Sunday 28 October 2012

To invest or to trade.

 

Like many other ppl who trade, the thrill of making huge profits within a short span of time intoxicated me.Somehow is a addiction,like taking drugs,once we get the hang of it ,we cant shake it off.

For a while, i was obsessed in making risky trades and it did reward me well but sometimes i got whack down too.

However it gave me a new perspective on how we should grow our money in a sensible and conservative manner.

I will like to share 2 of my speculative trades here;Genting SP & UPP.


Genting SP,the well known stock for punters.I short(sell first) the stock at $1.77 and cover back (buy back)at $1.74.

A gain of $0.03 gave me a net profit of $2070.45 in a duration of 1 hour and 14 mins.Of course,there are seasoned traders who can earn more than this.Now we move to UPP.
 
 
 
I bought UPP at $0.425 ,hoping it will rally up but it did not.To cut loss ,I sold off at $0.405.

A loss of $0.02 resulted a loss of $2264.21 in a duration of 1 hour.

From above, only one have huge deep pockets to burn,if not the frequent trade  that goes against us will make us go bust very soon.We hear a famous quote from seasoned traders "Cut loss fast & Let profits run".There is truth in it but to execute it is not a easy task and it will need a decent capital to absorb the losses.

Monday 8 October 2012

Interpretation of U.S unemployment rate

U.S had released it's latest unemployment rate at 7.8%.For the past 44 months,this is the first time the figure had reached below 8%.

Though the numbers look nice ,there is a flaw in the caculation.There are 2 main areas to take note when interpretating the unemployment rate.
First,we look at how U.S unemployment rate is calculated.

                      Number of unemployed & had been actively looking for jobs
---------------------------------------------------------------------------------------------------------x 100
Total Labour force(employed & unemployed who had been actively looking for jobs)


1)The figure does not include the number of unemployed people who give up finding jobs after 4 weeks,resulted them to left the labour force thus it will show a lower % in unemployment rate.

2)The figure does not include the number of ppl who are unemployed and are not actively looking for jobs for the past 4 weeks who enter into the labour force.

For point 1 ,we use an example to illustrate:
Total labour force(employed & unemployed who had been actively looking for jobs) = 100million
Number of unemployed & had been actively looking for jobs = 10 million
Unemployment rate = (10 / 100) x 100 = 10%

If the economy is deteriorating ,the number of unemployed who had been actively looking for jobs for the past 4 weeks will give up hope and stop searching for jobs.And assuming the number is 1 million people left the labour forces.
Total labour force(employed & unemployed who had been actively looking for jobs) = 99million
Number of unemployed & had been actively looking for jobs = 9 million

Unemployment rate = (9 / 99 )x 100 = 9.09%

So we will get a lower % in unemployment rate even when the economy is worsening.

For point 2,
If the economy is expanding,the number of unemployed who had not been actively looking for jobs for the past 4 weeks enter into the labour forces to search for jobs is 1 million people.

New Total labour force(employed & unemployed who had been actively looking for jobs) = 101million
Number of unemployed & had been actively looking for jobs = 11 million
Unemployment rate = (11 / 101)  x 100 = 10.89%

An increase in unemployment rate even though the economy is growing!

We can conculde that the caculation of the data did not consider the number of unemployed who have been actively looking for the jobs for the past 4 weeks who left the labour force and who have enter into the labour force thus it will show a conflicting result.