A trader's job

I was asked by an acquaintance about why I focus to much on losses - which is entirely not true; I focus more on controlling losses rather than the losing itself - the idea which seems to confuse her. So I explained. Well, I tried. I told her that the money you put into the stock market is a losing money, the money you can afford to lose.

Every time you put money into the stock market, you should be expecting it to lose, until proven otherwise by the market. To assume you are right every time you enter a position would only result into expensive loses, as you are going to marry your own opinion. And most of the time, people hate it when their opinion is wrong so they hold on to losing trades instead just to prove they are right. Then the stock starts to recover, they start to feel good because now, they are right. The stock has moved significantly against them though. Or they then realize way later on that they are indeed wrong in their position. Either way, they have already incurred major damage.

Why focus much on losses? What do you think of a trader's job, I asked, answering a question with a question (lol).

I believe that a trader's job is to cut losses. If you let losers hang on, the more damage they do until you finally accept you're wrong. You decide how much you are willing to give the market -stop loss and trailing stop- BEFORE you enter a trade, not when you're in it.

It becomes wrong - looking at the possible loss; fear - alone. We should be looking for the possible upside too so we can compare the potential risk-reward of the trade, then we decide if the trade is worth trading.

Not lecturing or feeling like a guru or something, just picking my brain here. I could be wrong.

So what's a trader's job anyway?

Quotes!

"Go for a business that any idiot can run - because sooner or later, any idiot probably is going to run it."
- Peter Lynch

"I hate weekends because there is no stock market." - Rene Rivkin

I like the quotes! XD

Personal Disclosure

Unbelievable. After global markets gains a hefty 2%(more or less), our market dropped significantly in today's session, dropping by 48.19 points or 1.10% courtesy of the huge sell down of PLDT. Anyway, that was a quick buy signal on appeared on the MACD suggesting buying would be just right on Monday.

Top gainers today with relative volume are BEL +18.65%, SMC +8.37%, AP +5.64%, and RFM +4.74%. Major losers are TEL -8.14% and SMPH -2.35%.

PLDT dropped by 8.14% accompanied by huge volume, which almost completely wiped out its previous gains in the last four weeks. Technically, the drop today is unwarranted. The sell down is unlikely to be a mistake as 7 foreign brokerage houses did the selling namely Macquarie, PEP, UBS, CLSA, JPMorgan, DBP-Daiwa and Deutsche - in that particular order. I highly suspect that are major changes in its fundamentals and/or its earnings report came out as a disappointment.

AEV advanced today by 0.87% after it got sold down when it breached the 36 levels. However, momentum and rate of change are still showing strength pointing to a continuation of advances next week.

No target for AEV as it swings up wildly so I'm simply going to ride it until it shows relative weakness.

AP advanced strongly today, deeming my estimates to be right, gaining 5.64% closing at 29.95. It gaped up today, pointing at 32 as a possible target in the short term IF the gap doesn't get filled. Momentum and rate of change are also both still showing strength suggesting further advances by next week although momentum seems to be at its peak already so there is also a possibility of profit taking early next week.

Personal Target: P35

It would seem that I was right on my decision to sell DMC and buy AEV as DMC continued to slowly decline by 0.50%, closing at 39.75. Meanwhile, AEV continued to advance today, closing slightly higher by 0.87%, closing at 34.70 after it met a strong selling pressure at the 36 levels that pushed the price down at the closing.

Verdict: I am right(sold DMC) and the guy who bought up DMC at 39.95 is wrong, short term speaking.

It seems that I am also right in choosing AEV over AT as AT has only inched up by 0.33% although its rate of change is still pointing up suggesting upward price movement - thus suggesting a bullish divergence. However, there's a bearish divergence reading on the RSI. Having mixed technical readings, I am leaning towards avoiding it as there are more attractive stocks that have confirming signals.

AP is now up by 10.64% within eleven trading days with doubled up position.
AEV is now up by 1.20% within one trading day. Break-even at 35.07.