Thursday, June 03, 2010

SGX - trade review

I was reviewing some of my past trades. This is one of them. The counter here is SGX. It's not exactly good for trading because the cost of 1 lot is quite high, so while the absolute value might be the same, a higher amount of capital is tied up in case the trade goes wrong. But I do like the cannot-die type of company for trading, so SGX fits perfectly.

Here's my two trades all depicted in the chart shown below:

What a roller coaster ride we have here...

I had 2 full round trips of SGX. The first was in 15th June 2009, bought at a price of 7.54 (the chart did took into account the drop of the price after its final dividend declared, hence it looks 'funny') and sold on 23 July 2009 at a price of 7.84 (again, the chart took into account the drop in price after its final dividend). Since the holding period is rather short, I did not get to enjoy any dividends declared.

Profit: $0.30

The second trip was in 5th Nov 2009 bought at a price of 7.88 and sold on 14th April 2010 at a price of 8.05. I managed to hold for a round of dividends declared at 0.0375, hence it boosted up my profits a little.

Profit: $0.170
Dividends: $0.0375
Total: $0.2075
Over profits for the 2 round trips:  $0.5075

This is only round 2 and hopefully many more to come. As you can see, my TA skills is not sharp. My entries and exit are less than commendable, but that is the nature of playing a probability game. On hindsight, I should have entered and sold at so and so price, but trading on the right edge of the chart is more difficult than looking back at it after trading it.

The closing price of SGX is 7.33 as of now. So, if I had bought at 7.54 and kept it till now, this will be what it looks like:

Profit: - $0.210
Dividend: $0.2675
Total: $0.0575

I'm not showing this to compare the buy-and-hold strategy versus the in-and-out strategy, because I know fully well that by selecting the appropriate time frames, both strategies will turn out to be winners. There are obvious advantages to both strategies and I would like to employ both of them. For example, if I had bought say 10 lots of sgx, I would have put half as a buy-and-hold positions and the other half as a trading position. The percentage can change according to the times, and need not be fixed in stone.

But I want to make it clear:

1. Buy and hold doesn't mean that you'll make money. Holding it long term doesn't mean that you'll make money. But if the company gives off a good dividend, it makes it that much easier to hold it longer. If the dividend is 10% per year, just holding it 10 yrs will recoup all your capital sunk in, never mind the capital appreciation or not. That's the wonderful thing about holding dividend yielding companies over the long term. But of course, there's a lot more things involved...10 yrs is a long time and they might not be around, that's why there's still a need to monitor the financial health of the company.

2. Using TA doesn't mean that you can catch the top and the bottom. If you can catch the approximate top and bottom, I think you'll boost your profit potential tremendously already. Of course, a lot depends on the person too - the mind, money and method. Fear makes you hesitant to buy when a signal presents itself while greed makes you hesitant to sell when the target price presents itself. These are all monsters that you have to face it if you're in the market.

Good fortune in the market :)


CreateWealth8888 said...

Look at net profit after brokerages.

la papillion said...

Hi bro8888,

Welcome back :)

For my personal record, I did update all the brokerage charges. For simplicity sake, I took it out of the calculation in the article.

CreateWealth8888 said...

For SGX you need 6 bids to break-even unlike penny stocks 1 or 2 bids so overhead is much higher and leaving it out for simplicity may not show provide a fair P&L to your readers.

la papillion said...

Hi bro8888,

Okay, if you insist. Here's how much you earn if you buy and sell (2 times) for 1 lot of sgx = $380.88

Here's what happens if you buy and hold until the price hits $7.33:

Everything is inclusive, including the dividends and the brokerage charges for both.