Catching a Falling Knife ( or Falling Safe )

Investment Strategies

Postby winston » Mon Mar 09, 2009 4:02 pm

TOL:-

I'm thinking of catching some falling knives over the next few months.

What is the best way to catch a falling knife ?
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Re: Investment Strategies

Postby financecaptain » Mon Mar 09, 2009 4:10 pm

You don't. You throw them.
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Re: Investment Strategies

Postby millionairemind » Mon Mar 09, 2009 4:46 pm

winston wrote:TOL:-

I'm thinking of catching some falling knives over the next few months.

What is the best way to catch a falling knife ?


W - you know I don't catch falling knives and I only go long when US mkt has a follow thro'..

But if I were to fathom a strategy... here is one...

1. Current HSI is about 11500 - buy 10% of what you want to buy
2. When HSI tanks to 10500 - buy another 15%
3. When HSI tanks to 9000 - buy another 20%
4. When HSI tanks to 8000 - buy another 25%
4. When HSI tanks to 7000 - buy final 30%

Average around HSI 8625

I can't see how HSI can drop below 7000.. that would mean that the market dropped more than 75% from the peak ....but I am often wrong.. :D

If HSI is at 7000.. that means we are in GREAT DEPRESSION II.. perhaps holding money is a better option.. :?

Say like no say like that.. paiseh... :oops:
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Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: Investment Strategies

Postby kennynah » Mon Mar 09, 2009 7:00 pm

i dont think catching a falling knife by going Long is a smart way to invest... especially, when one is already almost certain market is in downswing... so, why even go Long? hope, that where one enters a Long, is the bottom? i think that is naive and undisciplined.

if really wana go Long...now is the time to exercise patience and wait for enough signals to suggest that a sustainable Rally is underway...afterall, we are already at a LOW level... does it matter that we go along the chu chu train only when we know the engine wont stall immediately upon starting? sure, that wont be the rock bottom...but rock bottoms are known only as an after-the-fact....so, dont kick ourselves that we missed it... i, for one, has resigned to almost never be able to pre-catch the bottom... and i think, if i do, that would be pure luck...

DCA is not a good strategy...i dont believe in it and i try very hard not to practice DCA method of investment... all these from alot of tuitions fees paid out before... canto people have this saying...."seen ghost before, one will be scared of dark alleys"

good luck !!!
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Re: Investment Strategies

Postby winston » Tue Mar 10, 2009 10:32 am

MM, FinanceCaptain & Kenny - Thxs for your kind comments

Yes, the conventional way is to look at the following in order of priority:-
1) Market Direction
2) Industry Outlook
3) Stock Outlook

As I'm preparing to catch the falling knife for a technical rebound, I may have to skip the conventional way and just focus on the stock itself. It's a short term trade and stock specific.

Example: HSBC

If I know that the rights price is HK$28, that may provide a floor for the stock. And if the stock has dropped sharply over a short period, the shorts may be tempted to cover. The question then becomes when and why the shorts would be covering..
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Re: Investment Strategies

Postby bertyeo » Wed Mar 11, 2009 12:03 am

in theory, prices fall further after rights issue
only bonus and splits then prices fly up

correct me if i m wrong
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Catching a Falling Knife ( or Falling Safe )

Postby winston » Sat Jul 11, 2009 8:00 pm

I think it's time to also start another controversial thread :P

I borrowed what Heng Heng has to say about Averaging Down ..

========================================================

by HengHeng » Thu Jun 25, 2009 7:55 pm

cannot like that say leh ..

i kept 10lots of citi at 3 bucks i thot cheap .. then i see citi at 1 buck .. wah i tell myself mai tu liaoz .. wack 50lot .. to me i think at most lose 80k nia .. but basically if never average . .now still suck thumb leh ..


at that time i never had enough foresight to wack harder ... if not .. i can wait and collect dividends for the rest of my life .. LOL
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Re: Averaging Down on Losing Positions

Postby kennynah » Sat Jul 11, 2009 8:14 pm

generally, to me, averaging down on a losing position is a losing proposition....

there are other better ways, using options to mitigate a losing trade that does not add on further risks...which i will consider employing, rather than outright pile onto an existing losing position...
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Re: Averaging Down on Losing Positions

Postby millionairemind » Sat Jul 11, 2009 8:33 pm

I just have one word - DON'T... :P

Yes, I understand ppe. do it... HH definitely made a bundle...

Let me flip around and ask another question - What if it does not work out?? History is littered with stocks that went down and never came back up..

Let's think Citi for a moment. If you thought $25 was cheap, how about $20?? $15?? $10?? before it hits $1.. one would have dropped dead on the golf course.

Lets not go too far... how about a former darling Sino Env... It was once close to $4.. and now trades at 9cts... How much can you afford to average down??

If that's not enough, how about SWIBER? Peak $3.80.. now less than 80cts...

Sorry har.. to majority of the traders/investors, it might not be wise to average down.. ppe. like HH has got lots of years of experience... I guess he knows what he is doing...

I don't know what I am doing... :D So I don't average down. :mrgreen:
Last edited by millionairemind on Sat Jul 11, 2009 10:20 pm, edited 1 time in total.
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Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: Averaging Down on Losing Positions

Postby winston » Sat Jul 11, 2009 10:16 pm

The discussion below applies to Equities only and not to highly leveraged vehicles like Warrants & Futures:-

Averaging Down has been a source of my biggest mistake as well as a source of my biggest profit ..

Biggest Mistake is what MM described above. Where's the bottom ? Just when you thought that there's a bottom, there's a new bottom. However, I thnk that I made that mistake when I was blindly averaging down. If I have done my homework, I would have noticed that business fundamental have detiorated and I would not have averaged down blindly..

Biggest Profit is as follows:-

When one is averaging down on a losing position, it means that one did not cut everything in the first place.

In my case, I normally dont cut everything if a stock's fundamental is intact, even though the market direction could be downwards. That's because I want to continue to follow it's story. I want to buy later when it becomes very cheap..

If I cut everything and dont have a position, I dont have Sensory Acuity. I dont notice it's price range, it's trading volume, it's earning results, it's competitor' results, insider buying or selling etc.

So right now, I do the following:-
1) Have a mental Stop Loss
2) Depending on the situaton, I may cut a portion when the Mental Stop Loss is exceeded
3) Continue to monitor it's story, it's competitor's story, announcements, insiders buying and selling etc.
4) Weekly Decision on whether it's fundamental is intact. If not, then sell another portion or the rest
5) Constantly ask myself whether my money is being put to good use on this counter or to switch to another counter or Aset Class or Currency or Industry ..
6) If it's business fundamental is intact and it has dropped a fair bit, I may start averaging especially when I see the market trending upwards

Again, I try to control my risk by Position Sizing rather than thru a Stop Loss
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