SET Day trading versus a business

[Aussieroaming]

A few months ago I posed the question ..re day trading on the SET versus a business I.e. Money in a business versus risk on the SET, what would be the best investment based on my wife's success. I found it hard to justify buying a business based on her SET success.

I stated that my wife earns more than 100 000/month with an investment in the Set of abt 2 000 000. She now has about 3.5 to 4 mil in shares, hence her monthly gain is increasing.

Someone asked for a follow up on the monthly profit.

The answer..she has exceeded 100 000 every month since May, with the best month so far being 190 000 and the worst being 37 000. Average is about 150 000 now with September expected to be easily over 200 000 as she intends selling as the Set is due a re- set mid September. She already has 150 000 profit for current month.

Why do I offer this follow up? Only to encourage people that the SET can be used to derive income for farang if you are careful, patient and not greedy. Some of my wife's trades earn less than a grand, but she also rips out some corker deals.

Good luck and I hope some of you wisely invest to gain.

Cheers.

[falkan]

I guess it's more people than me that is curious in her day trading? a daily or weekly buy/sell update would be interesting to read here, my 300k gives me 40-60k a month on SET..

[Aussieroaming]

Yes I could probably do that. She records all of her transactions in a notebook. Only thing is it's in Thai..

40 - 60 a month is very good.

I was amazed at how volatile the market is

[fletchsmile]

Yes it's possible to make good money for some people day trading in the SET. It's also possible to lose good money too, so unlikely to be an option for many farang, and to be honest it's more likely they would be better off day trading markets they are more familiar with. It may be suitable for some though.

In terms of returns:

- I'm not particularly surprised she's made money every month since May. The market has gone up every month since May so every man and his dog would likely be making money - a rising tide raises all boats and that. I like the quote though about let's see who's swimming naked when the tide goes out. i.e let's see how well your Mrs is doing in a bear market

- SET is up about 10% end May - end August. That would be about THB 200k total or a tad under THB 70k a month. Suggests your wife outperformed the large cap SET index on average

- Now here's a slightly more interesting stat. The Thai mai index was up +42.5% end May to end August. That would be THB 850k or a tad over THB 280k a month vs your wife's 150k That would suggest your wife has significantly underperformed the mai in the month's since May.

So a few months in isolation in rising markets without understanding the risks and actual markets won't add a lot. If she's been trading in smaller cap companies she's done relatively poorly, if in larger then her alpha above the market is better.

On the question of her records being in Thai I find that bit hard to believe. She will be trading the tickers symbols in roman alphabet as that's how they're traded. eg BBL. Most normal traders therefore log the tickers - very strange if she doesn't. Similarly amount is in English numbers not Thai. So you should be able to monitor the basics of amounts and tickers/ company names easily.

BTW You haven't come back yet with how she performed in 2000, 2004, 2008 bear markets

So not saying that people can't make money day trading. The gaps in your though feedback include the consistency over long periods, and when the tide unexpectedly goes out, as well as understanding what risks she's taking. Without knowing what she traded and the risks and without knowing years like 2000/4/8 she might have been better off with a dartboard.

But yes it is possible to make money if you understand what you're doing. I remember your original post. So my follow up would still be: unlikely you could do this as you haven't yet grasped the understanding needed and how to look at this, you'd be better off giving your money to your wife, and yes it is possible she's on the right path - but really not enough info in your posts, and you still don't really know for certain what she's telling you is real as you say all the records are in Thai - which is odd for an experienced trader.

Cheers

Fletch

Edited September 6, 2014 by fletchsmile

[stockinvestor]

Great answer here from fletchsmile.

Just in addition I have attached a long term graph with many painful down periods. In the past few years there was mostly only one way, up.

Can you make money in Thai stocks? Yes, you can, but only if you know what you are doing. Even than there will be years with losses. In the long term maybe 10-15% or even 20% per year are realistic, sometimes much more, sometimes less. You can have a lucky

period in between and double your money in a short time if you bet on the right small cap stocks shooting up, but this does unfortunately not work in the long term over years.

It is definitely better than to invest in a beer bar business in Pattaya.....

Edited September 6, 2014 by stockinvestor

[huanga]

Completely agreed with Fletch. In an uptrend market, anyone who bets will look like a stock guru no matter what. But only in a downtrend, you will then know what you are really made of. I just caution you (and your wife) to have a firm exit strategy in place. it's never about how you enter the market but how you exit it!

In a stock market, there are only winners and losers. Capital preservation is always the key to eventual success. Moreover, be sure that you can embrace the dark path as you embrace the lighted one!

[Asiantravel]

This is a graph of the US market that was in a newsletter the other day. when the US market took a dive in 2008 /2009 losing almost half, by how much did the SET fall ?

Edited September 6, 2014 by Asiantravel

[fletchsmile]

Not quite sure where you're going with that, and not quite so easy to read the graph as to exact dates.

On the numbers I keep tho' for month-ends/ opening of a month for quick reference:

- S&P was at 1,468 on 31 Dec 2007 = start 2008, and the lowest month-end in 2009 was Feb at 735 so fell 49.9%

- for SET the numbers for those dates were 431.52 and 858.1 so fell 49.7%

Or are you saying you think we're heading for a 50% correction again on both S&P and SET very soon? Implying a fall in S&P is one thing. Implying SET will fall again by a similar amount is another. Bear in mind S&P rose nearly 30% in 2013 also while SET fell nearly 7%

Cheers

Fletch

Edited September 6, 2014 by fletchsmile

[Duff]

Indeed. US outperformed EMs for quite a few years. It's just normal that EMs have now started outperforming the S&P (China +30%, possibly just getting started, Latam +36%, India +40%, Thailand +37%...)

Thai stocks have been in a bull that started in January this year. The majority of people make money during a bull. Like the old Partridge used to say "Well, it's a bull market!". You should check how she performs during a bear or a market going sideways. This is when you'll know whether she can adapt her strategy and she's the real deal

[Asiantravel]

Not quite sure where you're going with that, and not quite so easy to read the graph as to exact dates.

On the numbers I keep tho' for month-ends/ opening of a month for quick reference:

- S&P was at 1,468 on 31 Dec 2007 = start 2008, and the lowest month-end in 2009 was Feb at 735 so fell 49.9%

- for SET the numbers for those dates were 431.52 and 858.1 so fell 49.7%

Or are you saying you think we're heading for a 50% correction again on both S&P and SET very soon? Implying a fall in S&P is one thing. Implying SET will fall again by a similar amount is another. Bear in mind S&P rose nearly 30% in 2013 also while SET fell nearly 7%

Cheers

Fletch

" Not quite sure where you're going with that, and not quite so easy to read the graph as to exact dates."

In 2008 the US markets falling simultaneously resulted in SET falling so I wouldn't think it is unreasonable to expect the same phenomena occurring again?. Today we are in a very globally interconnected world and there are even more potential risks from all kinds of directions and I just wonder how SET would withstand any of these potential shocks this time?. Geopolitical or financial. Some people are even warning of a Lehman style banking crisis in China.

[Dario]

To Aussieroaming:

I absolutely believe that. BUT: only very few people are able to make these kind of gains, maybe a percentage of 1-5% of all small investors. The rest is losing money. It needs a lot of experience, learning, rigorously applying the rules and no greed at all. My highlights from Monday to Friday I'm experiencing in the SET and the mai, an amazing stock exchange if you you know it very well. There is a lot of money to be made in the SET!

[Aussieroaming]

Dario, I agree.

I invest in Australia but Thailand is definitely different and doesn't always follow the normal trend charts.

[cocopops]

Yes it's possible to make good money for some people day trading in the SET. It's also possible to lose good money too, so unlikely to be an option for many farang, and to be honest it's more likely they would be better off day trading markets they are more familiar with. It may be suitable for some though.

In terms of returns:

- I'm not particularly surprised she's made money every month since May. The market has gone up every month since May so every man and his dog would likely be making money - a rising tide raises all boats and that. I like the quote though about let's see who's swimming naked when the tide goes out. i.e let's see how well your Mrs is doing in a bear market

- SET is up about 10% end May - end August. That would be about THB 200k total or a tad under THB 70k a month. Suggests your wife outperformed the large cap SET index on average

- Now here's a slightly more interesting stat. The Thai mai index was up +42.5% end May to end August. That would be THB 850k or a tad over THB 280k a month vs your wife's 150k That would suggest your wife has significantly underperformed the mai in the month's since May.

It's the case in other Asian developing markets too. The large-cap indexes are weighed down by shares issued by the big state-owned firms. Check out the FTSE Thai indexes - the large-cap has offered a really good return for the last decade or so, but the small and mid-cap returns are ****ing sensational.

Which goes a long way to explaining how the active managers manage to keep their returns consistently above the index here too...

The following fact-sheet only shows the 5 year returns. Can't find the ones with 10 years now... But from memory, the relative small/large-cap results were pretty similar for both five year periods.

http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue?issueName=SETSERIES

[fletchsmile]

They go in cycles. As you say tho this is one way an active manager can outperform a simple index.

If you look at the preceding 5 years tho it was pretty much the opposite story. Ftse large cap beat the ftse small cap in 3 out of 5 calendar years and ball park both were similar in the other 2. Not only did the large caps outperform in those 3 years they did by 20%+ in each of those years. When you compound those 3 years at 20%+ the ftse large cap will have been not far off doubling the small cap.

So 5yrs large cap outperformance in the first 5 discrete calendar years then 5 years small cap. Any active fund manager calling that ok would easily beat SET.

Cheers

Fletch

[cocopops]

They go in cycles. As you say tho this is one way an active manager can outperform a simple index.

If you look at the preceding 5 years tho it was pretty much the opposite story. Ftse large cap beat the ftse small cap in 3 out of 5 calendar years and ball park both were similar in the other 2. Not only did the large caps outperform in those 3 years they did by 20%+ in each of those years. When you compound those 3 years at 20%+ the ftse large cap will have been not far off doubling the small cap.

So 5yrs large cap outperformance in the first 5 discrete calendar years then 5 years small cap. Any active fund manager calling that ok would easily beat SET.

Cheers

Fletch

My recollection is no good then. Do you have a link? Thanks.

[fletchsmile]

I used the data you supplied in your pdf file to base the comments

2004/5/7 favoured the large caps and 2009/1012 favoured the small caps. Not much in the other years

For 2004/5/7 just noted the % s and did a quick compounding in my head as using mobile so no calculator or spreadsheet to hand. Broadly fits what I remember tho I dont really follow the ftse versions of the index.

Cheers Fletch

Cheers

Fletch

[Ludacris]

Anytime someone claims to profit from daytrading I always ask the following question:

Compare your daytrading results to investing all your capital plus 30-40% margin in an index fund on the first day of your daytrading period. In an uptrending market, it would be extremely difficult for daytrading to beat the margined-indexed results if the trader is following proper risk management (ie. only risking 2% of total capital in any one trade, only risking 6% of total capital at any one time as suggested by Elder). If someone does end up beating the indexed results, it's more than likely they got really lucky on one trade and the results are not reproducible.

I've spent years writing and testing trading algorithms and none of them come close to outperforming margin-indexing when proper risk management is applied. I have a hard time believing that any human could consistently outperform my computer trading over a long period of time, let alone margin-indexing.

[timewilltell]

Anytime someone claims to profit from daytrading I always ask the following question:

Compare your daytrading results to investing all your capital plus 30-40% margin in an index fund on the first day of your daytrading period. In an uptrending market, it would be extremely difficult for daytrading to beat the margined-indexed results if the trader is following proper risk management (ie. only risking 2% of total capital in any one trade, only risking 6% of total capital at any one time as suggested by Elder). If someone does end up beating the indexed results, it's more than likely they got really lucky on one trade and the results are not reproducible.

I've spent years writing and testing trading algorithms and none of them come close to outperforming margin-indexing when proper risk management is applied. I have a hard time believing that any human could consistently outperform my computer trading over a long period of time, let alone margin-indexing.

You are just not at the right stage in your development but stuck in the 'holy a Grail of systems' stage. You can make multiples of your investment but any system is going to be hugely difficult to code.

The problem is context. The context of the market changes almost daily and therefore so does the method to trade it. Nothing is foolproof but any system that ignores context is going to be marginal.

You can day trade very consistently with low risk if you study market context and trade the inflection points, You probably don't understand me, and That is OK but you will not be very successful if you stare at code and systems all day. You just might if you stare at multiple charts and study the inflection points. Its laborious and computers really cannot do it easily thankfully.

I went through your stage for several years so I know where you are, and even you are likely smarter with computers and coding than me, you are still looking for the Golden Chalice which dies not reside where you are looking. Funds have billions at their disposal so if it could be done with computers then arbitrage would already have killed markets as they would become perfect. They are far from perfect because they are barometers of emotion and the human psyche overlaid on fundamental values. And there is your edge.

Sent from my iPad using ThaiVisa app

[timewilltell]

Completely agreed with Fletch. In an uptrend market, anyone who bets will look like a stock guru no matter what. But only in a downtrend, you will then know what you are really made of. I just caution you (and your wife) to have a firm exit strategy in place. it's never about how you enter the market but how you exit it!

In a stock market, there are only winners and losers. Capital preservation is always the key to eventual success. Moreover, be sure that you can embrace the dark path as you embrace the lighted one!

Good post, especially your last paragraph. I disagree that it is never about your entry though because your entry determines your risk through prudent stop positioning. But anyway that's just my take.....

Sent from my iPad using ThaiVisa app

[Ludacris]

If your inflection point method works so well, why haven't people been able to duplicate it well enough that it's no longer effective?

Please post long-term trade logs that show that your method plus risk management outperforms margin-index investing. Until then, you sound like another guru trying to promote or sell a "holy grail" system.

Another huge advantage of margin-index investing I forgot to mention in addition to outperforming any other method is that it's completely on autopilot except for a few rebalancing trades per year. Compare that to the almost infinite hours needed to watch the markets everyday.

[Aussieroaming]

Ludacris

I work in a technical field and have a science degree. I believe in logic, graphs and trends etc. however I believe that there is a human component in trading that defies science.

When my wife got told to buy a certain share at 18 baht and sell when it hits 24 baht i was sceptical. When I saw that share rise from 19 baht to 24 baht over a period of about one hour and then drop straight back to 20 baht I realised that some trends can't be turned into an algorithm.

Do shares get manipulated and driven artificially on the SET..yes. Can you build a mathematical model for that, not likely.

[Ludacris]

Of course there's human and emotional components to the stock market. Can someone use that to make money - yes. Can someone use it to have more winning trades than losing trades - yes. Can a small percentage consistently make money long-term trading - yes.

The long-term trend of the market is up - so even throwing darts or random trading could potentially make money.

But when risk management is applied to trading, can someone consistently outperform investing your entire capital plus margin in an index portfolio long-term - No Way!

Yes, there are stories of people who bet big on one lucky winner and made a fortune, but there are also countless other stories of people who blew-up their accounts. I'm positive if you looked at even successful daytraders' records, you will find that they underperformed margin-index investing over a 30 year period.

Have read through 'A Random Walk Down Wall Street' (especially ch10 on Behavioral Finance) by Malkiel, 'The Disciplined Trader' by Douglas, and 'The Intelligent Investor' by Graham. Then ask your wife to turn off her phone and write down the reasons behind buy and sell decisions that she came up with herself in English with results and we'll continue this conversation.

Your wife blindly following someone else's instructions to buy and sell at certain levels is not what I consider skilled trading.

[Aussieroaming]

Fletch smile..sorry mate you are correct, my wife's journal where she keeps her trades is actually legible and in English. I thought it was in Thai but I hadn't read it previously as it's like her diary.

Dario...I agree the SET is a good platform to trade in. From what I see the day trading is about being on line and watching all day each day..I think that's why my wife does ok. Ok I accept that fletch smile thinks she has failed to get the gains he might have...but I am very proud of her tenacity and perseverance that's led her to earn what she does per month.

[Pattaya46]

my 300k gives me 40-60k a month on SET..

Uh ???

50k on 300k is a 16+% profit in 1 month!

It would mean you double your initial capital in less than 5 months

and that you multiply it by more than 6 in on year (+500%!) ...

So can you please confirm that your capital in SET

is now (~1 year later) about 2 millions baht ?...

[fletchsmile]

Wonder how Mrs.Aussieroaming is doing this year as some one has just resurrected the thread? or maybe she's watching the cricket instead

[puukao]

real business is 100x different than day trading....

real business: hire a few employees, work much longer hours, overhead, taxes, permits, etc.....in America you need about 30,000 USD gross revenue a month to break even.....6 days a week working.....rent is like 3,000 USD

day trading......first,you need the money to start. once you have that, you need great computer and simply click buttons. you need to pay whatever expenses..

say you have 25,000 USD to daytrade.....in Thailand you might need 15,000 USD to live OK....so that percentage is crazy...not realistic...

so you need about 200,000 USD to daytrade.....and still need to make just under 10% to basically survive and not save for retirement or anything else...

this is why 90% fail...

and a few percentage do make it...

[Rancid]

I think his wife is doing very well. On the positives the market keeps on going up, no doubt if you are a good trader can keep making money. Negatives are the Chinese markets that also kept going up are looking shaky, and didn't they stop short selling as some other markets did back in 2009? If a market turns around isnt shorting a major way to hedge longs or make money, no doubt the Junta would never do that though? Also seems stocks are going up without volume or earnings justifying it, odd to say the least. And seems some big successful hedge funds are throwing in the towell lately, you have to wonder why.

Seems to me we are living in a giant Ponzi scheme but as said on another thread though, the doomers have been consistently wrong.