I would like to thank Mr Yeo for his contribution to the blog.
Here is how he does it (as quoted by him) :
Basically this is my strategy. It is very similar to the stock trader, Jesse Livermore. Livermore shorted the market when it crashed in 1929.
1. Decide what stocks. I have a first line list and a standby list. Those in standby list are
Keppeland, Sembcorp Marine, Wilmar. Unless they drop to near $1 where risk is much
less, I may not consider buying. All the stocks belong to a different class. You cannot
expect a BMW to be in same class as a Toyota.
2. Then work out how much capital you are putting in.
3. Allocate how many lots for each of the stocks you wish to buy. After my first buy,I
won't buy more of a stock as it go down but buy less. I prefer to buy more when
I see my stock going up and I am in paper profit. But I cannot keep averaging up
and I have to stop at a certain price. So that chart may help me in that. But right now I
just estimate for each stock waht is the range I wish to average up.
4. With margin, I prefer to be in borrowing phase when I am in paper profit.This is
important. That's why I average up. Thus now that I nimble here and there, I buy bit by
bit.
Just don't put all your lots at one price. But first entry should be at a reasonable low risk level. There is no meaning buying a stock at $1 and then you still want to nimble all the way down to if it goes to 20c.
2 comments:
His concept is interesting. He buys more when it goes up rather than he buys more when he goes down. I am doing the opposite actually. I think one should also buy in slowly and save some capital in case stocks get more undervalued since it is supposedly that no one can predict the bottom.
I have tried using averaging up or down strategy. Aveing up is good because money will be used more efficiently. ie paper profit. However, must be careful as trend reverse. It may fall fast below ave price since one is aveing up.
For aveing down, it is not recommended unless there is a near-term support price. If not,when a price will stop falling, Nobody knows. Capital is a issue and no point pumping more money into a sinking boat.
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