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Post by oldman on Oct 19, 2013 8:12:38 GMT 7
Lately, I had a most interesting experience when I was trading a stock. Instead of selling, I landed up buying the stock!
This happened because I use a number of online broking systems and some of these systems default the trading screen to buy.... meaning that if you are not careful and you key in an order only to forget to check that you have also to change the default buy order to sell, then, you will end up buying instead of selling the stock. When you are in a rush to trade, sometimes, you can overlook such matters.
But strangely enough, the stock then went up and I made even more money from my accidental buying! When I think hard about this episode, it dawned onto me that though we think we are smart in guessing the direction of a stock, more than likely, we are really leaving it to lady luck more than any intelligence.
After all, stocks move up and down due to supply and demand, especially so if the timeframe is just a few minutes or days. Nothing fundamental would have happened to the stock during these short few minutes or days. Hence, the movement of the stock is more likely to be due to basic supply and demand.
As highlighted in my book, there are those with the financial muscle to buy and sell stocks and affect the supply and demand equation, especially in the short term. These folks can influence the share price more than anything else and they are smart enough to make it appear that they are selling when they want to buy and vice versa. Such is the nature of the beast, otherwise known as the stock market.
As a result, if we apply intelligence to our trading, more than likely, we will sell when the smart money wants to buy and buy when they are selling to us. One must always remember that the smart money is usually one step ahead of us. You can try to out-guess them but most of the time, they are more likely to out-guess you.
Hence, in trading, whether we win or lose may be decided more by lady luck rather than by intelligence. This is why I always put the bulk of my money in fundamental stocks and only once a while, like in the recent penny run-up, I did some trading for the fun of it.
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