Continued from 10 Year Full Time Trader Recap -- Part I. I have discovered some interesting fact about stock market for the past 10 years and to me is considered priceless.
Pandora's Box
Stock market is the Pandora's Box of a nation's economy, happenings and future. Once you know the rationale behind the irrational market movement, it is like opening up the Pandora's Box, the good and bad all presented in front of you. Perhaps that is why stock market is known as a forward indicator of its economy. Why is it so ? Stock market is a place where it records billion dollar of transaction daily from domestic and global players. Stock prices move up or down with respect to the future prospect of the listed companies' earnings. Companies' earnings are directly linked to the economy without any doubts. How a nation economy pens out depend on the foresight and policies of the Government implementing it. While nobody has that crystal ball to correctly predict the future, the many players in the stock market with their majority believing will in one way or another shape the outcome towards it. It is the bigger market trend we are talking about and not the daily or weekly or monthly fluctuation.
An example was the FTSE STI index till now since recovering from 2008 GFC has unlike most regional market fail to surpass the peak in 2007. As such, Singapore economy after registering an almost +15% GDP growth in 2010 has practically on a downtrend hitting a multi-years low in 2016 before rebound. The rebound of Singapore economy as seen presently was reflected by the rebound of the stock market around April last year.
During early 2016 when Singapore stock market (and global stock markets) was on a crash scenario and people were concerned about the nation's economy, there were ministers coming out to ask people disregard the negative sentiment of the stock market but in actual fact, the nation economy hit multi-years low in 2016. Then few months ago there was a novice MP during PM's special parliament session (which should not be held at all as that is not the correct procedure in the history of Singapore) to address his siblings' accusation of him abusing of power, instead of questioning PM about the accusation, gave an account of the muted market reaction to support the PM's innocent. Disregard the stock market when it is against you ? Emphasis on the stock market when condition is in flavor of you ? That should not be the way to look at stock market and stock market should in no way to be used as a political tools for any political party's agenda.
There is another insight information we can get from stock market. How the listed company performs depend on how the management manages the company. The way how the management team manages the company especially domestic company with local management team very much resemble how the people at the top in managing the country. This is very much so because these people were born, grew up, educated, nurtured and believed in the way the country is being governed. As such, that influence has more or less being adopted in running the company. Hence, how these companies fare more or less can tell a thing or two about the people at the top. Complacency, inability to think out of the box, conservative, lack of innovative, short of creativity, slow to react, etc are some of things that worth noting. Just look at some of the companies like NOL, SMRT, SPH and ComfortDelGro and I need not elaborate further. The latest big news was SMRT, the collision at Joo Koon station, the faking of maintenance records that led to the flooding of MRT tunnel, the "deep-seated culture" that was used to justify all the problems our rail network system is facing and not to forget the "volunteered CEO" issue. If all these can happen to a government linked corporation, there is nothing to prove that it is not happening to the political party that is governing Singapore now. 上梁不正下梁歪, if you know what that Chinese phrase means, you will understand the point. Something for you to ponder about which I strongly believe should be recorded in the history of Singapore. It always said it takes two hands to clap. We have a scenario in which one neither have the experience of running a big corporation nor any direct experience relating to railway network system volunteered to be the CEO of SMRT but if SMRT or LTA or the ministry does not give the green light to appointed such a person, instead opting to go for one with the relevant experience then the whole saga might be different. So to put the blame solely on the CEO for all the problematic issues is rather unfair as both parties should be equally responsible for it.
Emulator and Simulator
Stock market is a life event emulator and simulator.
"Whenever there is crisis, there will be opportunity". This statement should be no stranger to anyone. While some might not experience that in his/her lifetime or even if it has he/she might just have missed the opportunity but in stock market, that event frequently happened and if he/she missed that, the result will be pretty much immediate and significant. Looking at the past 10 years, we have 2008 GFC, 2011 Japan tsunami, 2012 Europe debt crisis, 2013 US Fed indicating tempering of QE, raising of interest rate, 2014 crude oil price crashed due to supply glut, 2015 China stock market crashed, early 2016 global stock market tanked due to concern of China economy, mid 2016 Brexit and November 2016 US Presidential Election outcome. All these were events that led to crisis in stock market whereby stock prices fell to cheaply level and after the fear subsided, stock market rebounded and moved higher. Should one fail to capitalize on those opportunities, the next thing will be missing out that big profit gain.
"If ain't broken, don't fix it". Another statement that should not be a stranger to most. The SGX trading system was doing fine with daily volume recorded at least 3 billion during the 2007. However, in 2011 to salvage the low daily volume due to the fall out of the s-chips, SGX decided to do away with the 1.5 hour lunch break and minimize the tick size so as to attract more high-frequency traders. The daily volume failed to increase after those new measures and retail traders were sidelined as the new tick size became very difficult to churn profit. After 6 years of fruitless result from the new system, SGX decided to reinstate the lunch break (but instead of 1.5 hours, shorten to 1 hour) and widen the tick size for stocks price at $1 and above. This no doubt is a classic example of "If ain't broken, don't fix it" scenario. Lately, there is a talk by DPM that instead of "If ain't broken, don't fix it", it should be "If ain't broken, experiment it". Well, what he said could be true BUT to experiment on new things, one must be prepared to take full responsibility for the casualty of the experiment. Just like the case of SGX did away with lunch break and reducing the stock price tick size 6 years ago, brokers and retail traders were mostly the casualty but who has actually came out to claim responsibility for the "failed experiment" ? So if one want to experiment, make sure don't just talk only and must prepare to take full responsibility of the outcome of the failed experiment.
Confident, determination, patient, persistent, hardworking, meticulous and discipline are some of the positive features one must have in order to succeed in life, to reach your goal. Without those, be it trading or investing, it is very difficult to success in stock market. One needs to be hardworking to do all the research on the correct stock to buy, one need to be meticulous to look into all the risks involved so that every move will be a calculated one with manageable risk. One needs to be disciplined enough not to chase the price as any rush move can result in capital loss. Stock prices fluctuate and one need to have that confident in what you have research so far, be determined, patient and persistent to wait for the eventual gain.
Complacent, emotional and indecisiveness are some of the negative features that associate with failure. These also apply to stock market and the outcome can be felt almost immediately. When stock market is running up, making good money suddenly becomes very easy, people will become emotional with the fear of losing out, rushing in with a complacency mindset but when stock market suddenly takes a turn, any indecisiveness to cut loss will lead to a bigger loss. Stock market only allows one that split second to make decision and any indecisiveness is very costly.
To summarize my 10 years as a full time trader :-
Engineering taught me to be analytical but stock market perfects that. Be a trader in stock market widen my knowledge in the borderless horizontal dimension while my previous job could only do it in the capped vertical dimension. The flexibility and freedom of a stock trader could not be exchanged for any money in the world. While others have the fear of losing their job during recession, a stock trader has no such fear. As long as stock market is there even if the nation is into recession, profit can still be made. As such, stock trading is an unique surviving skill. The emergence of AI brings out the thought of replacing human's job but AI is a plus tools for a stock trader on the contrary. The high of being a stock trader is you could earn the monthly pay of a fresh graduate in just a day but the low is it could take you 6 months just to earn that same amount.
