Staying in the Trading Saddle

The stock market is not so much the serious ‘suit and tie’ job but rather think of it more of a challenge which when adopted, understood and run with structured and controlled approach can be an enjoyable, satisfying, fun and rewarding experience.

Detachment from emotionally charged ‘noise’ and distraction is the key to making this step and reducing stress. Sometimes dark clouds appear but that’s the ‘joy’ of the stock market we all have to experience. It’s a pastime, hobby, occupation, interest, or all of these things but in essence it’s a business like any other with profits and losses or income and expenses. It’s simple, make sure your profits are greater than your losses – and you win, but most of all preserve your capital (that’s your budget) and the good times will follow. Those are booms and busts and the challenge for us all is to manage them as best as we can to try and smooth the ride. The essence is being able to make money and guide your trading business safely to profitability. It’s a challenge and it’s tough. Below we have Nine Entertainment which has been an enjoyable, satisfying, fun and rewarding trade – so far.

Nine Entertainment

A member recently asked me about NEC. Is it too late? Current price is $2.95. It has just struck a new all-time high – above $2.55. Price 12 months ago – $0.90. The stock still holds a valid trend supported by a strong Trend Intensity Rating (TIR). Any stock with a valid trend and TIR can be entered provided you follow the same risk management strategy. The strategy: keep it simple, maintain your focus and manage your stop! Treat it like any other trade.

When I began Stockradar in the 1990’s, I was very much tied to the ups and downs of the stock market as were my membership rates. This made for quite a relentlessly exhausting ride, so by necessity of survival I had to smooth those swings as my sanity depended on it. I had to learn how to even out that ride purely for psychological survival. Most of my members are with me in understanding the need to be poised, astute, disciplined and in control in both good times and difficult times. And if it can be done a more relaxed and positive state that has to be a good thing and that will endear success even further. That’s the state of mind we need to attain. Learning how to part ways with unnecessary noise that doesn’t form part of your decision making is a very positive step towards achieving that. So, building a positive, stable and sound approach through all types of markets brought me much freedom, safety and contentment. Understanding ourselves and our needs and how we manage them can very much be a sound introduction into how we engage with the stock market that goes up, and down. If we are to engage, that’s the reality. Too often we can take the comfortable ride and expect it to last forever. Not so surprise, surprise. Manage with diligence.

There is still much work to be done but this is a great starting point that

provides a robust foundation to start building on.

We can see the smoothed effect on our portfolios of the systemic GFC fall back in 2007/08 and more recently the more savage fear driven effect of the Covid ‘lightening’ crash. Two different drivers and two very different recovery phases but both positive outcomes that were dealt with appropriately. The facts we know are the market falls between 10% and 25% every two years, fear driven or systemic it doesn’t matter they happen, and every 10 years we see a more calamitous retraction for want of a more descriptive word. It’s always a shock but the market invariably recovers, it’s the timing that is the tricky part. We can see the GFC effect which has been minimalised by the following steady climb in the portfolios and as to how we respond to the Covid crash will be an interesting exercise to observe. Already the portfolios and the (ASX/200) have quickly regained the losses. The American market (technology) as we know has shot the lights out, but a correction will come soon. The trick is staying in the saddle and balancing the roaring opportunities of the uptrend against the inevitability of the fall. Here money management devoid of the ‘noise’ effect is fundamental to survival. So regardless of all these permutations the key it so keep it simple, i.e. don’t try and be too smart and read every whimper and whine, while remaining true to the strategy you choose to employ. If you do the chances are, you’ll take more profits than losses. It’s not easy but if you’re playing the game, you must be realistic.

What’s happening in the world, it’s going crazy?



Current market – Jeremy Grantham, among others, identified the markers for us, extreme overvaluation, explosive price increases, frenzied issuance, hysterically speculative investor behaviour. It may go on for some time as pinpointing the end is a difficult quest. But if it looks and quacks like a duck – it is a duck. So, head out of the sand time and work on how you are going to do two things. Lock in some profits while maintaining exposure and in the same breath ‘protect your capital’. It means not riding slingshot with this move but carving out exuberantly generated profits and ensuring your risk management processes are in place and ‘moving with the market’. Don’t change your behaviour when the market does, keep your poise and control.

After the South Sea Bubble Sir Isaac Newtown was later said to have grumbled that he could calculate the motion of stars,

but not the madness of people. That’s incalculable.

A new spike and rising interest rates may cause an initial panic but in the end it’s a good thing at the beginning of a recovery.

– investors are looking for credit to spend and grow again.

This is my experience in trading for 40 years and I note Alan Kohler in his Weekend Briefing this week (27/2/21) noted the same. It is an initial shock when interest rates turn but that’s a fear response and when we view it in perspective the reality of why they’re turning up (from extremely low levels to now be where they were only 12 months ago) the market may gain some confidence in the reason why. Just like inflation and the extremely deflationary environment we are in. Even the central banks alone can’t engineer an increase in inflationary pressures. Deflation reigns. Pick your targets and shoot hard we never know what’s ahead.

This is from a recent edition of the AFR – worth a read.