ROBOTS CAN MAKE MORE MONEY
November 4th 2008 00:00
The presumption, of course, is that robots cannot recognize fear or greed.
You cannot buy shorts at the Philippine Stock Exchange (well, that is true whether you want to buy a pair of short pants or you want to short the market) so, this newbie thought of figuring out a way on how to make money at the PSE while the market is falling.
Here is what he saw: It is as risky as hell, but he thought it could be done (maybe like day- traders and swing- traders do it. Ah, but those are professionals). If he were a robot he’d have made money. Since he is not, he didn’t really do it (all he did was buy cautiously with what little money he had), but he thought he could have done it, and he could have probably made money in the process- probably - If he were a robot.
First, the usual disclaimer: This is a newbie’s post which, today, is featuring a newbie’s observation, which in NO WAY is a recommendation of any sort in playing the market. This newbie does not engage the services of a broker, nor dId he get any professional advice from anyone for this post, and therefore, his opinions do not necessarily convey any useful truth.
All this newbie did was to observe.
He noticed that the price of the shares of one of the listed banks is not swinging as wildly as the others - it was just hovering in the P40 range. The other banks admitted to having exposure with Lehman Brothers. This one didn’t. The price of the PSE shares was down to P350.00. He knew that it went to around P1, 500.00 in 2007 before the world market plunge. Then, there’s that food chain which share price has been moving in a rather wide range. The widest was from P36 to P52.
He saw a few other stocks that weren’t as “panicky” as the rest of the shares in the market, but for the sake of brevity, let’s limit his observations to these three stocks.
When the world markets took a deep dive on October 28, 2008 the price of that bank shares dropped to P19, the PSE was beaten down to P180 and the food chain slipped to P39. Trading was suspended when the Philippine Stock Exchange fell by 10 percent but, the slide continued to 12 percent when the trading resumed 15 minutes later.
This was the time when everyone was running in all directions looking for an exit. Anywhere you look, the market was falling. It was true in Asia, the Americas, Europe, Africa. It was scary, but a robot probably wouldn’t be scared.
October 28, 2008 was seven (7) days ago.
Let’s skip to the present. The bank shares which price went down to P19 closed today at P42. The price of PSE shares which fell to P180 rose to P226 and closed today at P216. The food chain was unchanged today at P46.
This newbie is not good with math, but that bank could have given him more than 100% income had he bought its shares then and sold it today. The PSE could have turned in a generous 25%, and the food chain, something like 17% - all in seven days!
A newbie could not expect to get the maximum of those income potentials but a 15% profit in 7 days wouldn’t be too bad. That is, if he was able to trade like a robot and did not recognize fear or greed. At least, that’s how this newbie thinks.
The market almost always bounce back after a big fall doesn't it?
But then, someone has already said that "not because the sun has always risen from the east, it will continue to do so everyday" or something to that effect. In fact, in some countries, the sun do not rise everyday. Still...
Now, how does one becomes a robot…?
Illustration pic source: Wikipedia
You cannot buy shorts at the Philippine Stock Exchange (well, that is true whether you want to buy a pair of short pants or you want to short the market) so, this newbie thought of figuring out a way on how to make money at the PSE while the market is falling.
Here is what he saw: It is as risky as hell, but he thought it could be done (maybe like day- traders and swing- traders do it. Ah, but those are professionals). If he were a robot he’d have made money. Since he is not, he didn’t really do it (all he did was buy cautiously with what little money he had), but he thought he could have done it, and he could have probably made money in the process- probably - If he were a robot.
First, the usual disclaimer: This is a newbie’s post which, today, is featuring a newbie’s observation, which in NO WAY is a recommendation of any sort in playing the market. This newbie does not engage the services of a broker, nor dId he get any professional advice from anyone for this post, and therefore, his opinions do not necessarily convey any useful truth.
All this newbie did was to observe.
He noticed that the price of the shares of one of the listed banks is not swinging as wildly as the others - it was just hovering in the P40 range. The other banks admitted to having exposure with Lehman Brothers. This one didn’t. The price of the PSE shares was down to P350.00. He knew that it went to around P1, 500.00 in 2007 before the world market plunge. Then, there’s that food chain which share price has been moving in a rather wide range. The widest was from P36 to P52.
He saw a few other stocks that weren’t as “panicky” as the rest of the shares in the market, but for the sake of brevity, let’s limit his observations to these three stocks.
When the world markets took a deep dive on October 28, 2008 the price of that bank shares dropped to P19, the PSE was beaten down to P180 and the food chain slipped to P39. Trading was suspended when the Philippine Stock Exchange fell by 10 percent but, the slide continued to 12 percent when the trading resumed 15 minutes later.
This was the time when everyone was running in all directions looking for an exit. Anywhere you look, the market was falling. It was true in Asia, the Americas, Europe, Africa. It was scary, but a robot probably wouldn’t be scared.
October 28, 2008 was seven (7) days ago.
Let’s skip to the present. The bank shares which price went down to P19 closed today at P42. The price of PSE shares which fell to P180 rose to P226 and closed today at P216. The food chain was unchanged today at P46.
This newbie is not good with math, but that bank could have given him more than 100% income had he bought its shares then and sold it today. The PSE could have turned in a generous 25%, and the food chain, something like 17% - all in seven days!
A newbie could not expect to get the maximum of those income potentials but a 15% profit in 7 days wouldn’t be too bad. That is, if he was able to trade like a robot and did not recognize fear or greed. At least, that’s how this newbie thinks.
The market almost always bounce back after a big fall doesn't it?
But then, someone has already said that "not because the sun has always risen from the east, it will continue to do so everyday" or something to that effect. In fact, in some countries, the sun do not rise everyday. Still...
Now, how does one becomes a robot…?
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