Friday, 12 April 2013

Quote for the day

“If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it’s coming in, it'll never happen. The market is always right.” - Ed Seykota

Market ends up in the green amidst low activity...

The ASI gained 73.94 points WoW to close at 5,839.88 points (1.3%), whilst the S&P SL20 Index gained 21.01 points WoW to close at 3,333.54 points (0.6%). 

Indices benefited mainly on the back of the gains made by Vallibel One (8.6% WoW), John Keels Holdings (0.6% WoW), Distilleries Company of Sri Lanka (2.4% WoW), Ceylon Guardian Investments (8.7% WoW) and Nestle Lanka (1.1% WoW).

The final week in the run up to the Sinhala & Tamil New Year saw a marked decline in investor activity compared with the previous weeks at activity at the Colombo bourse as indicated by low turnovers and volumes. Both indices trended upwards for most of the week and ended up in the green. 

This maybe a response to the positive sentiment expressed by the ADB in its economic outlook for the economy which also projected a GDP growth rate of 6.8% and 7.2% for 2013E and 2014E respectively. 

Interest in the Colombo bourse may be sustained given the Central Bank’s objective of lowering borrowing costs by May-June which would make equities more attractive from a valuation perspective. 

However, the ADB cautions that the BOP deficit and the increasing share of foreign borrowing poses the most significant challenge towards the future growth prospects of the economy. 

Banking & Finance sector counters continued to command institutional interest with firms such as Hatton National Bank, Central Finance Company and Pan Asia Bank benefitting from crossings over the week.

Furthermore, Panasian Power, Free Lanka Capital Holdings, Dialog Axiata, Seylan Merchant Bank (Non-Voting) and Seylan Merchant Bank topped the list in terms of volume traded during the week.

The week saw foreign purchases amounting to LKR 885.3 mn whilst foreign sales amounted to LKR 230.8mn. Market capitalisation stood at LKR 2,237.3bn, and the YTD performance is 3.5%.


Bourse fairly buoyant despite the festive season
The mood at the Colombo bourse remained fairly buyout despite the upcoming festive season, driven by high institutional and foreign activity. The performance of the indices was especially a welcome on the heels of the Central Bank’s assessment of the economy for 2012 as well as the positive comments mentioned in the ADB’s Asian Development Outlook for 2013.

World stocks also demonstrated strong performance lifted by a surprise drop in US unemployment figures and the Bank of Japan’s aggressive monetary policies in an attempt to beat continuous deflation witnessed in the country. Further, the improvement witnessed in the China’s imports of key commodities in March also propelled the world stock markets to high levels. Reaffirming this, MSCI world index gained 2.5% WoW to close at 1,462.8 as at Thursday reaching a 5 year high, while the S&P 500 also climbed to record levels during the week since 2007. Most frontier markets also made gradual recovery in tandem with the movement in the world indices. Furthermore, the performance of equities has made the investors to shift away from safe heaven assets.

In the context of Colombo Bourse, investor’s focus in the coming weeks would increasingly turn towards 1QCY2013 earnings results of the corporations. Furthermore, treasury secretary’s statement regarding the possible easing of market interest rates from May and June 2013 is likely to draw investor attention more towards the bourse.
Source: Asia Wealth Management Research

The Success Indicator

I really liked this image I saw on Facebook about the difference between the way successful people view the world and the way unsuccessful people view the world. Obviously, there is no single indicator that is going lead to success and there’s certainly no holy grail to success, but I think this provides some pretty good general guidelines. A lot of these are things I need to do some serious work on. I hope you find it helpful and thought provoking as you planning for your future. 

Successful People
  • Have a sense of gratitude 
  • Forgive others
  • Accept responsibility for their failures 
  • Compliment
  • Read everyday
  • Keep a journal
  • Talk about ideas 
  • Want others to succeed 
  • Share information and data
  • Keep a "to-be" list
  • Exude joy
  • Keep a "to-do/project" list 
  • Set goals and develop life plans 
  • Embrace change
  • Give other people credit for their victories 
  • Operate from a transformational perspective

Unsuccessful People
  • Have a sense of entitlement 
  • Hold a grudge 
  • Blame others for their failures
  • Criticize 
  • Watch TV everyday
  • Say they keep a journal but really don't
  • Talk about people
  • Secretly hope others fail
  • Horde information and data 
  • Don't know what they want to be
  • Exude anger 
  • Fly by their seat of their pants
  • Never set goals
  • Think they know it all
  • Fear change
  • Take all the credit of their victories
  • Operate from a transactional perspective


Jake Bernstein's 10 Psychological Stock Trading Principles

In chapter 19, Mr Bernstein lists ten psychological stock trading principles he believes to be essential to a trader’s success. The ten principles are as follows:

1. Plan your trades specifically and in advance. “If you are specific, organized, and act on plans, you will avoid costly efforts often caused by spontaneous decisions.” Obviously without some sort of plan we are much more likely to trade off fickle emotion instead of steadfast reserve.

2. You alone are responsible for the success or failure of your trading. By taking total responsibility for your trading results, good or bad, and not blaming friends, brokers, market letters, etc. you will be “consistent and truthful to your trading system. And consistency is the single most valuable key to success.”

3. Never hope that a position will go your way; never fear that a position will not go your way.
Once in a trade you have absolutely no control over its eventual direction no matter how many prayers or petitions are offered. “Hope and fear are two of the greatest enemies of the speculator, fostering only false perceptions. You must avoid these feelings at all costs. The more rigid you can become in your execution of trades, the more profitable will be your results.”

4. Monitor your performance feedback of results. The only feedback a trader can depend upon is the written record of trade results and the recorded thoughts surrounding each trade execution. “At any time you must know how well or how poorly you are doing. You must also know if poor results are caused by your inability or that of your trading system.”

5. Attitude is your greatest asset. “A good trading system is perhaps only 20 percent of the total picture. A positive attitude may very well comprise the balance of successful trading.” No matter how many losses you have and no matter how irrational the market seems to be it is imperative that you keep the proper, level-headed attitude. If you don’t then the market will take advantage of you.

6. Don’t take the market home with you. “The market must be seen as a means to an end. It should not become a way of life, and it should not dictate your every move.” Much like what I like to refer as a life outside the charts. It does help to look at the market from without instead of from within all the time.

7. Cultivate effective and positive relationships. Trading can be a lonely game and one of like attracts like, therefore, it is important for us to grow and maintain a healthy relationship garden. “If we associate with those who are highly motivated, who seek to achieve, who have ambitious goals, and who are willing to forge ahead regardless of obstacles, then we will acquire similar drives.”

8. Enjoy the fruits of your labor. Motivation is tantamount to a successful trading strategy. The positive feelings you can experience from acquiring things as a result of trading efforts can act as positive reinforcement for future trading decisions. “Make it a regular practice to remove profits from the market. Spend some of them and save some of them.”

9. Avoid overconfidence. With the enjoyment of the fruits of your labor its cousin, measured control, should not be far behind. You should not become over emotional about your trading so “the best course is to even out the peaks and valleys. Each loss should be a negative experience, but not a totally destructive defeat. Similarly, each profit should be taken in stride. Overconfidence may, in fact, be even more potentially destructive than lack of confidence, since it will make you take chances that could destroy you.”

10. Your next goal should always be in sight. “Once you have obtained an objective, make certain that your next challenge is set.” If you have met a profit objective then set a new one so that you have created a new challenge, a new mountain to climb so to speak. If you do not start to work on climbing a new mountain then you will have a tendency to fall off the current one, giving back all that you have accomplished.

Most of these are fairly common and well-known stock trading principles but just like in life the simple and obvious are most often overlooked while we spend out time searching for the rare, complicated and not so important.