Archive through October 22, 2007

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mum

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Post Number: 180
Registered: 08-2005

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Friday, October 19, 2007 - 02:04 pm:

I agree with Dug and have found that now I pay attention to market depth i am more profitable. Its nice to know that there are a stack of buyers sitting before your stop anyway.(Even if they disappear sometimes) I think you can get a feel of the depth for a stock too if you watch it for awhile. Wait till after lunch and see if the buyers come back in

(Message edited by mum on October 19, 2007)

rockon

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Post Number: 221
Registered: 08-2003

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Friday, October 19, 2007 - 04:03 pm:

Hi Mum,

Don't forget that businessmens' lunch time lasts till about 2.30 and sometimes they have enjoyed their lunch and sometimes they haven't.

.... Regards.. Mick

sittingduck

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Post Number: 23
Registered: 11-2004

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Votes: 0


Friday, October 19, 2007 - 08:41 pm:

G'Day Dug,

I'm right at your target $ wise, having grown $5k over the last few years. I have made some mistakes over the time, and have learned some lessons. If they apply I will throw them in.

Here is a summary of what I understand you are saying here. So far I have got:
- Objective: turn $25k to $50k (time frame seems to be to achieve it in a reasonable time frame, not too quick to be risking throwing it away, but not dragging out feet and wasting time)
- No external leverage (margins, CFD's, options etc) (nb I consider trading smaller shares a form of leverage, but it's internal to the trade itself)
- Use existing momentum (ie don't bottom pick, don't be afraid of entering an established trend, don't buy into a downtrend)
- Small shares are best for growth (I don't recall a definition of what a small share is, but you seem to be avoiding top 300 based on your CC "Rave" comment in post 2407)
- Use 2% or less Stop Loss to set Position Size. (so max $500 incl brokerage on $25k account)
- Market Depth is useful (you don't say how as yet. I use it to see if there is short term support/resistance when I place orders and to see if I can get a good price at open. Any other suggested uses?)
- If you can take a $1k profit you have done well (you get a bit cryptic in your language, but you seem to suggest initial position size for this profit preferably to be around $3k but $5k would still be OK, so we would be looking at 20% to 30% roughly)

Have I missed anything? Am I on course?

To the others I have read your comments too, I am just filtering Dug's as he started this thread. And he's as bad as the Captain for making you read what he has written, though that can be a good thing as it makes you think more about it at the same time as you translate.

Cheers and thanks for the help (am working on systems analysis and design at the moment, so this is good).
SittingDuck

peter1

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Post Number: 167
Registered: 12-2005

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Votes: 0


Friday, October 19, 2007 - 11:44 pm:

Dug: I admire your persistance, a real asset when trading. I see you want to "get real" again and start with 25K. The only way to make this work is to trade "free", unencumbered by fear, greed, too much knowledge and certainly without the trading restrictions that are often repeated meaninglessly by losers.

This is, of course, nearly impossible to do.

Who is your target audience? Newcomers to the markets can't do this. Existing unsuccessful traders won't be able to do it.

You seem to be following the mantra's of the know-it-alls regarding position size and risk.

5 positions: Small position sizes just dilute all of the profits. Why not just one or two? This will keep you focussed. Costs will be a smaller percentage of profits.

2% Risk: Why this figure? Too restrictive, makes position sizes too small.

I agree with your desire to "go with the flow". This is the only way to do it and the easiest. Find a stock making a new high and buy it. It's that simple. Keep the stop real close and exit asap and at the first sign that the momentum is stopping. Keep all losses very small, that will be essential. The good trades keep on rising after entry and the starting stop loss prices are never threatened. You only need a couple of these to reach your goal.

An interesting thread, Dug. Lets see what develops.

dug

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Post Number: 2413
Registered: 07-2005

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Votes: 0


Saturday, October 20, 2007 - 10:10 am:

Excellent Comments sitting duck and peter1.I especially appreciate the length of them.I abhor one line posts and glib summaries.
I know I flit and gloss over points,need to translate/summarise my positions but,well,I'm not writing a book here.
Anyway some of your points.
TARGET AUDIENCE-I see it as anyone who is dedicated to the Share Market.
One reads in say the Daily Bread Thread of Million Dollar plus Portfolios but even these comment that it is not the Blue Chips that are the power-house,percent gainers in the heart of these virtually Index following portfolios.
So in this way my Target Audience is Those who think Blue Chips are the ants pants and small shares are all Dreadful and to be avoided by all but Gamblers.

I hope by "pooh poohing" this Common Tenet that "newbies"etc START by seriously trying to get a method to play the pennies.The 25grand is just a base figure plucked from the air but it is tied into being a proportion suitable for putting up as a Percentage of a Much Larger Portfolio.

Position Size and Risk-I'm trying to develop this thread into a "New" Pertinent Method for these two.I haven't quite got the nuts'n'bolts clear in my own head so to try and lay it out open for criticism could be nigh on,well,difficult.

It's not "revolutionary"like out there New.Gee it's based on a Wazza Buff[ett]quote so hopefully it's "Valid" but it's to do with Basketing.All ya eggs in one Basket and then watch THAT.

So,yes peter 1 with only $25k you don't Buy 5 positions.I'm thinking that you come up with say 3 "considered" options/setups.When these tell Entry you buy say 3 grand in each,Get Out if they don't pan out,Pyramid into any one [or all]IF they do.
Stop Loss is then generated if/when these THREE Positions show a pre-determined loss percentage OR one of them,in particular,"duds".
Now,I even find it hard to follow the reasoning behind this "method" but it's what I'm pursuing,trying to get a handle on.I think CC is doing some variation on this but...well he don't want to talk about it!!

Small Shares Definition-I take the Reserve Bank definition of the Buying Power of a Penny in 1964 as being approx 20 cents.Apply it as a Penny Share was one under a shilling and get my definition that a small,penny,share is under $2.

The "problem" I have with Top 300's is chiefly due to CFD's applying to these.
Say you can get 10 Leverage in a share.You do not use CFD's Only your OWN Money and you are after 15%+.Well when/if the Share goes up 15% I reckon all this Sell Pressure comes on because all these CFD diddlers are on 150%!!Your chances of getting a decent score [20%+]are wiped out[or could be]by these blessed CFD No HOPERS!!

Now I know according to you,peter1 a CFD player is all conservative.Has trimmed back the Leverage into prudent "Investing" but I reckon the Average CFD Goer is a screaming YAHOO,BigBoy at the Local BarBQue Type,who's couple of weeks before crashing wrecks any plays so I AVOID.

Anyhow sitting duck,while developing your system try and incorporate 10 Ten Cents as a zone of Natural Resistance.It's because the "tick" goes up from .01 to .5-
Five[5]Percent.This CAN cause Buyers to hesitate while Sellers Grab ie puts the market mechanism "askew".

all chatted out for now.later.

"I hear WHAT you say,
BUT I SEE what you DO"

Zelman Cowan 1970 Canetoad!

tryhay

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Post Number: 778
Registered: 09-2005

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Votes: 0


Saturday, October 20, 2007 - 05:14 pm:

Hey dug & whoever else is interested

I reckon the "get real' section of the forum should be reserected and used on a similar basis to last time. I now have a $30,000 trading portfolio and if we can log our trades and chart comments then I see value for each participant and perhaps the wider forum also.

It will expand the current pretty wooden approach to stock picking (in the weekly comp) and may have greater appeal/interest ~ even to those 'others' in "Hilarius' hall Of Fame": they know who they are

It would also demonstrate how some of the approaches you are discussing above work in real time

What do you think?

resillent1

Member

Post Number: 226
Registered: 10-2006

Rating:
Votes: 1


Saturday, October 20, 2007 - 06:16 pm:

This is how I would go about trying to build 25K into something substantial.

If you want to double 25k fairly quickly than you must know and be able to accept that you could just as likely halve it (or worse). Unless your comfortable with the risk and that could be a big ask if its all your savings – Don’t proceed reward without risk just doesn’t happen.

Looks for stocks with:

Momentum, in the absence of leverage you will need it to get a meaningful result.

Liquidity will help you avoid slippage on transactions.

Favourable fundamentals will help you avoid nasty gaps.

To get your potential reward up, you have to lift risk one way or another. I would do this by disregarding diversification, meaning single stock positions for the full 25K.

I wouldn’t pyramid in.

Fixed fractional position size with 4% at risk on each trade. This means initially you would risk $1000.00 on your first trade. To get the full 25K on with 1K risk you need an entry within 4% of your exit, which should be a technically based exit (i.e. below support etc)

Risking 4% fixed fractional position sizing should leave you 50% of your 25K in the event of the longest statistically likely losing streak if you have a 50% win rate. However slippage could still kill you and achieving a 50% win rate with 4% movement for your initial exit will make a 50% win rate a difficult task.

Cut unmercifully on stops – this is critical to protect capital and allow your too stay in long enough to get the big payer you are chasing.

To cover your losses on the likely 50% or more of your losers and too make you lots of money, you must let your winners run. That means lots of scope once they start to move in your favour. Whilst initial stop must be 4% to conserve capital trailing stop may need to be wide, maybe 30% or more from market (stock behaviour dependent) to catch the full move. Wide trailing stops are psychologically tough and you will give back sizable profits – but staying on something like a Paladin is what we’re after.

If you want to get off your training wheels with 25K than this is one approach. Its not balanced but you will either learn too ride or skin your knees.

If this approach works, you need to recognise the benefit luck has played in the result and implement additional risk reduction measures to protect the larger capital, before luck goes against you and boom turns into bust.

Cheers

danielc

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Post Number: 140
Registered: 09-2003

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Saturday, October 20, 2007 - 06:32 pm:

With out a doubt the clearest and best post so far,from some one who has obviouswly been throu the baptisim of extreme fire. now lets get down to buisness and pick a few stocks and give clear and understandable reasons WHY. you can have the Best trading system in the world and give it to every one of the posters so far and GUESS WHAT every one would trade it diffrent .. this buisness is not BLACK/WHITE it is black and white green and yellow purple and grey and these colours will change in diffrent shades all the time . AND you have to addapt to the mood so lets stop pn around and get on with it other wise all we are going to do is go round and round in circles. This is just my opn of course not saying i am right.....

captain_chaza

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Post Number: 2769
Registered: 02-2003

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Votes: 0


Saturday, October 20, 2007 - 06:33 pm:

Please note!!!

I have thrown Officer Resillient overboard for "THAT" sort of advice

"To get your potential reward up, you have to lift risk one way or another. I would do this by disregarding diversification, meaning single stock positions for the full 25K.
I wouldn’t pyramid in."

Crikey!
How dumb was that?

It's back to the safety of all the Long Term excuses for you Sea-cadet Res #1

Salute and Gods' speed

NB
If I am wrong?
It's all in the doing!

"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.

"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893

"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897

sittingduck

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Post Number: 24
Registered: 11-2004

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Votes: 0


Saturday, October 20, 2007 - 07:03 pm:

Dug, that 10c Natural Resistance has bitten me a couple of times. I have mostly worked on 50c to $2 shares while building my current capital, but have been moving down over the past 6 months. So far my track record on <20c isn't good.

I will have a look at how I have traded that zone around 10c later and see what I can learn about where I have gone wrong.

As for your $25k mark. I like it. As I have moved up over $20k I have found that the 2% rule is less restricting and I have more flexibility as to what I trade. It's where you can start looking for more opportunities, that wouldn't be sensible early on with $5k - $10k (eg a small shares tick can be more than 2%)

Cheers
SittingDuck

resillent1

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Post Number: 227
Registered: 10-2006

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Votes: 0


Saturday, October 20, 2007 - 07:42 pm:

Thanks for the criticism Chaza – I’m pleased that you made it straight forward so I can understand what you are saying.

Your criticism is valuable because, before somebody is prepared to back only their best shot they should have enough faith in their analysis and psychology to disregard the opinion of somebody who is as great as you proclaim yourself to be.

Perhaps you could detail why I am wrong and how diversification can give a better risk return outcome.

Maybe you don’t want, perhaps you hide behind diversification to compensate for poor analysis or a head that can’t accept the risk.

captain_chaza

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Post Number: 2770
Registered: 02-2003

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Saturday, October 20, 2007 - 08:02 pm:

My Apologies if I have singled anyone out as a Long Termer

It is not what I am about
I have never been about that form of excuse !

Life is too short!

Sailing the Global Exchange is all about Sailing from One financial year to the next

Adjust your mind accordingly to the Wind or a Bloody good excuse that works every time

The choice is yours!

It's as Simple as that!

Salute and Gods' speed

PS
We don't all have to be good
I have used the Long Term excuse for longer than I can remember
It does not mean I was right!

PPS Now you all know why I do not subscribe to the Long Term Threads
'Been there! Done That!"

What a pack of long winded words upon words upon words!
LOL!!! IMO!!!

captain_chaza

Member

Post Number: 2771
Registered: 02-2003

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Votes: 0


Saturday, October 20, 2007 - 08:27 pm:

Congratulations Sea-cadet Sitting Duck

I think you have worked it out

Those stupid text book 2% losses were never designed for pink sheets

This is a completely different arena where fortune favours the brave

Averaging down I have found better than averaging up

My old 1st Officer Spids would roll over in his grave if he ever heard this
SO THERE!
I have said it!!

Salute and Gods' speed

mum