Go the Opposite Way with Market
1. Be Greedy When Others are Fearful
I believe most of the investors heard this famous quote from Warren Buffett before, he said: “Be fearful when others are greedy and Be greedy when others are fearful.” But, how many of us would actually able to execute this? What most of us practice is “Be fearful when others are fearful and be greedy when others are greedy.” ![]()
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And the result is, we are nothing compared to Warren Buffett, which mean his success in stock investing had proven his quote. ![]()
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I always believed in this quote, but it was extremely hard when I try to execute it. We human beings are emotional, and stock market is where the battle of human’s psychology took place. Most of the time, I will tell myself that “Do Not Enter when Excited![]()
and Do Not Exit when Panic![]()
”. This is because emotion will affect my decisions which could lead to my gains or losses.
This applied during the earning seasons as we could see the PAST earnings of the companies and also the prospects of the companies which will it be reflected in the FUTURE quarter reports.
Most of the times there are 3 outcomes reflected on stock’s price after announcement of earning reports which are:
- Beyond Expectation: Price goes up
- Within Expectation: Price goes down and sideway
- Below Expectation: Price goes down
For my trading, if my preference companies give a within or below expectations earning results, if they are potential in future and moving uptrend, I will wait for the fearful throw which I will collect my preference stocks. In contrast, when the stocks I’m holding is going up and people being hyped on it, I would ride the trend and take profit by batches.
For instance, $Apple(AAPL.US$ had gave a bright quarter report this week which we saw double digits growth. However, they concerned about the chips shortage which could slow down their revenues. As such, the concern bring down the stock price, and I had yet to see any fearful throw of this counter so I will wait for it to happen.
- Beyond Expectation: Price goes up
- Within Expectation: Price goes down and sideway
- Below Expectation: Price goes down
For my trading, if my preference companies give a within or below expectations earning results, if they are potential in future and moving uptrend, I will wait for the fearful throw which I will collect my preference stocks. In contrast, when the stocks I’m holding is going up and people being hyped on it, I would ride the trend and take profit by batches.
For instance, $Apple(AAPL.US$ had gave a bright quarter report this week which we saw double digits growth. However, they concerned about the chips shortage which could slow down their revenues. As such, the concern bring down the stock price, and I had yet to see any fearful throw of this counter so I will wait for it to happen.
2. Downtrend, Sideway, Uptrend
However, not every fearful throw is worth the purchase or entry. For me, I will only place my entry during Uptrend and I do not do any Short Selling. So how do we differentiate when is downtrend, sideway or uptrend?![]()
It’s very simple, just open a particular chart of an index or a stock, zoom out to around 1Y timeframe and the trend will be very obvious.
However, not every fearful throw is worth the purchase or entry. For me, I will only place my entry during Uptrend and I do not do any Short Selling. So how do we differentiate when is downtrend, sideway or uptrend?
It’s very simple, just open a particular chart of an index or a stock, zoom out to around 1Y timeframe and the trend will be very obvious.
-Downtrend
As the chart showed, the index is in a downtrend, whenever I saw this trend, I won’t be considering any entry to this. Although the small rebound in between may earn some small profits but for me, the profits is low and risk is high. So it’s a big No No for me. ![]()
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- Sideway
Well sideway trend is much better than downtrend right? As the $Taiwan Semiconductor(TSM.US$ chart showed there is a solid support and the rebound is much higher than during downtrend, this is quite a decent trades if entry during correction and exit during rebound. For me, this is a better choice than downtrend, reward and risk are acceptable, but I’m looking for better rewards.![]()
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- Uptrend
Now my most favourable trend, the uptrend!![]()
As from $Nasdaq Composite Index(.IXIC.US$ chart, if there is any fearful throw during a uptrend, it will be a golden opportunity to earn big!!! As from the chart, during the uptrend, any correction is minor follow by major upwards. This is always the trend I’m looking for!!! The fearful throw during uptrend is rare, but it can appear few times in a year, and I am more than happy to wait patiently before open my fire. ![]()
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3. 1:3 Risk Reward Ratio
The earning season is very useful to examine the financial status of a company and how the market react to it. The financial reports update me how is the company doing for the past 3 months and I will examine is the current reports fit with previous prospects. In my trading journey, I had always emphasize on risk reward ratio. Before I click on the Trade button on MooMoo, I would had plan my strategies in advance. For instance, where shall I stop loss if I’m wrong about the fearful throw? What is my minimum reward I want to achieve?
For sharing purpose, most of the time I would plan a 1:3 risk reward ratio, which is stop loss at 10%, take profit at least at 30%. I trained myself to be so discipline that I would not hesitate to stop loss when it reached my stop loss point, but for most of the people, they think that paper loss is not a real loss, but ultimately, reluctant of stop loss will cost your time opportunities and capital opportunities, where you can invest the chips on a better stocks.
What about timeframe? I don’t limit it, as long as it is moving upwards, I don’t mind it takes 1 year to reach 30% as I’m so much comfort with this type of trading life. I don’t have to keep watching the movement of bids every seconds, I can enjoy my own life and have better mental health. For now my capital is still small, but I can see positive movement in my portfolios, which I will keep repeating it and grow my wealth.
The earning season is very useful to examine the financial status of a company and how the market react to it. The financial reports update me how is the company doing for the past 3 months and I will examine is the current reports fit with previous prospects. In my trading journey, I had always emphasize on risk reward ratio. Before I click on the Trade button on MooMoo, I would had plan my strategies in advance. For instance, where shall I stop loss if I’m wrong about the fearful throw? What is my minimum reward I want to achieve?
For sharing purpose, most of the time I would plan a 1:3 risk reward ratio, which is stop loss at 10%, take profit at least at 30%. I trained myself to be so discipline that I would not hesitate to stop loss when it reached my stop loss point, but for most of the people, they think that paper loss is not a real loss, but ultimately, reluctant of stop loss will cost your time opportunities and capital opportunities, where you can invest the chips on a better stocks.
What about timeframe? I don’t limit it, as long as it is moving upwards, I don’t mind it takes 1 year to reach 30% as I’m so much comfort with this type of trading life. I don’t have to keep watching the movement of bids every seconds, I can enjoy my own life and have better mental health. For now my capital is still small, but I can see positive movement in my portfolios, which I will keep repeating it and grow my wealth.
In general, these are parts of my trading ideology during earnings season where we can pick the strong and disqualify the weak. We want to be a predator instead of prey in the stock market, so we shall act like a predator, wait patiently, move quietly, and attack once the timing is right.
Lastly, thank you @moomoo Event for another great even during this earnings season. I’ve learnt a lot on this platforms from all the sifu-sifu here. Kudos to moomoo team!!![]()
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Disclaimer: All the information shared above is served solely as the purpose of education and sharing. Please be informed that the information shared is not investment advice and I do not recommend any buy/sell calls. Please consult your financial advisor prior making any investment decision.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Investorgator : Thanks for sharing your insight with specific examples. I have just started my personal investment journey and find that even close friends are often reluctant to share their experience. So this is useful for me to learn other 's perspective at this critical milestone of the corporate earnings. Whilst your style may not be mine in the end, I thank you for your selfless sharing.
101657140 : Thank you. That was a great read
hock lor : Good
Kat1015 :
jexs : thanks for this!
jasonlwp : Good read
jasonlwp jexs: like
102930057 : Informative guide. Thanks!
vpmyoges : Good
102799731 : good n insightful sharing
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