Quote for the day

"A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."
-  Winston Churchill

LSL Market Review 04th Mar 2013

Mid-capped and low-capped counters led the losers today although encouraging activity was seen Commercial Bank and Sampath Bank. Foreigners were net buyers in banking counters. Ceylon Tobacco Company was on the losers list today as well. We continue to reiterate that this sluggish period is an opportune period for collecting shares at bargain prices.

ASI slipped 20.80 points (0.37%) to close at 5,631.89 and the S&P SL20 index lost 3.07 points (0.10%) to close at 3,203.78. Turnover was Rs. 1,076.2Mn.

Top contributors to turnover were Commercial Bank with Rs. 557.0Mn, Sampath Bank with Rs. 312.9Mn and National Development Bank with Rs. 49.6Mn. Most active counters for the day were Commercial Bank, National Development Bank and Touchwood Investments.

Notable gainers for the day were Lighthouse Hotel up by 10.6% to close at Rs. 47.00, Commercial Leasing & Finance up by 7.7% to close at Rs. 4.20 and Amana Takaful up by 6.7% to close at Rs. 1.60. Notable losers for the day were Laxapana down by 3.9% to close at Rs. 4.90, Durdans down by 3.8% to close at Rs. 100.00 and Citrus Leisure down by 3.6% to close at Rs. 19.00.

Cash map for today was 54.28% led by solid buying on banking counters. Foreign participation was 41.56% of total market turnover whilst net foreign buying was Rs. 858.31Mn.

10 Market Insights from Mark Douglas

1. The four trading fears

95% of the trading errors you are likely to make will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table – the four trading fears

2. The proverbial empathy gap

You may already have some awareness of much of what you need to know to be a consistently successful trader. But being aware of something doesn’t automatically make it a functional part of who you are. Awareness is not necessarily a belief. You can’t assume that learning about something new and agreeing with it is the same as believing it at a level where you can act on it.

3. The market doesn’t generate happy or painful information

From the markets perspective, it’s all simply information. It may seem as if the market is causing you to feel the way you do at any given moment, but that’s not the case. It’s your own mental framework that determines how you perceive the information, how you feel, and, as a result, whether or not you are in the most conducive state of mind to spontaneously enter the flow and take advantage of whatever the market is offering.

4. The flaws of fundamental analysis

Fundamental analysis creates what I call a “reality gap” between “what should be” and “what is.” The reality gap makes it extremely difficult to make anything but very long-term predictions that can be difficult to exploit, even if they are correct.

5. A good trader is a confident trader

I've worked with countless traders who would spend hours doing market analysis and planning trades for the next day Then, instead of putting on the trades they planned, they did something else. The trades they did put on were usually ideas from friends or tips from brokers. I probably don’t have to tell you that the trades they originally planned, but didn’t act on, were usually the big winners of the day. This is a classic example of how we become susceptible to unstructured, random trading—because we want to avoid responsibility.

6. Anything could happen

The best traders have evolved to the point where they believe, without a shred of doubt or internal conflict, that ”anything can happen.” They don’t just suspect that anything can happen or give lip service to the idea. Their belief in uncertainty is so powerful that it actually prevents their minds from associating the “now moment” situation and circumstance with the outcomes of their most recent trades.

They have learned, usually quite painfully, that they don’t know in advance which edges are going to work and which ones aren't  They have stopped trying to predict outcomes. They have found that by taking every edge, they correspondingly increase their sample size of trades, which in turn gives whatever edge they use ample opportunity to play itself out in their favour, just like the casinos.

7. Most people are obsessed with being right

Why do you think unsuccessful traders are obsessed with market analysis.They crave the sense of certainty that analysis appears to give them. Although few would admit it, the truth is that the typical trader wants to be right on every single trade. He is desperately trying to create certainty where it just doesn’t exist.

The typical trader won’t predefine the risk of getting into a trade because he doesn’t believe it’s necessary. 

The only way he could believe “it isn’t necessary” is if he believes he knows what’s going to happen next. 

The reason he believes he knows what’s going to happen next is because he won’t get into a trade until he is convinced that he’s right. At the point where he’s convinced the trade will be a winner, it’s no longer necessary to define the risk (because if he’s right, there is no risk). Typical traders go through the exercise of convincing themselves that they’re right before they get into a trade, because the alternative (being wrong) is simply unacceptable.

If he exposed himself to conflicting information, it would surely create some degree of doubt about the viability of the trade. If he allows himself to experience doubt, it’s very unlikely he will participate. If he doesn’t put the trade on and it turns out to be a winner, he will be in extreme agony. For some people, nothing hurts more than an opportunity recognized but missed because of self-doubt. For the typical trader, the only way out of this psychological dilemma is to ignore the risk and remain convinced that the trade is right.

8. Trading has nothing to do with being right or wrong on any individual trade

For the traders who have learned to think in probabilities, there is no dilemma. Predefining the risk doesn’t pose a problem for these traders because they don’t trade from a right or wrong perspective. They have learned that trading doesn’t have anything to do with being right or wrong on any individual trade. As a result, they don’t perceive the risks of trading in the same way the typical trader does.

9. We have to be rigid in our rules and flexible in our expectations

We need to be rigid in our rules so that we gain a sense of self-trust that can, and will always, protect us in an environment that has few, if any, boundaries. We need to be flexible in our expectations so we can perceive, with the greatest degree of clarity and objectivity, what the market is communicating to us from its perspective.

10. Market losses are simply the cost of doing business

When I put on a trade, all I expect is that something will happen. Regardless of how good I think my edge is, I expect nothing more than for the market to move or to express itself in some way. However, there are some things that I do know for sure. I know that based on the markets past behavior, the odds of it moving in the direction of my trade are good or acceptable, at least in relationship to how much I am willing to spend to find out if it does. I also know before getting into a trade how much I am willing to let the market move against my position. There is always a point at which the odds of success are greatly diminished in relation to the profit potential. At that point, it’s not worth spending any more money to find out if the trade is going to work. If the market reaches that point, I know without any doubt, hesitation, or internal conflict that I will exit the trade.

The loss doesn’t create any emotional damage, because I don’t interpret the experience negatively. To me, losses are simply the cost of doing business or the amount of money I need to spend to make myself available for the winning trades. If, on the other hand, the trade turns out to be a winner, in most cases I know for sure at what point I am going to take my profits. (If I don’t know for sure, I certainly have a very good idea.) The best traders are in the “now moment” because there’s no stress. There’s no stress because there’s nothing at risk other than the amount of money they are willing to spend on a trade. They are not trying to be right or trying to avoid being wrong; neither are they trying to prove anything. If and when the market tells them that their edges aren’t working or that it’s time to take profits, their minds do nothing to block this information. They completely accept what the market is offering them, and they wait for the next edge.

Source: http://ivanhoff.com

Quote for the day

“Market action is not complex but surprisingly simple. Yet it is often made to appear complex by newspaper forecasters and market letter writers." - Burton Pugh

LSL Weekly Market Review 01st Mar 2013

Market started on a negative note on Tuesday as negative developments in the macro-economic front and motions against Sri Lanka at the UNHCR factored in during trading. Most blue-chips lost ground as retail selling also picked up. Private deals on blue-chips helped buoy turnover levels. The market is developing into a buyers’ market whereby opportunities for bargain hunting will arise. ASI lost 66.13 points (1.15%) to close at 5,669.48 and the S&P SL20 index lost 27.86 points (0.86%) to close at 3,195.42. Turnover was Rs. 714.0Mn.

Indices rebounded from Tuesday’s steep drop helped by gains on banking and financials. CTC dropped during trading, as investors feel the counter may be overvalued at these current prices. However, market continued to offer plenty of opportunities for bargain hunters whilst retailers continue to be muted. Yields on treasury bills remained at previous levels for the second week running which should indicate that rates should hold steady at the rates. ASI gained 4.99 points (0.09%) to close at 5,674.47 and the S&P SL20 index gained 8.61 points (0.27%) to close at 3,210.82. Turnover was Rs. 623.1Mn.

Losses on Ceylon Tobacco Company and John Keells Holdings saw indices driven lower on Thursday. Leisure conglomerate Aitken Spence saw almost 6.5m shares trade on the normal board contributing more than 50% of today’s turnover. Earlier Commercial Bank and Sampath Bank had reported exceptional 4th quarter results. ASI lost 38.57 points (0.68%) to close at 5,635.90 and the S&P SL20 index lost 16.43 points (0.51%) to close at 3,194.39. Turnover was Rs. 1,430.6Mn

Indices closed higher on Friday helped mainly by gains on Ceylon Tobacco Company which rebounded from Thursday’s drastic price drop. Hatton National Bank drove turnover levels higher with institutional activity. S&P confirmed Sri Lanka’s B+ rating but warned of “bloated state sector and lack of transparency and independence”.   ASI gained 16.79 points (0.30%) to close at 5,652.69 and the S&P SL20 index gained 12.46 points (0.39%) to close at 3,206.85. turnover was Rs. 673.9Mn. Top contributors to turnover were Hatton National Bank with Rs. 361.5Mn, Sampath Bank with Rs. 55.0Mn and Chevron Lubricants with Rs. 39.6Mn. Most active counters for the day were Central Investments & Finance, Touchwood Investments and Hatton National Bank.

Notable gainers for the day were SMB Leasing non-voting up by 33.3% to close at Rs. 0.40, Swarnamahal Financial Services up by 12.5% to close at Rs. 3.60 and Maskeliya Plantations up by 9.8% to close at Rs. 13.40. Notable losers for the day were DIMO down by 6.5% to close at Rs. 510.00, Hayleys MGT down by 5.0% to close at Rs. 9.50 and PC House down by 2.4% to close at Rs. 4.00.

Cash map for today was 45.69%. Foreign participation was 36.42% of total market turnover whilst net foreign buying was Rs. 324.35Mn.

Quote for the day

 “Throughout my trading career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you.” -  Larry Hite

LSL Market Review 28th Feb 2013

Losses on Ceylon Tobacco Company and John Keells Holdings saw indices driven lower. Leisure conglomerate Aitken Spence saw almost 6.5m shares trade on the normal board contributing more than 50% of today’s turnover. Earlier Commercial Bank and Sampath Bank had reported exceptional 4th quarter results.

ASI lost 38.57 points (0.68%) to close at 5,635.90 and the S&P SL20 index lost 16.43 points (0.51%) to close at 3,194.39. Turnover was Rs. 1,430.6Mn.

Top contributors to turnover were Aitken Spence with Rs. 770.6Mn, DFCC with Rs. 184.6Mn and John Keells Holdings with Rs. 60.5Mn. Most active counters for the day were Central Investments & Finance, Commercial Bank and Touchwood Investments.

Notable gainers for the day were Asiri Surgical up by 5.6% to close at Rs. 9.40, Ceylon Cold Stores up by 5.3% to close at Rs. 134.00 and Sunshine Holdings up by 4.2% to close at Rs. 27.50. Notable losers for the day were Ceylinco Insurance non-voting down by 10.3% to close at Rs. 280.00, The Finance down by 10.0% to close at Rs. 12.60 and Renuka Holdings down by 6.6% to close at Rs. 32.50.

Cash map for today was 81.92%. Foreign participation was 75.4% of total market turnover whilst net foreign selling was Rs. 20.7Mn.