie Infrastructure (MIG) made up the previous three days losses so I bought in at $3.85.

The LLC price began making a recovery on the previous day's losses, and I flirted with the idea of closing my short position with a tiny profit left intact. However, the bears showed strongly into the close and I believe the rally was shortlived. To be careful, I've trailed my stop loss closer at $14.

Lastly, Coles Myer (CML) made strong gains as it broke through medium-term resistance with the 12 month high of $10.86 in its sights. I think there is at least one more day's gain left in the stock so I bought a modest 480 CFD shares just before the close.

You see, Mr Economist?

2 Comments:

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