If you’re losing money in stocks, determine the role of each position and stick to it.
Hello, this is Koyama.
In a previous newsletter,
we talked about "high-yield bonds."
What are high-yield bonds?
In simple terms
they are bonds with low credit ratings and high risk
“High-yield” = “high coupon” meaning, but
they carry high default risk compared to other bonds.
That is, high risk, high return.
Lately, the risk of high-yield bonds has increased even more.
Companies issuing high-yield bonds
are said to be many in American shale oil companies.
There is also saying,
“10% of high-yield bonds are shale companies.”
Butthose shale oil companies are struggling
due to the drop in crude oil prices.
Last week, Whiting Petroleum,
an American producer of shale oil,
went bankrupt.
If crude prices remain low,
more than half of shale companies may go bankrupt
according to some speculation.
Going forward, if shale companies start to fail one after another,
the high-yield bond market could be shadowed with clouds.
While lower oil prices and cheaper gasoline may be welcome in daily life,
we are not in a situation to simply rejoice.
Oil prices,
and the movements of the US, Saudi Arabia, and Russia
are closely watched.
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Why not rethink your trading approach?
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As you can see, recently there has been a lot of
news that stirs anxiety.
Words like “COVID-19,” “infection,” “crash,” “bankruptcy,” “unemployment”
and other unpleasant terms fill the air.
Many people’s hearts grow tired from the negative news delivered daily,
don’t you think?
On top of that, stock prices swing violently.
Many traders’ spirits grow tired as well.
In a long trading life,
if you want to earn over a lifetime,
reducing daily mental fatigue even a little is an important factor.
Reading the news and gathering information isn’t necessarily bad,
but
if you are being driven by the news and trading based on it,
why not rethink your trading method?
Consider shifting to a winning method
instead of chasing negative headlines.
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“But how?”
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What is the way to win
and how many are seeking it as well.
So today as well, without being swayed by the news,
I would like to share hints for
winning in stock trading,
but in my school, the Stock Academy,
we often use the term “settlement patterns.”
We talk about how important it is
to know the settlement patterns.
The meaning of “settlement patterns” is
as the words suggest,
Ultimately, how you settle matters,
and being able to imagine those patterns
is extremely important.
In practice, at Stock Academy we give detailed lectures on settlement patterns.
However, even after this,
you may still wonder
“Why are settlement patterns so important?”
There will be people like that.It’s not meaningful if you don’t understand why.
So here, I will explain why settlement patterns are important.
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Think backward from the goal scene.
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On a side note,
recently I was lounging and reading a manga.
Do you know the manga “Aoashi”?
It’s about a boy named Aosaki Suisei growing up
It’s hard to put down once you start reading,
in a Japanese youth soccer setting.
and in volume 6 there is this line.
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Therefore,
think backward from the goal scene.
This pass is meant to imagine what goal…
you envision when you deliver it.
Think about all of that.
Only after calculating that,
does the first “killer pass” emerge.Kobayashi Yu goes
“Aoashi 6 (Shogakukan Inc.)”
2016-08-03 first edition, first print
P.197
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The line about killer passes in soccer,
it’s a speech that applies to stock trading as well.
“How will you settle to achieve a profit?”
That goal image should come first,
and to pursue that goal,
what positions should you hold,
is crucial in stock trading.
For those who are only interested in buying stock and selling when prices rise to earn money,
it may be a meaningless discussion, but
in my case,
I use a method that manipulates the balance of long and short positions
to capture profits,
and in this method,
I always have a clear image of how I want to settle in the end,
and to reach that,
I consider what positions to take.
This is crucial in stock trading.
That’s why, at the start of trading,
knowing the “settlement patterns” is important.
If you don’t have a goal,
your path will be unclear.
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Clarifying the roles of positions
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And when you actually hold a position,
you must decide what role each position will have,
and keep that in mind.
Few people consciously assign clear roles to their positions, but…
In soccer, just as GK, MF, FW, DF have clear roles,
stock trading also requires assigning clear roles to positions.
And once you assign a role, you must stick with it.
In a soccer match, if a defender suddenly becomes a forward,
the game becomes a mess, doesn’t it?
When learning typical investment methods,
you rarely hear discussions about “roles of positions.”
It may be hard to understand,
but
even during recent crashes,
I have been sharing methods that keep me consistently profitable.
So please, today as well,
thank you for reading until the end.
Keizo Shimoyama
