Posted this elsewhere some time ago and for me still holds good. Thought it might start a discussion on people's trading styles.
Here are a few thoughts. They helped me, you might not find them useful but here they are anyway!
1) You think you have a strategy. Hang on then, take ten minutes to write down its bullet points. Easy? Thought not! You think you have a strategy but realising it is a mess is the hard bit.
2) If honest did you write: Buy a share ramp it for all I am worth and flog it when i lose my bottle. Not only is that fairly sure-fire way to the poorhouse, it wrecks the camaraderie of the trading thread, antagonises others and you only alienate people who should be - and you would benefit from having - on your side.
3) Right then get it sorted. Now, not next week! Here's mine and again you might not like it fair enough not a problem.
1)I start with a mythical 20,000 pounds (with another 5,000 in cash). I am going to invest 75% of it in buy and hold stocks, but always when I buy a share i have a price target. I will distribute the 15,000 thus: Two stocks each with 4,000, two with two thousand, three with a thousand each. The more I like a stock the more it will get (as to sectors, stock selections and weightings that's down to the individual - I prefer a spread of sectors).
If my target is reached in the absence of significant value-changeing news (results, contracts, warnings etc) then I will sell at that price when it is reached. Time has taught me patience and analysis.
My target might well be a 50% gain in a year. Stop! Think! That's a stellar return in any other field. If it is reached in two weeks, great, i'll take it. But if it loses me more than 15% it's a goner. Lastsummer i bought a share called Vantis. It is duller than a November washout,but so far it is up 30% after 8 months. Well on its way. (You have the alternative to taking all your profit by banking your original stake and keeping the rest as free shares, something i am quite keen on.
2) If this plan comes to fruition, my 15k makes 7,500 and that's my tax allowance. A craking year.
3) BUT of course life never works like that so here's where the other 5k comes in. This is my play money, my day trades. As I see it, the point of this type of trading involves more risk, because i am trying to make more money a lot more quickly ! But I might lose a lot of it. And any profits will make up for the shortfall in my buy and hold portfolio.
4) Tenby (Cat) has taught me to buy shares that have good volume and are already moving up ideally having broken out on the chart. That is the most successful day trading strategy i know of. Again have a target at which you will bank it in the absence of price changing news. Don't buy shares stuck in a range or falling. And what is the point of trying to ramp, say, IMG. It has a market cap of 100 million or whatever and one institutional seller is going to mean 1000 small buys are swallowed up. Not worth the stress and effort! I don't short but the reverse principle (ie shares going down on good volume, below a chart support) is true for those who do.
And NEVER FALL IN LOVE WITH A SHARE. IT DOES NOT HAVE BREASTS (OR WOTEVER THE GIRLS LIKE EITHER!!!)
Your thoughts and strategies???
Full Version: My trading strategy.
EC, some girls like breasts too, so I've heard! 
As for my main strategy, I monitor around 70-80 stocks - most have been on my monitor for at least 6 months.
I give each stock a value, based upon fundamental analysis and expected newsflow.
1) I use the charts to work out how low the stock is likely to fall in a bear market,
2) Where its trading range is likely to be in a sideways market and
3) How high it could realistically go in a bull market.
I then position myself thus:
When the outlook for the markets is a bit gloomy & they are just range trading, I buy whenever the stock is at the lower end of my 'range' (determined in 2, above). If the markets are on a bit of a slide, but they show signs of starting to recover, I'll buy up the stocks that are near the lower support levels (determined in 1, above). If the markets go berzerk and we enter a bull market, I'll add to any stocks that are still undervalued (according to point 3, above).
That's my strategy for my core portfolio of medium/long term stocks and I'll often add/reduce them as market conditions change, news comes out or the stock becomes overbought/oversold.
SB
As for my main strategy, I monitor around 70-80 stocks - most have been on my monitor for at least 6 months.
I give each stock a value, based upon fundamental analysis and expected newsflow.
1) I use the charts to work out how low the stock is likely to fall in a bear market,
2) Where its trading range is likely to be in a sideways market and
3) How high it could realistically go in a bull market.
I then position myself thus:
When the outlook for the markets is a bit gloomy & they are just range trading, I buy whenever the stock is at the lower end of my 'range' (determined in 2, above). If the markets are on a bit of a slide, but they show signs of starting to recover, I'll buy up the stocks that are near the lower support levels (determined in 1, above). If the markets go berzerk and we enter a bull market, I'll add to any stocks that are still undervalued (according to point 3, above).
That's my strategy for my core portfolio of medium/long term stocks and I'll often add/reduce them as market conditions change, news comes out or the stock becomes overbought/oversold.
SB
Yes er em I heard that too, SB!!
Is that somewhere between a head and shoulders!!
Good strategy though. What are your main criteria for establishing which are 'value'?
Is that somewhere between a head and shoulders!!
Good strategy though. What are your main criteria for establishing which are 'value'?
To determine value I try and work out how much I would pay for the business, if I were rich enough to buy it myself, and compare the profits from doing this with the interest I'd get if I put my money in a bank account.
In a bank account, at 5% interest it would take about 18 years to double my money, after tax.
Therefore, if I can buy a low risk business that will double my money in 12 years, that would be fair value, IMO, anything less is very good value. For example, I consider ROK to be fairly low risk, and at a forward PE of 10, allows me to double my money in 10 years, assuming no growth. However, the business is still growing at a rapid rate so I'd expect to double my money a lot sooner - it is, therefore, an undervalued business.
A higher risk business would have to show me that it can double my money at a much faster rate to warrant the extra risk.
SB
In a bank account, at 5% interest it would take about 18 years to double my money, after tax.
Therefore, if I can buy a low risk business that will double my money in 12 years, that would be fair value, IMO, anything less is very good value. For example, I consider ROK to be fairly low risk, and at a forward PE of 10, allows me to double my money in 10 years, assuming no growth. However, the business is still growing at a rapid rate so I'd expect to double my money a lot sooner - it is, therefore, an undervalued business.
A higher risk business would have to show me that it can double my money at a much faster rate to warrant the extra risk.
SB
Interesting SB. Another I've read, is that if growth rate=PE then the company may be fairly priced; if growth>PE then it may be good value. thoiughts?
I'd love to add my own trading strategy, but I haven't developed one yet. Hope all those who have add to this thread.
I'd love to add my own trading strategy, but I haven't developed one yet. Hope all those who have add to this thread.
As a newcomer I feel a bit guilty posting so soon but I've been noting your comments and there seems so much help and comeraderie I feel I should give a bit as well as take. Hope no-one ever burns their fingers following my stretegy but here goes anyway.
Apart from the normal charts and reports I try to look at the broad trends. With China/India and others fast developing more western style economies there will be such a demand for natural resources like water, oil, steel (and its components) et al that there must a return for the investor in those directions..
Corus, for instance, has not had the best results in recent years but demand for steel is such now that - even acknowledging the increase in raw material costs - they must keep heading north and the interims are due next month.
As for a purchasing strategy I think its a matter of personality. If you go for it, you'll occasionally win big but suffer some hard falls as well. If you're a steady Eddie you'll tick over year on year but probably lack the nerve for a big one.
For me it's like golf. Pitch and run for safety or go straight for the flag. I choose the latter not cos its better or wiser but cos I like the adrenalin rush. To me the worst scenario is picking a winner but not getting in far enough to real any real excitement. Trouble is if you knew how many times I've lost at golf...
Apart from the normal charts and reports I try to look at the broad trends. With China/India and others fast developing more western style economies there will be such a demand for natural resources like water, oil, steel (and its components) et al that there must a return for the investor in those directions..
Corus, for instance, has not had the best results in recent years but demand for steel is such now that - even acknowledging the increase in raw material costs - they must keep heading north and the interims are due next month.
As for a purchasing strategy I think its a matter of personality. If you go for it, you'll occasionally win big but suffer some hard falls as well. If you're a steady Eddie you'll tick over year on year but probably lack the nerve for a big one.
For me it's like golf. Pitch and run for safety or go straight for the flag. I choose the latter not cos its better or wiser but cos I like the adrenalin rush. To me the worst scenario is picking a winner but not getting in far enough to real any real excitement. Trouble is if you knew how many times I've lost at golf...
lol - great first post Spartacus, look forward to more of the same!
Nothing wrong with that strategy as far as I can see, as long as you've got the patience to see it through.
Pee, I think you mean the PEG ratio, which combines PE ratio's with growth rates. Although I never look at the PEG ratio as such, I do use Earnings and Growth rates primarily to arrive at my end valuation.
SB
Nothing wrong with that strategy as far as I can see, as long as you've got the patience to see it through.
Pee, I think you mean the PEG ratio, which combines PE ratio's with growth rates. Although I never look at the PEG ratio as such, I do use Earnings and Growth rates primarily to arrive at my end valuation.
SB
Yes SB. If you don't use price & earnings, how do you use earnings and their growth? Also, do you factor in divis?
Also Spartacus - welcome (if i may SB/Teal); good to see another birdie-bogie man to add to the large collection.
When I've sorted out a strategy, I'll probably be more of an SB - not brianwise, but cautious-wise - if such words exist.. lol
Cheers.
Also Spartacus - welcome (if i may SB/Teal); good to see another birdie-bogie man to add to the large collection.
When I've sorted out a strategy, I'll probably be more of an SB - not brianwise, but cautious-wise - if such words exist.. lolCheers.
Pee, I take no account of dividends because I like to invest in small caps. Small caps by their nature should have a lot of growth potential and if they are paying out big dividends I see this as negative as it indicates to me they are struggling to grow any further. Small companies should use their cash to grow, in my opinion, not pay dividends.
Here's some more info on PEG ratios:
http://www.investopedia.com/printable.asp?...s/00/092200.asp
SB
Here's some more info on PEG ratios:
http://www.investopedia.com/printable.asp?...s/00/092200.asp
SB
Only recently as I become more nervous of the markets has dividend become 'of interest'. In that sphere for example, TTS has over 30p of its 55p share price in the bank and pays about 6%, exceptional for a technology stock. With no debt that looks pretty secure - beats the bank too if the shares have a hard time. Also commercial property (dare I mention GSC one more time) pay well overall too.
However it is not a central point in my investing. Spartacus makes a good point about trends (probably easier to follow and make money than to guess the next fad...... witness oil!).
PEG ratios I am not keen on, particularly with small companies. As they mature the peg almost invariably slows rapidly.
However it is not a central point in my investing. Spartacus makes a good point about trends (probably easier to follow and make money than to guess the next fad...... witness oil!).
PEG ratios I am not keen on, particularly with small companies. As they mature the peg almost invariably slows rapidly.
Short term trading or medium/long term investing?
Clem talks a lot of sense in thsi article from www.thebusinessonline.com
SB
Clem talks a lot of sense in thsi article from www.thebusinessonline.com
QUOTE
Skip on the pennies, blip on the pounds
Clem Chambers
October 31, 2004 6:00 PM (GMT)
Trading is about the toughest game in the world. For many of our users at ADVFN, trading the markets is their livelihood and they sit in front of their monitors all day.
Sitting in front of a computer is nothing special for many people but the life of a trader is one where he is welded to the screen like a soap opera fan watching an episode where their favourite character has just been shot dead. They stare at the end of their chart's wavy line as the single pixel that represents the price wobbles around. As that pixel twitches, hundreds and sometimes thousands of pounds ebb and flow in and out of their trading account.
Dropping £100,000 into the market for a few minutes to try to make a few hundred is just the sort of activity that will separate your stomach from its lining and most people lose their shirt, too. Trading involves long periods of inaction followed by short periods of intense pressure. For many, profits fill in losses and losses hang like dark clouds over them as they try to get even. There are traders that have been in the game for years and they make good money, but they are thin on the ground.
The reason trading is so tough is that if you don't have a trading edge over the bulk of the market then any action will on average lose you the cost of doing the trade. Random trading is like flipping a coin. You win or lose a pound if you guess right or wrong and in the process you are being charged a penny by the coin-tosser to play the game. Sadly however much cash you start with, you will lose the lot given time because on average you are losing 1p a go.
Trading costs are therefore extremely important. For a long term investor they can still be a big deal. Even if you only turn over your portfolio every three years, paying perhaps 0.5% over the odds for your dealing, this can turn into significant money over a lifetime. For a trader, even the tiniest fraction can make the difference between profit and loss.
The difference between a trader's lot and an investor's is that the investor is riding the tide of progress as it flows into the economy. If you can imagine that this growth is 3% on average, an investor tries to find stocks where this rising tide might account for a 6% or 7% increase in a company's value. A 2% cost of capturing this benefit still leaves a 5% annual profit. This makes investing what maths professors call a positive sum game. The poor trader buys and sells in minutes so there is no time to capture this long-term benefit and therefore his profit must come at someone else's expense. This makes it a hard game indeed be-cause, as a whole, the market and the price it sets is the sum total of everyone's opinion and on average the market is a pretty smart beast.
Having to sit down and build tools for traders and then test them, I can assure you that the world is a much finer place when you do not have to throw large sums around the market on the blip and skip of an intra day chart. Buying good stock for the medium term is much better for your health as is seeing a dividend cheque drop through your letterbox rather than a margin call.
You could do a lot worse than to stick some Lloyds TSB in your portfolio. With a p/e of seven and a stonking but potentially unsustainable 8% dividend it's an attractive value investment. Unlike the trader who is unable to head for the toilet before he closes his trade, with a solid stock like Lloyds TSB you can comfortably forget you own it until further notice.
Clem Chambers is CEO of ADVFN (www.advfn.com) - Europe's leading stocks and shares website. e-mail: clemcham@advfn.com
Clem Chambers
October 31, 2004 6:00 PM (GMT)
Trading is about the toughest game in the world. For many of our users at ADVFN, trading the markets is their livelihood and they sit in front of their monitors all day.
Sitting in front of a computer is nothing special for many people but the life of a trader is one where he is welded to the screen like a soap opera fan watching an episode where their favourite character has just been shot dead. They stare at the end of their chart's wavy line as the single pixel that represents the price wobbles around. As that pixel twitches, hundreds and sometimes thousands of pounds ebb and flow in and out of their trading account.
Dropping £100,000 into the market for a few minutes to try to make a few hundred is just the sort of activity that will separate your stomach from its lining and most people lose their shirt, too. Trading involves long periods of inaction followed by short periods of intense pressure. For many, profits fill in losses and losses hang like dark clouds over them as they try to get even. There are traders that have been in the game for years and they make good money, but they are thin on the ground.
The reason trading is so tough is that if you don't have a trading edge over the bulk of the market then any action will on average lose you the cost of doing the trade. Random trading is like flipping a coin. You win or lose a pound if you guess right or wrong and in the process you are being charged a penny by the coin-tosser to play the game. Sadly however much cash you start with, you will lose the lot given time because on average you are losing 1p a go.
Trading costs are therefore extremely important. For a long term investor they can still be a big deal. Even if you only turn over your portfolio every three years, paying perhaps 0.5% over the odds for your dealing, this can turn into significant money over a lifetime. For a trader, even the tiniest fraction can make the difference between profit and loss.
The difference between a trader's lot and an investor's is that the investor is riding the tide of progress as it flows into the economy. If you can imagine that this growth is 3% on average, an investor tries to find stocks where this rising tide might account for a 6% or 7% increase in a company's value. A 2% cost of capturing this benefit still leaves a 5% annual profit. This makes investing what maths professors call a positive sum game. The poor trader buys and sells in minutes so there is no time to capture this long-term benefit and therefore his profit must come at someone else's expense. This makes it a hard game indeed be-cause, as a whole, the market and the price it sets is the sum total of everyone's opinion and on average the market is a pretty smart beast.
Having to sit down and build tools for traders and then test them, I can assure you that the world is a much finer place when you do not have to throw large sums around the market on the blip and skip of an intra day chart. Buying good stock for the medium term is much better for your health as is seeing a dividend cheque drop through your letterbox rather than a margin call.
You could do a lot worse than to stick some Lloyds TSB in your portfolio. With a p/e of seven and a stonking but potentially unsustainable 8% dividend it's an attractive value investment. Unlike the trader who is unable to head for the toilet before he closes his trade, with a solid stock like Lloyds TSB you can comfortably forget you own it until further notice.
Clem Chambers is CEO of ADVFN (www.advfn.com) - Europe's leading stocks and shares website. e-mail: clemcham@advfn.com
SB
It's a good article and much of it is true. I do happen to think Lloyds is decent value here and the point about dividends is often missed by traders............
...........Here comes the but.............
If you'd held it for the last five years.........
...........Here comes the but.............
If you'd held it for the last five years.........
But 5 years ago the yield wasn't 8%. More like 3.5%.
Found this elsewhere, and though he is a member here, hasn't posted for over a month so i hope Taurus doesn't mind me repeating it here as it is an excellent summary imho of three types of 'us'!
"An investor tends to get caught up in a stock and can become attached to it and gives it more accolades than it deserves because they own a piece of it.
A gambler always believes they are right no matter what the market signals are.The gambler is inflexible about getting out of the trade because they feel strongly they are right.Being inflexible and unwilling to admit you're wrong will lead to a drain on the gamblers funds..
A trader is flexible and stays detached from their trades and is always willing to change direction at a moments notice either taking profits or keeping losses to a minimum."
"An investor tends to get caught up in a stock and can become attached to it and gives it more accolades than it deserves because they own a piece of it.
A gambler always believes they are right no matter what the market signals are.The gambler is inflexible about getting out of the trade because they feel strongly they are right.Being inflexible and unwilling to admit you're wrong will lead to a drain on the gamblers funds..
A trader is flexible and stays detached from their trades and is always willing to change direction at a moments notice either taking profits or keeping losses to a minimum."
Intresting post,
All my share buying consists of is looking at the charts, trying to gauge the trend or breakout.
Checking the RSI to find if it is over brought or over-sold.
Also not trying to buy at the bottom and sell at the top, getting greedy will soon make your pot dissappear. Try to take a healthy profit and start setting stop losses as soon as the share goes blue. At the end of the day a small profitis better than none at all.
All my share buying consists of is looking at the charts, trying to gauge the trend or breakout.
Checking the RSI to find if it is over brought or over-sold.
Also not trying to buy at the bottom and sell at the top, getting greedy will soon make your pot dissappear. Try to take a healthy profit and start setting stop losses as soon as the share goes blue. At the end of the day a small profitis better than none at all.
I don't have a set trading strategy, but I try to keep things simple. When I started trading I made so many mistakes it was ridiculous and I decided after a few months that I was running around like a headless chicken trying to make money too quickly. I had about 20 shares in my portfolio and if one share didn't make me money after a couple of weeks I would become impatient, sell it and buy another. Another big mistake I made was to re-invest my profits instead of banking them. It's a minefield out there for anyone new to trading, a constant learning process.
QUOTE (Crazy Woman @ Nov 6 2004, 15:38)
When I started trading I made so many mistakes it was ridiculous and I decided after a few months that I was running around like a headless chicken trying to make money too quickly. I had about 20 shares in my portfolio and if one share didn't make me money after a couple of weeks I would become impatient, sell it and buy another.
I made the exact same mistake, Crazy Woman!
So have we moved on SB? You certainly have, and it's been a sometimes painful learning process for both of us during which we have learned which posters on various bulletin boards we respect and trust and which we disregard. I suspect it is also one of the main reasons that so many of your friends on ShareCrazy are now posting on this forum.
moderator edit - please resolve via private message...
When looking around the bb's i often see comments of 'cutting my losses,bailing out,stopped out 'etc.Looking at the opposite angle it is far less often that i see people adding to an already successful purchase.
Adding to my position is one of the most effective methods i've used over the years to increase my profits.
Once i am satisfied that i have made a correct call i always take another look to see how much further i think the price will go.I have already done the research on the stock and if i feel the story holds good i am always prepared to buy more, usually less than the original purchase.
In my present portfolio i have done this with PDP [once] and SGI[twice] and these are now my two largest holdings and also the ones in which i hold the largest [paper] gains.
BTW adding to a position is not to be confused with averaging down which i think happens far more often usually with much less successful results.
Adding to my position is one of the most effective methods i've used over the years to increase my profits.
Once i am satisfied that i have made a correct call i always take another look to see how much further i think the price will go.I have already done the research on the stock and if i feel the story holds good i am always prepared to buy more, usually less than the original purchase.
In my present portfolio i have done this with PDP [once] and SGI[twice] and these are now my two largest holdings and also the ones in which i hold the largest [paper] gains.
BTW adding to a position is not to be confused with averaging down which i think happens far more often usually with much less successful results.
Useful advice from MikeHardman, posted on ADVFN:
renco2 - 16 Jan'06 - 16:18 - 122 of 140
Hello guy's
I'm new to this game, but have read a lot of books!!! not sure what good that'll do me? Could someone give me an opinion on MPM.L I'm thinking of going long but haven’t got the nerve to pull that trigger!
MikeHardman - 16 Jan'06 - 17:36 - 136 of 140
renco - what information do you base your trading on?
I think you'll find everyone here uses trades, level2, news and charts - all live streaming; plus fundamentals and non-streaming charts, and summaries from the main newspapers; many folks have access to various tipsheets and report sources.
In a sense, that's all newsflow.
In addition to that, there's info in your head:
- trading skills
- feel for the market
- understanding of what trade types mean
- understanding how to react to news (eg. how to analyse director dealings, placings, mergers, trading stmts, etc.)
- knowing what factors outside the stock market affect stocks (eg. conflict in oil-producing areas, commodity prices, economics announcements (and expectations), the effect of weather and stockpiles on oil & gas prices, etc.)
And detailed stock-specific info, eg.:
- trading patterns (eg. has an institute been offloading persistently?)
- does a MM seem to have a lot of stock to shift?
- do trading statements come out reliably at certain times of the year (the market may run up or down to these)
- are there specific industry events where the company gets key annual exposure?
- what news is in the wings (especially important for small miners and oilers and biotechs and techs)
- awareness of the free float
- awareness of how the city regards the management, and other sentiment factors
- awareness of how the spread and liquidity varies (on news days, some small stocks can see high volume and tighter spreads, which is fine for buying-in, but if you try to sell in between such higher-volume days, you may be disadvantaged by a higher spread and lower liquidity)
How much info you have can determine:
- your style of trading (activeness)
- your approach to risk (acceptance that with limited info you expose yourself to poor timing of trades (though with it, there's no guarantee))
You get info by:
- paying for it (unlimited streaming data, broker services, software systems, magazine and e-zine subscriptions, books, courses, etc.)
- watching and learning and taking notes
- sticking with it, and thereby developing the subtler skills (feel) and a bank of experience ('I won't do that again' or 'I've seen this promising situation before') and an ability to manage the info-flow in your head (influx, filtering, assessing, discarding, storing, retrieving, valuing relative to its age, etc.)
- trying ideas out - not least of which being whether you trade on fundamentals or charts or both (or mickey mouse tealeaf-reading stuff, for that matter)
- learning from mistakes
In trying to gain that info, you pay in terms of money, time, aggravation, tiredness, and maybe social problems, etc.
...and you darn well hope you get something positive back for all that!!
With a bit of luck, that'll be mainly money. But in any case, if you have one of the right attitudes, you should make some friends, learn more about the financial world, and maybe gain familiarity with particular companies (or industries at any rate), which could lead to employment opportunities. Some traders have pre-existing skills they can turn to their advantage in stock/commodity trading; I am a geologist (and IT consultant), for instance, which gives me a slight edge in understanding resource stocks - both in reading between the lines in RNS newses and when it comes to talking with exploration managers, eg. And an 'edge' is very valuable in the trading world; you are competing in a vast sea of other traders; the market as a whole will always know more than you do - so any chance to get one over on the market is worth using, assuming other factors allow you to play such a card.
You will have noticed I used the word 'info' a lot there.
Gordon Gekko ['Wall Street'] was right: "The most valuable commodity I know of is information."
Its just a question of - what info, how you get it, how you manage it, and how you use it.
Good luck.
renco2 - 16 Jan'06 - 16:18 - 122 of 140
Hello guy's
I'm new to this game, but have read a lot of books!!! not sure what good that'll do me? Could someone give me an opinion on MPM.L I'm thinking of going long but haven’t got the nerve to pull that trigger!
MikeHardman - 16 Jan'06 - 17:36 - 136 of 140
renco - what information do you base your trading on?
I think you'll find everyone here uses trades, level2, news and charts - all live streaming; plus fundamentals and non-streaming charts, and summaries from the main newspapers; many folks have access to various tipsheets and report sources.
In a sense, that's all newsflow.
In addition to that, there's info in your head:
- trading skills
- feel for the market
- understanding of what trade types mean
- understanding how to react to news (eg. how to analyse director dealings, placings, mergers, trading stmts, etc.)
- knowing what factors outside the stock market affect stocks (eg. conflict in oil-producing areas, commodity prices, economics announcements (and expectations), the effect of weather and stockpiles on oil & gas prices, etc.)
And detailed stock-specific info, eg.:
- trading patterns (eg. has an institute been offloading persistently?)
- does a MM seem to have a lot of stock to shift?
- do trading statements come out reliably at certain times of the year (the market may run up or down to these)
- are there specific industry events where the company gets key annual exposure?
- what news is in the wings (especially important for small miners and oilers and biotechs and techs)
- awareness of the free float
- awareness of how the city regards the management, and other sentiment factors
- awareness of how the spread and liquidity varies (on news days, some small stocks can see high volume and tighter spreads, which is fine for buying-in, but if you try to sell in between such higher-volume days, you may be disadvantaged by a higher spread and lower liquidity)
How much info you have can determine:
- your style of trading (activeness)
- your approach to risk (acceptance that with limited info you expose yourself to poor timing of trades (though with it, there's no guarantee))
You get info by:
- paying for it (unlimited streaming data, broker services, software systems, magazine and e-zine subscriptions, books, courses, etc.)
- watching and learning and taking notes
- sticking with it, and thereby developing the subtler skills (feel) and a bank of experience ('I won't do that again' or 'I've seen this promising situation before') and an ability to manage the info-flow in your head (influx, filtering, assessing, discarding, storing, retrieving, valuing relative to its age, etc.)
- trying ideas out - not least of which being whether you trade on fundamentals or charts or both (or mickey mouse tealeaf-reading stuff, for that matter)
- learning from mistakes
In trying to gain that info, you pay in terms of money, time, aggravation, tiredness, and maybe social problems, etc.
...and you darn well hope you get something positive back for all that!!
With a bit of luck, that'll be mainly money. But in any case, if you have one of the right attitudes, you should make some friends, learn more about the financial world, and maybe gain familiarity with particular companies (or industries at any rate), which could lead to employment opportunities. Some traders have pre-existing skills they can turn to their advantage in stock/commodity trading; I am a geologist (and IT consultant), for instance, which gives me a slight edge in understanding resource stocks - both in reading between the lines in RNS newses and when it comes to talking with exploration managers, eg. And an 'edge' is very valuable in the trading world; you are competing in a vast sea of other traders; the market as a whole will always know more than you do - so any chance to get one over on the market is worth using, assuming other factors allow you to play such a card.
You will have noticed I used the word 'info' a lot there.
Gordon Gekko ['Wall Street'] was right: "The most valuable commodity I know of is information."
Its just a question of - what info, how you get it, how you manage it, and how you use it.
Good luck.
A great post from Mike Hardman, who is one of the many excellent contributors to the ADVFN DAY thread. Well worth the subscription imop.
This list was posted by SIWEL100 on another site (SMC Thread) and refers to trading AIM shares.
As a recent buyer of SMC who is still holding I think I am guilty of breaking most of these rules!!!!
I hope this is of interest/use
John
1. If you buy and the price moves against you, immediately sell. Your loss is contained to a few % + dealing costs and you can always re-enter the stock. But it prevents a massive loss accumulating.
2. If you buy an AIM stock and it issues a bad news RNS then sell and take it off your watchlist.
3.100% let alone 500% gains in a period of weeks months are extremely rare in any form of investment. Recognise that such activity is irrational and that price spikes will always collapse. Be extremely cautious buying any stock that has a gain exceeding 50% and be prepared to sell without hesitation.
4. Always focus first on not losing money rather than making it.
5. Only ever buy on news issued by a company not on a "good story" on a bb. You create a watchlist by reading bb's but only trade company issued news.
6. Set a trailing stop loss on every stock you are in profit on. If it breaks that stoploss then sell without hesitation and take it off your watchlist.
7. Never trade an AIM stock for 10%. Either it has the news to double or ignore it.
8. Never buy because you are bored or have loose cash in your trading account.
9. If you sell a stock that has spiked never try to pick up a few extra % trading it long as it falls. If you arent short then take it off your watchlist.
10. Be as happy to short collapsing spikes as you are to invest long on growing ones.
11. Be as happy to be sitting in cash as holding investments.
12. Always look for smaller potential gains in the silly summer and larger ones in the mad winter.
13. There are exceptions to every rule but ignore them or you risk your trading account.
14. Never ever average down, you should already have sold.
As a recent buyer of SMC who is still holding I think I am guilty of breaking most of these rules!!!!
I hope this is of interest/use
John
1. If you buy and the price moves against you, immediately sell. Your loss is contained to a few % + dealing costs and you can always re-enter the stock. But it prevents a massive loss accumulating.
2. If you buy an AIM stock and it issues a bad news RNS then sell and take it off your watchlist.
3.100% let alone 500% gains in a period of weeks months are extremely rare in any form of investment. Recognise that such activity is irrational and that price spikes will always collapse. Be extremely cautious buying any stock that has a gain exceeding 50% and be prepared to sell without hesitation.
4. Always focus first on not losing money rather than making it.
5. Only ever buy on news issued by a company not on a "good story" on a bb. You create a watchlist by reading bb's but only trade company issued news.
6. Set a trailing stop loss on every stock you are in profit on. If it breaks that stoploss then sell without hesitation and take it off your watchlist.
7. Never trade an AIM stock for 10%. Either it has the news to double or ignore it.
8. Never buy because you are bored or have loose cash in your trading account.
9. If you sell a stock that has spiked never try to pick up a few extra % trading it long as it falls. If you arent short then take it off your watchlist.
10. Be as happy to short collapsing spikes as you are to invest long on growing ones.
11. Be as happy to be sitting in cash as holding investments.
12. Always look for smaller potential gains in the silly summer and larger ones in the mad winter.
13. There are exceptions to every rule but ignore them or you risk your trading account.
14. Never ever average down, you should already have sold.
A list of axioms posted by a trader (retired I think) on another website; more opinions than axioms, and you have to decide to accept or reject these when trading in your own inimitable way:
First Major Axiom: On Risk
"Worry is not a sickness but sign of health. If you are not worried, you are not risking enough."
Adventure is what makes life worth living. Every occupation has its aches and pains. The rich have to worry about their wealth. But, if there is a choice between remaining poor and worry-free, the selection is obvious. It is better to be wealthy and worried than to be worry-free and poor.
Minor Axiom I:
"Always play for Meaningful Stakes."
If you invest Rs. 1000 and your investment doubles, you have only Rs. 2000 and are still poor! So if you want to be rich, you must increase your stakes.
Minor Axiom II:
"Resist the allure of diversification".
Firstly, diversification negates the earlier principle of playing for meaningful stakes. Secondly, it may keep you where you began so that your gains on few will cancel out the losses on the other few. Thirdly, it entails keeping track of many more items leading to confusion and occasional panic.
Second Major Axiom: On Greed
"Always take your profit too soon."
Lay investors having made the investment tend to stay too long on it out of greed for higher profits. But, one must conquer this weakness and book profits soon. If one is less greedy for more profits one will take in more. Don't stretch your luck. In effect, it suggests, SELL sooner than later.
Minor Axiom III:
"Decide in advance what gain you want from the venture, and when you get it, get out. Decide where the finish line is before you start the race".
This is self explanatory and hence needs no comment.
Third Major Axiom: On Hope
"When the ship starts to sink, don't pray, jump"
This axiom is about what to do when things go wrong. Learn how to accept a loss. One should accept small losses to protect oneself from big ones. When the market starts falling, sell, take your money and run!
Minor Axiom IV:
"Accept small losses cheerfully as a fact of life."
Expect to experience several smaller losses while awaiting a large gain.
Fourth Major Axiom: On Forecasts
"Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly."
The story of a monkey throwing darts on the stock exchange page of a newspaper, to select the companies to buy, and coming out a winner is too well known to be recited. Recent news from London, further proves the truth, when an untrained chemist's stock selections, in a widely publicised contest open to all and sundry, registered higher appreciation over several full time highly qualified fund managers' well researched selections. Human events cannot be predicted by any method by anyone and, hence, don't trust anybody's predictions.
Fifth Major Axiom: On Patterns
"Chaos is not dangerous until it begins to look orderly."
The truth is that the world of money is a world of patternless disorder and utter chaos. This axiom is a commentary on Technical Analysis - a branch of investment strategies based on charts and patterns. The fact is, no formula that ignores own intuition's dominant role can ever be trusted.
Minor Axiom V:
"Beware the Historian's Trap".
This is based on the age old but entirely unwarranted belief that history repeats itself.
Minor Axiom VI:
"Beware the Chartist's Illusion".
Life is never a straight line. Let us not be hypnotised by a line on a chart.
Minor Axiom VII:
"Beware the Co-relation and Causality Delusions."
Don't be taken in by coincidences in the market.
Minor Axiom VIII:
"Beware the Gambler's Fallacy."
There is a gambling theory which suggests that one should put small stakes initially and test their luck, and if these turn out well one should go for big stakes on the dice table. But this is not correct. It only shows that winning streaks happen. But nothing is orderly about it. You can't know how long it will last or when it will strike.
Sixth Major Axiom: On Mobility
"A putting down roots. They impede motion".
You may feel socially comforting to have roots. But in financial life, roots can cost a lot of money. Have a flexible approach while investing. This axiom implies a state of mind.
Minor Axiom IX:
"Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia."
Do not develop emotional attachment to your investment. You should feel free to sell when desired.
Minor Axiom X:
"Never hesitate to abandon a venture if something more attractive comes into view."
Never get attached to things, but only to people. Otherwise it hits your mobility. Never get rooted in an investment. You should remain footloose, ready to jump away from trouble or into a profitable opportunity as and when circumstances demand.
Seventh Major Axiom: On Intuition
"A hunch can be trusted if it can be explained."
A good hunch is something that you know but you don't know how to recognise it. When a hunch hits you, try to locate some data in your mind for any familiarity. Then only should you act on it.
Minor Axiom XI:
"Never confuse a hunch with a hope".
Be highly skeptical. Examine every hunch with extra care.
Eight Major Axiom: On Religion and The Occult
"It is unlikely that god's plan for the universe includes making you rich".
You can't only pray that you should be made rich. You will have to work at becoming rich. Mere prayers will not suffice.
Minor Axiom XII:
"If Astrology worked, all astrologers would be rich."
This is self explanatory. Don't trust predictions.
Minor Axiom XIII:
"As superstition need not be exorcised, it can be enjoyed provided it is kept in its place."
In your day-to-day financial matters, act rationally. But, when buying a lottery ticket, give it a full play to amuse yourself.
Ninth Major Axiom: On Optimism and Pessimism
"Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic."
In poker and a lot of other speculative worlds, things are never as bad as they seem - most of the times they are WORSE.
Confidence comes not from expecting the best but from knowing how you will handle the worst. Optimism can be treacherous because it makes you feel good.
Tenth Major Axiom: On Consensus
"Disregard the majority opinion. It is probably wrong".
It is likely that the Truth has been found out by a few rather than by many.
Minor Axiom XIV:
"Never follow speculative fads. Often, the best time to buy something is when nobody else wants it."
This is the best way to get a good stock cheaply.
Eleventh Major Axiom: On Stubbornness
"If it doesn't pay off the first time, forget it"
If at first you don't succeed, try and try again and you will succeed in the end. This is good advice for spiders and kings but not for ordinary persons with regard to financial matters. Every trial is a costly error.
Minor Axiom XV:
"Never try to save a bad investment by averaging down."
If the price of the stock goes down after your purchase don't buy more to bring down' the average cost of your total holding. Investigate why the price went down rather than put good money in a bad bargain.
Twelfth Major Axiom: On Planning
"Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans, or other people's seriously."
This is self explanatory and hence needs no comment.
Minor Axiom XVI:
"Shun long-term investments."
If possible try to a long-term investments. The author noticed that the Swiss group never took a long-term view of their stock purchases. They always sold out as soon as their targeted profit was achieved.
First Major Axiom: On Risk
"Worry is not a sickness but sign of health. If you are not worried, you are not risking enough."
Adventure is what makes life worth living. Every occupation has its aches and pains. The rich have to worry about their wealth. But, if there is a choice between remaining poor and worry-free, the selection is obvious. It is better to be wealthy and worried than to be worry-free and poor.
Minor Axiom I:
"Always play for Meaningful Stakes."
If you invest Rs. 1000 and your investment doubles, you have only Rs. 2000 and are still poor! So if you want to be rich, you must increase your stakes.
Minor Axiom II:
"Resist the allure of diversification".
Firstly, diversification negates the earlier principle of playing for meaningful stakes. Secondly, it may keep you where you began so that your gains on few will cancel out the losses on the other few. Thirdly, it entails keeping track of many more items leading to confusion and occasional panic.
Second Major Axiom: On Greed
"Always take your profit too soon."
Lay investors having made the investment tend to stay too long on it out of greed for higher profits. But, one must conquer this weakness and book profits soon. If one is less greedy for more profits one will take in more. Don't stretch your luck. In effect, it suggests, SELL sooner than later.
Minor Axiom III:
"Decide in advance what gain you want from the venture, and when you get it, get out. Decide where the finish line is before you start the race".
This is self explanatory and hence needs no comment.
Third Major Axiom: On Hope
"When the ship starts to sink, don't pray, jump"
This axiom is about what to do when things go wrong. Learn how to accept a loss. One should accept small losses to protect oneself from big ones. When the market starts falling, sell, take your money and run!
Minor Axiom IV:
"Accept small losses cheerfully as a fact of life."
Expect to experience several smaller losses while awaiting a large gain.
Fourth Major Axiom: On Forecasts
"Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly."
The story of a monkey throwing darts on the stock exchange page of a newspaper, to select the companies to buy, and coming out a winner is too well known to be recited. Recent news from London, further proves the truth, when an untrained chemist's stock selections, in a widely publicised contest open to all and sundry, registered higher appreciation over several full time highly qualified fund managers' well researched selections. Human events cannot be predicted by any method by anyone and, hence, don't trust anybody's predictions.
Fifth Major Axiom: On Patterns
"Chaos is not dangerous until it begins to look orderly."
The truth is that the world of money is a world of patternless disorder and utter chaos. This axiom is a commentary on Technical Analysis - a branch of investment strategies based on charts and patterns. The fact is, no formula that ignores own intuition's dominant role can ever be trusted.
Minor Axiom V:
"Beware the Historian's Trap".
This is based on the age old but entirely unwarranted belief that history repeats itself.
Minor Axiom VI:
"Beware the Chartist's Illusion".
Life is never a straight line. Let us not be hypnotised by a line on a chart.
Minor Axiom VII:
"Beware the Co-relation and Causality Delusions."
Don't be taken in by coincidences in the market.
Minor Axiom VIII:
"Beware the Gambler's Fallacy."
There is a gambling theory which suggests that one should put small stakes initially and test their luck, and if these turn out well one should go for big stakes on the dice table. But this is not correct. It only shows that winning streaks happen. But nothing is orderly about it. You can't know how long it will last or when it will strike.
Sixth Major Axiom: On Mobility
"A putting down roots. They impede motion".
You may feel socially comforting to have roots. But in financial life, roots can cost a lot of money. Have a flexible approach while investing. This axiom implies a state of mind.
Minor Axiom IX:
"Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia."
Do not develop emotional attachment to your investment. You should feel free to sell when desired.
Minor Axiom X:
"Never hesitate to abandon a venture if something more attractive comes into view."
Never get attached to things, but only to people. Otherwise it hits your mobility. Never get rooted in an investment. You should remain footloose, ready to jump away from trouble or into a profitable opportunity as and when circumstances demand.
Seventh Major Axiom: On Intuition
"A hunch can be trusted if it can be explained."
A good hunch is something that you know but you don't know how to recognise it. When a hunch hits you, try to locate some data in your mind for any familiarity. Then only should you act on it.
Minor Axiom XI:
"Never confuse a hunch with a hope".
Be highly skeptical. Examine every hunch with extra care.
Eight Major Axiom: On Religion and The Occult
"It is unlikely that god's plan for the universe includes making you rich".
You can't only pray that you should be made rich. You will have to work at becoming rich. Mere prayers will not suffice.
Minor Axiom XII:
"If Astrology worked, all astrologers would be rich."
This is self explanatory. Don't trust predictions.
Minor Axiom XIII:
"As superstition need not be exorcised, it can be enjoyed provided it is kept in its place."
In your day-to-day financial matters, act rationally. But, when buying a lottery ticket, give it a full play to amuse yourself.
Ninth Major Axiom: On Optimism and Pessimism
"Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic."
In poker and a lot of other speculative worlds, things are never as bad as they seem - most of the times they are WORSE.
Confidence comes not from expecting the best but from knowing how you will handle the worst. Optimism can be treacherous because it makes you feel good.
Tenth Major Axiom: On Consensus
"Disregard the majority opinion. It is probably wrong".
It is likely that the Truth has been found out by a few rather than by many.
Minor Axiom XIV:
"Never follow speculative fads. Often, the best time to buy something is when nobody else wants it."
This is the best way to get a good stock cheaply.
Eleventh Major Axiom: On Stubbornness
"If it doesn't pay off the first time, forget it"
If at first you don't succeed, try and try again and you will succeed in the end. This is good advice for spiders and kings but not for ordinary persons with regard to financial matters. Every trial is a costly error.
Minor Axiom XV:
"Never try to save a bad investment by averaging down."
If the price of the stock goes down after your purchase don't buy more to bring down' the average cost of your total holding. Investigate why the price went down rather than put good money in a bad bargain.
Twelfth Major Axiom: On Planning
"Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans, or other people's seriously."
This is self explanatory and hence needs no comment.
Minor Axiom XVI:
"Shun long-term investments."
If possible try to a long-term investments. The author noticed that the Swiss group never took a long-term view of their stock purchases. They always sold out as soon as their targeted profit was achieved.
wow,
a lot of information there!
i have developed my own ranking system over the last eight years to place a VALUE on a stock. i give my stocks a rating of A - F based on results.
it would be great if i could get some constructive criticism on my system from you all. please let me know if you are interested. slick__ryan@live.com
a lot of information there!
i have developed my own ranking system over the last eight years to place a VALUE on a stock. i give my stocks a rating of A - F based on results.
it would be great if i could get some constructive criticism on my system from you all. please let me know if you are interested. slick__ryan@live.com
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