Saturday, 2 July 2016

The startling 80-20 rule

The 80-20 rule, a.k.a. the Pareto principle, states that roughly 80% of the effects come from 20% of the causes. For example, in business, 20% of customers equal 80% of sales, or you could say 80% of the profit comes from 20% of customers. 

I analysed my past transactions from different angles. My winning trades account for 57% of the total trades while losing trades stand at 43%. This is a bit surprise to me, because I always thought I lost more. It is now clear to me, that I magnify my losses and minify my victories, such that I self-blaming when losing, and feel nothing but want to earn more when winning -- an unconscious action (I can talk about this ceaselessly, but this is not the main point of this article).

Another thing I found startling is that 80% of the amount won comes from only 20% of the winning trades. Similarly, 80% of the amount lost comes from 20% of the losing trades. To make things clear, let say I profited RM 100K in 20 winning trades. Then, the 80K profit (80% of 100K) comes from only 4 winning trades (20% of the total winning trade). The rest 20K comes from 16 winning trades. The same applies to the losing trades. 

What a surprise.. Really?

The big question is: SO WHAT?

On the winning trades, focusing on the potential top 20% will boost the profit significantly. If the company is doing good, then just let the profit runs. On the other hand, limiting the losing trades, i.e., cut lose when necessary will prevent further losses. This will ensure that the losing trade will not belong to the top 20% that contributes to the significant loss. However, cut loss is something people don't like to do. I think the main reason is that cut loss means admitting our own mistake, and people always find it hard to admit their own mistakes (another unconscious action). But my past transactions have come down to this startling 80-20 rule. Thus, in the future, I will keep in mind of this

You are welcome to do your own analysis to find out if your past transactions follow this amazing rule.

Thursday, 23 June 2016

The consequence of stock market speculation

I have transacted more than 30 times last month, the highest in my history.

It all started with MISC, when it dropped 13% per day despite a good quarter report. I saw an opportunity coming the next day of the plunge: a chance of rebound. MISC has fundamentals. The daily chart is out of BB lower band. These two features satisfy my rules to catch a rebound. The feeling of securing a return of 20% intraday is so good.

MISC plunge

For a long time I have not earned like this in a single day. My next unconscious reaction is to continue speculation. I started to buy in stocks without even looking at the fundamentals and technical chart. KANGER and LSTEEL, just to name a few. I did not have solid grounds like I bought MISC call warrants. I just thought that luck will be on my side, and I can continue winning just like that. But once again, how unbelievably, I vomit out all earnings.

Only then I realised that the more I trade, the more I lose. 
Only then I realised that winning is the beginning of losing.
Only then I realised that my thought of playing stocks has ended up getting played by stocks.

After all, my best strategy is to hold for a few months. In the mean time, wait patiently for any opportunity of "fast money". If this kind of opportunity comes every week or fortnight, it is probably good enough to generate a considerable extra income.

Thursday, 2 June 2016

The technique of average down

Say if I buy a stock today at RM 1.00. Unfortunately the share price drops to RM 0.90 a few days later. I decided to purchase additional units of the stock. Say if I purchased the same quantity as the other day, then my average entry price is RM 0.95. In this case, I do not have to wait until the share goes back to RM 1.00 to break even, RM 0.95 is enough.

The idea of average down is simple. It sounds nice, as if averaging down will be easier to break even or even making profit. However, from my experience, average down has mostly resulted in horrendous outcome. I lost even more, let alone trying to break even.

Firstly, if a share drops 5-10% in a short time after buying, it means that I did not wait long enough to buy at a lower price. This implies that I made an impulsive decision to jump in. An impulsive decision is usually an emotional one. Stock market cannot allow emotional decision. This reason alone is good enough to lose money.

Secondly, my attitude of averaging down is horribly wrong. I admit that I carries a sense of gamble (a legacy?) when average down, longing that the more I average down, the easier it will to break even. Additionally, the action inevitably accompanies a feeling of vengeance. This emotional state itself is negative in nature. Negative emotion always resulted in negative outcome. And the market has never failed to give me a lesson on this.

Thirdly, and technically, it may be that the stock is in the down trend. If the share keeps on dropping, cut loss might be a wiser choice than average down.

Interestingly, on the other hand, if the share goes up shortly after I buy, "average up" usually brings even more return. Maybe earning money shortly after buying is a sign that the purchase is a good decision. Nevertheless, the psychological barrier to buy the stock at a higher price is much stronger than average down. This is human nature: if I can buy an item at RM 1.00 today, why would I pay for RM 1.10 in the next week? But my experience proves that this is a better way. So overcoming the psychological barrier to "average up" is an important way to make more money? Yes, I believe so.

Monday, 16 May 2016

Transferwise: the best way to transfer money from overseas to Malaysia

Sometime ago I want to transfer some money from Australia to Malaysia. I researched for many companies to look for the best (cheap and effective) way. Here it is.

Trasnferwise is the best company you could possibly find for fund transfer from Australia to Malaysia (and I believe for other major currencies to MYR too). Established in the UK, Transferwise supports all major currencies and is invested by Sir RichardBranson, the founder of Virgin group. 


1. It uses mid-market rate. This means that your transfer rate is even better than BNM's buyer rate, i.e., the exchange rate they offer is exceptional. In contrast, traditional telegraphic transfer (TT) using banks comes with a 5-10% spread as compared to BNM forex rate.

2. Small transaction fee and no other hidden fee will be incurred. For AUD-MYR, you will be charged 0.7% of the amount you transfer. And because you do not "lose" in forex rate,  this means that the money you receive is only 0.7% less compared to the "optimal amount". I bet you can find any company doing better than this.

3. Fast and efficient. From my experience, the service is very impressive. I received the fund the next business day after they received my fund.

4. Reliable and secure. In the process of fund transfer, you will be updated at each stage about your fund status. This gives you peace of mind. You can read some review here. I am not surprised that this company receives 9.5/10 for their service. 

If you want to transfer fund from overseas to Malaysia, abandon the exorbitant fees charged by banks and start using Transferwise by registering here. Yes, I have to tell you that this is my referral link. If you signed up using this link you will have a free transfer of up to GBP 500. And if you successfully refer your friends and they have made a transfer, you will be rewarded with cash.

Wednesday, 11 May 2016

So a good financial report does not mean a jump in share price

This is subtly related to a previous article the consequence of betting on quarterly reportIn the article, I talked about the lesson learnt from betting on financial reports. Now the market seems to "evolve" to another higher standard.

Malaysia International Shipping Corporation (KL: MISC) announced its quarter report on last Friday, 6/5/2016. The company's profit rises 17% quarter-over-quarter. Despite a good quarter report, out of a sudden, MISC plunged 13% on Monday 9/5/2016, with no apparent reasons.

This reminds me of the opposite example, IOICORP. On 16/11/2015, IOICORP posted a loss of 719M, downed 500%+ quarter-over-quarter. For a blue chip stock to incur a loss, people were expecting a big drop in the share price. However, nothing happened on the next trading day and the stock was performing just like normal.

What does this imply? The financial world is changing at all time. So the stock market changes pattern too. The "correlation" between financial results and short term stock price movement seems to disappear. While fundamentals are still important, my view is that its importance and significance has diminished to a lower "weighting". If this is true, then the old way of "long term investment" may no longer work. The big question is: what is the more important factor now? This is a question worth contemplating.

Friday, 18 March 2016

Leaving Australia for good: the tension of opposites

It has become pretty clear that I will have less than 1 month in Australia. Nothing is going to stop it.

Living for 3.5 years, Sydney has become an ordinary city to me, nothing more, nothing less. The excitements that I have had when I first came to this beautiful place have unfortunately, yet inevitably, turned into normalcy. The good things have been taken for granted and the bad things have already been accustomed to. Ridiculously, the city that crowned the top 10 most livable cities in the world, a place that so many people long to visit, is also the place that I cannot wait to leave.

I experience the tension of opposites*: part of me want to leave here so badly, yet part of me know that there is nothing better back in Malaysia. When I think of I have enough of Sydney, the mind starts generating all kinds of reasons to justify the thought, e.g., I miss Malaysia food. But then I also know that I am going to miss Australia very much: the fresh air, the days of cycling and the fun of swimming & snorkeling in the sea, etc. More importantly, I like the way Australians think, the mindset, the "software", which determines the "quality" of a community.

Which makes me realising, once again, that you always get some and lose some at the same time. Life is only fair this way. Time flies and there is not much I can do to hold on to all these things. This experience only happens once in a lifetime. I cannot, and do not want to leave any regrets while in Australia. This means that, appreciating all moments while I am still here is the best I can do to for the rest of the days in Australia.

*The tension of opposites was mentioned in  <<Tuesdays with Morrie>>, my favorite book written  by Mitch Albom

Sunday, 17 January 2016

A(nother) market turmoil

Recently, another market turmoil has emerged. Major overseas market are having big drops. Well, except KLSE.

This time, apparently sparked by a plunge in crude oil price and fears about Chinese economy growth, has the overseas stock market to drop 2-3%, literally every second day. Chinese economy growth problem? Really?

Brent crude oil: Looking back only to realise that oil really start to drop since 2H 2014. And it drop really quickly. I thought it would stop at around USD 40/barrel, but the market always surprises you. I has now come down to below USD 30/barrel. The financial market is interesting: the crude oil price has rarely gained any considerable attention in the past, and it is now ubiquitous on the media.

(Print-screened from Bloomberg)

NASDAQ: I have a dream of NASDAQ to shot up to 10000 points in coming years for another round of technology bubble. But it now looks like an impossible task?

(Print-screened from

DAX is literally dropping 2-3%+ every second day for the past week!

NIKKEI is literally dropping every second day too.

On the other hand, KLSE is like a heaven, completely oblivious to what is happening globally. Magic always happens in Malaysia, going along with the phrase "Malaysia Boleh".


The last "noticeable" adjustment occurred in Aug 2015, coming with no signal (at all). In less than six months, another round is coming. Frankly, no one can stand seeing stocks dropping to such an extent every second day, let alone that the bearish market has yet to be confirmed.

I am wondering, the market hasn't even drop for 20% and the market sentiment is already so negative, what if something worse is yet to come?

I would like to see if this would turn out to be another adjustment.

Sunday, 10 January 2016

2015 Review


1. 2015 signals the rise of put warrants in KLSE, which is something that I did not touch at all in 2015, which turned out to be a correct decision: when something seems so hot in the market and everybody is trying to make a slice from it, the wise action to do is to stay away from it.

2. 2015 also sees the birth of CHINA-A50 call and put warrants. Catching a correct trend could easily secure a profit of 20% in a week (and vice versa). I played once and that's it. China stock market is comparatively volatile and these structure warrants aren't meant to hold long.

3. 2015 is the year of export counters due to an abrupt depreciation of MYR. Glove stocks are the dominant players. Unfortunately I did not catch any of them.

About myself:

1. Dividend sums up to be RM 1338.19 -- not a big amount, really, but it is a bonus for me.

2. The number of trade I have transacted is close to the sum of 2011-2014, i.e., unbelievably high. Some are really good decisions, but followed by other bad decisions not long after. Still, I need to learn to hold cash without "feeling itchy on my hand".

3. I bought some CWs that if I continue holding I would have secure a huge profit. But there is no such thing anyway.

Using busyness as an excuse, I buy shares purely based on suggestions on the Internet. This is nothing to be proud of, but this is what I have done for the past year. Although quite a number of mistakes have been made, the overall return is satisfactory. Perhaps later this year I would have time to start making my own study on the market.

I set a high aim for 2016, hopefully to achieve it by the end of the year.