Buy on hope, buy on fear, sell on clarity

Blog entry #2:

I love playing poker and many traders told me that the game and trading is very similar.  I never understood what that really meant until one day it hit me.

The stocks are always selling at market price based on what it knows as of that moment (being priced in), and what we buying is the future (in poker terms, the flop, turn and river).   Hence we are betting the probability on what will happen in the future.

For example, in September (before the fed announcement), people were unsettled due to not knowing what the fed will do.  From the various articles and survey on financial medias such as CNBC and Bloomberg, they all leaned towards to QEIII (65% to be exact).

I thought to myself, i have a 65% chance to make money tomorrow and what could i buy to maximize my bet.   I immediately thought of buying gold and i bought 1818 (zijin mining) based on it is the miner that mainly mines for gold.

My bet paid off and it went up 13% the next day.  (this is one of the better bets i have made)

I believe in stocks like poker, you can't win every bet you make, you need to know how to maximize a situation and cut loss when your hands not good anymore (still trying to master how to fold losing hands).  As long as we make more winning bets then losing bets then we can consistently profit from the markets.