For those that may not know, this means after experiencing a lot of pain day after day holding onto losing positions that just keep getting worse the person finally closes out these positions in order to relieve the pain.
It can be quite liberating to throw in the towel and let it all go. The positive reinforcement a person gets from the ease of pain makes them feel like it was the right decision to relieve themselves of their positions.
The reason why I think it is significant is because it usually means the market has bottomed.
I also found it interesting because I found myself selling a lot of crappy positions I had held.
Whether its the bottom or not today will be telling.
What did I do today...?
Well, firstly I dumped IGC (the stock I got long yesterday on the close). It was at a miniscule profit (whoopdy-do). It was basically a scratch trade because the SPI was coming off and the buyers were not queuing up after yesterdays impressive rally. It led to the right decision ultimately so I am happy sticking to my trading plan (which is selling on open if there is no excitement).
It was also interesting to note that RCH, OMH and MUR also did nothing today - so I was fortunate to have passed them up. Overall - it was a success as I avoided putting myself in a bad situation.
RWD - a stock I sincerely believe in, was also smashed today. RWD is a potash stock. In fact it is the only stock in Australia that has a listed potash JORC. I am very bullish potash. Although this is the case RWD may have logistical problems because it is in the middle of Western Australia. Hence transportation of product may be difficult. Nonetheless these deep brine salt lakes (in this case Lake Dissapointment) are very rare to find in the world. Compass Minerals (a Canadian company) has a startling similar resource and is valued with a market capitalisation of over A$2billion. RWD is being priced at just over $100million. The difference in this case is that Compass is already producing - however the scope for RWD given this appears to be bright.
I was fortunate enough to bail on RWD just before the smashing. A relatively big sell order for the market depth appeared before the open which was well below the market. I figured he had some sort of agenda (perhaps insider?) to offer it so well below the market. Moreover he looked legit as he was not pulling his offer in the final minutes of the match. So I went below him in the final seconds of matching and scratched my trade before the open. Overall, it was good execution, and I am pleased with myself.
I scrapped more CWK. Perhaps it was my own personal "capitulation". I realised yesterday and today that I bought far too many as it continued to fall (a cardinal sin I now understand and appreciate). I will remember to not add to my longs as its falling unless it was predetermined and that amount I am adding is bearable if the position continues to turn sour. Because of this mistake I took a far larger loss than I should have. It has ruined my past 2 months work. Tuition can be very expensive in the markets, but I will try my best to make the most of it. In summary, although the fundamentals for CWK are very attractive I had far too many for the type of buy it was intended to be (a pure fundamental play). I can always buy them back if market sentiment turns favourable again, but for now I prefer the cash combined with a lesson hard learnt to boot.
Finally, I cut some POZ at a small profit. I figured I better reduce my position since I think the market is about to turn very sour. No matter how hard the fundies tried to rally our markets they always come back to offer it - it is very concerning. Although it is generally a mistake to sell out for such small profits I was taking market risk into consideration rather than the desire to take my profits off the table (which is also a cardinal sin).
I still have POZ and CWK as I believe in their fundamentals, just a much more reasonable size for a market that has a large possibility of crashing.
Right now I am 85% cash.
This is what the market looks like right now. It was interesting what my colleague proposed:
"You know it is always funny to look back at previous market crashes and see this big nice rounding top right before the splat. Then you ask yourself 'why was anyone stupid enough to be long in that market when it was so obvious it was going to crash?' A child could look at it and tell you it was going down. Its definetly not rocket science."
The scary thing is I think he is right. Perhaps some traders (including myself) are being way too complex about the whole thing. Quite simply, it looks like the markets have a good chance of capitulating/crashing/seriously falling from here.
I am happy that my position in cash reflects my beliefs at this stage. I have learnt not to become too attached to my positions. Another cardinal sin is for a trader to let his positions dictate what his oppinions are and not letting his oppinions dictate his position. I am glad I have overcome this as it was a problem in the past. It disallows someone from thinking objectively about the situation.
I also went to my brokers outlet to ask if I can open up a short account. I dont think I will be able to profit from being long only in the future what is now obviously a bear market. They were closed as I arrived after 4pm... lazy paper pushes. Well I am a lazy paper pusher that finishes at 4pm as well so I can't really say that - we are the same breed.
I went for a long walk around the city after this passing up the earlier bus contemplating what happened today and what the future may hold for the markets. The images I conjured were up very bleak indeed.
Whether this is the bottom or not will be very interesting for me. I will watch and learn as much as I can.
Be careful out there and stick to your stops.
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