Tuesday, October 1, 2013
Stock market as an unregulated online casino?
The two casinos in Singapore are regulated by the CRA, with restrictions on locals such as entry levy and background checks. I think they are some who take trading as an online casino.
I was following a few forums, and was quite surprised by the interest shown in penny trading. There are few observations that shown the recklessness of investors and the fact that they treat the stock market as a casino.
1) Many of the posts are not backed by TA or FA (if there is any FA to begin with anyway).
2) When the price of a penny does run, instead of taking some profits off the table, many are screaming a higher target price. Many do not realized the Law of gravity applies in stock market too.
3) When price start to correct from their peak, many new forummers seem genuinely surprised or disappointed. I mean, I do not know how much a penny can run, whether it is a 2 baggers or 10 baggers, but as it goes up, I will be very wary of the risk-reward profile is constantly changing.
4) Penny trading attracted a lot more attention, many are looking for instant gratifications.
5) They believe if the price fall, after they buy it, they make a wrong decision, and if the price rises, they have made a right a decision. This is a myth Peterlynch wants us to be aware of. For this statement to be true, you must be buying at the bottom and selling at the peak. If you can do that, you beat Warren Buffet hands down, and I think he will need to learn from you.
Posted by Sillyinvestor at 10:38 PM