The event in August that I am most wary of right now
Hello, this is Koyama.
The other day,about three months since the last time,
we held the Stock Academyexperience seminar.
Because of the Covid-19 situationwe had been unable to do it for a while,
so this is truly the first experience seminar in a long time.
About 30 peopleparticipated.
To everyone who participated,just to be sure
we conducted temperature checks,
and everyone wore masks during the seminar.
.
Because of Covid,
there were some who feel more anxiety about the future,but
on the other hand,there were also people who saw the current market as a
chance because the market is moving a lot right now.
This time,many experienced investors participated,
and it seems that the more experienced,the more they see it as a chance.
Indeed,volatility is high,
and as prices move a lot now,
it is also a chance to make significant profits in a short period.
But as much as thatthe risks are also greater,
it will be high risk and high return,
but if you manage your funds properlyand trade,
there is certainly a higher likelihood of opportunities.
Now,in this current market situation,
what am I thinking when I trade?
This time,I will share my sense of the market.
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The eight-month event I am most wary of
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First of all, as I always say,
I do not trade based on predictions.
I do not take positions just because I think it will go up or down,and forego trading on guesswork.
Rather than market forecasts,
what is more important is
"how to prepare for the worst-case scenario."This is overwhelmingly more important.
For the positions I hold,
what will I do if the market moves unfavorably?
This is something I always keep in mind when trading.
However, I also
think about
“what will the big trend be?”
I will hold both buy and sell positionsand trade using a balancing approach, but
which position to prioritize, buy or sell,I change that strategy
according to the market flow.
So currently,how do I view the market flow?
The discussion is that
one big point is an event planned for August to September.
That event is
the domestic companies’earnings announcements.
There was an earnings release in May,
but the figures announced then
did not fully reflect the impact of the pandemic.
In the next earnings announcements,
the effects after the state of emergency will
be properly reflected in the numbers.
Since the economy had stopped,
most companies, with some exceptions,are expected to show considerable earnings deterioration.
Also,in the West
the situation is more severe than in Japan,
and cities were locked down,
so, for example, the damage to export companies is unavoidable.
While it may be "priced in,"
there is a possibility that after earnings, stock prices may not fall further,
but
the next earnings announcements overall are unlikely to be highly hopeful,
and I believe that market sentiment will not improve at least yet.
Not only earnings,
but concerns about a second wave of Covid-19
cannot be discarded yet.
Compared to other countries, Japan has kept the number of infections down,
but on a global level
the infection risk still exists.
In particular, conditions in India and Brazil are worrisome,
and the resulting economic losses cannot be ignored.
Regarding US economic indicators,
they have not been as bad as expected,but
even with the Fed pumping money so much
it is clear that the US economy is not a favorable situation.
Of course,depending on future vaccine development and
other factors, market conditions could change,
but for now I amtrading with a view to the August earnings releases
while keeping a wary eye on stock price declines.
In other words,the trading style is biased toward selling.
Even if I hold a short position
and am facing unrealized losses,I will not rush to deal with it.
Of course,balancing with other positions also matters,
and there are positions that should be closed quickly,
so it varies case by case,but the basic stance is to favor selling.
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From which perspective does trading yield
profit?
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Now, finallya little more concrete
points for making a profitwill be shared.
As I have mentioned in this newsletter before,
the key is
to consider the role of your positions.
This is the point.
Even though the stance is “selling-dominant,”that does not mean
to hold sells in a haphazard or unplanned way.
We position with a clear goal in mind.
For example,
“Is this a position to greatly extend profits
or a position to hold for the long term?
Or,
is this a position to take profits in a short period?”
This is considered when entering.
Always think two, three steps ahead,
“What is the purpose of holding this position?
Will I hold it long-term?Or settle it quickly in the short term?”
These are the things I consider.
Andwhat was decided at the beginning
is kept and turned into profit.
When playing shogi,
you think ahead like, “If I move the rook here, it will affect later…”
and you always consider future implications,and the same applies to trading,
holding positions with future outcomes in mind.
If you think two or three moves ahead,
you may say,
“I know this, but what is the purpose of this position?”
and whether to hold long-term or settle short-term.
There are very few who actually practice this and profit from it.
Most people enter with only thoughts like,
“If I hold here, the stock price will rise and I’ll profit.”
Even just practicing
“consider the role of the position”
will make a big difference, so please try to be conscious of it.
With that, thank you for watching until the end today as well.
Thank you for reading.
Keizo Shimoyama
