# Technical Trading Suddenly Makes More Sense



## wayneL (16 January 2008)

As I read the tales of woe on this board and others, I can't help feeling a bit smug about being a technical trader. I'm sorry about feeling that way, and I do commiserate with those feeling the heat right now, but for people who trade technical systems, it is business as usual, or they are all cash.

This isn't meant as gloating, but for people to consider some technical aspects, even if a fundamental trader. Long termies need not worry, if indeed their view really is long term; even if there is a lot more downside the market will eventually recover.

A well designed long only technical system will have the trader largely or wholly exited from the market right now, and fears of margin calls and suchlike will be the furthest thing from their mind. Swing/day traders will be taking opportunities, whether long or short as they present themselves.

So up for discussion, the good sense of technicals in crappy markets. 

Cheers


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## Timmy (17 January 2008)

What's to discuss?


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## wayneL (17 January 2008)

Timmy said:


> What's to discuss?



err...sorry, not clear.

For people who use fundamentals.


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## doctorj (17 January 2008)

To poke fun at the fundies?

Long termers who are worried aren't long termers or are over leveraged.  The natural direction for the market is up.


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## Timmy (17 January 2008)

wayneL said:


> So up for discussion, the good sense of technicals in crappy markets




Sorry wayne ... I meant that for me there is nothing to discuss, am in full agreement with you.  Hmmmm, maybe I would add to use technicals in all markets not just crappy ones.

There is a role for fundamentals, but for me it is economic fundamentals.

I have no problem with a true value investment approach either - and like  you and doctorj have said, such investors without excess leverage will have no concerns.

Two words to add to you statement doctorj - "the natural direction for the market is up" - survivorship bias.


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## Sean K (17 January 2008)

Technicals for when you don't understand a company or sector, it's highly speculative, or you are $1 from a margin call.

Fundamentals for when you (think you) see long term value. 

Then go to Yogi's horiscope and check the alignment of the stars. 

Finally, combine two cups of sugar with some eggs and beat till fluffy. Place in oven at 220 degrees.

Then, cross your fingers and hope the balance of greed and fear is a round abouts.


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## wayneL (17 January 2008)

kennas said:


> Technicals for when you don't understand a company or sector, it's highly speculative, or you are $1 from a margin call *or if you trade technically*
> 
> Fundamentals for when you (think you) see long term value.
> 
> ...



Don't forget eye of newt, toe of frog, wool of bat and tongue of dog.


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## Sean K (17 January 2008)

wayneL said:


> Don't forget eye of newt, toe of frog, wool of bat and tongue of dog.



How did that bit in red get there? 

 LOL

Perhaps I'm just no good at technical trading as I've tried both and perceive that I've made larger % gains from picking an undervalued stock and holding it till it gets more correctly rated and then taking profits and moving on (*see note). Those who's funnyamentals I have no idea on (most stocks actually ) I quickly dump if key support is broken. Must be why I'm only holding a handful right now..... Having said that, I've yet to comprehensively compare % gains on tech v funny wins/losses over the past few years so, I could be speaking crap. Must say, selling on technical breakdowns has absolutely saved my bacon a few times.

(Note: perhaps I've been living in a bull market fairyland for the past 4 years too)


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## tech/a (17 January 2008)

> I've yet to comprehensively compare % gains on tech v funny wins/losses over the past few years so, I could be speaking crap.




*Kenna's*

Ducati for 2 yrs attempted to prove that he could make the same compounded gains as The technically traded System I have on "The Chartist".
It was to be a 3 yr test case.
Ducati tried to demonstrate that using a stop was NOT necessary and that holding Undervalued stock would eventually come good and save the day.

After 2 yrs he abandoned the project in fact he has not posted anywhere I know of for over a year.
Duc knew his fundamental stuff and those who knew him will remember reams of fundamental argument and discussion.

His NETT result after 2 yrs was 1.5% profit on capital.
And that was before the correction periods.

That's the only head to head compared Technical/fundamental comparison,Other than realists challenge to myself a year or so ago.
He to seems to have disappeared. Normally a sign of Blowing up your account!

*Wayne.*
I'm making up a "Top Quotes" I find while looking through some of the technical threads.
While the authors will remain nameless---the end result will tell a lot!

Mind you there are technical and Fundamental Traders and then there are technical and Fundamental traders---you know what I mean.


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## Sean K (17 January 2008)

tech/a said:


> *Kenna's*
> 
> Ducati tried to demonstrate that using a stop was NOT necessary and that holding Undervalued stock would eventually come good and save the day.
> 
> ...



Hi Tech, 

As I alluded to above I use discretion to sell out of 'fundamental' stocks when they break key support. I'm still holding one (KMN) at the moment that I'm off 20% on and has just broken what I consider key support which if confirmed, is going to the dog house. This is where a combination of tech and funny analysis can be used IMO.

In regard to net gains over the past 2 years, I've done a little better than 1.5% using a combination of TA and FA. My discretionary approach seems to have worked reasonably well, but hey, it's a bull market. Perhaps now that Wayne's Four Horseman have arrived, I will only be technical trading, due to all those key support levels being smashed....


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## tech/a (17 January 2008)

> Wayne.
> *I'm making up a "Top Quotes" I find while looking through some of the technical threads.
> While the authors will remain nameless---the end result will tell a lot!
> 
> ...



*
To early in the morning SHOULD read

Wayne.*
I'm making up a Compendium of "Top Quotes" I find while looking through some of the *FUNDAMENTAL* threads.
While the authors will remain nameless---the end result will tell a lot!

Mind you there are Technical and Fundamental Traders and then there are Technical and Fundamental traders---you know what I mean.
Reply With Quote


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## Wysiwyg (17 January 2008)

tech/a said:


> Mind you there are Technical and Fundamental Traders and then there are Technical and Fundamental traders---you know what I mean.
> Reply With Quote




I have been meaning to say for ages, thankyou tech/a, for offering THE most valuable piece of investment strategy I have ever read.


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## Trembling Hand (17 January 2008)

This game offers much to many (mostly perverse thrills not cash) but the bottom line is that you do it for money and hopefully lots.

With that in mind and given that many will make money from Tech and/or Fund analysis. And the reverse will happen that many will lose using anything they touch.

I would like to see a race between a group of profitable practitioners of both Tech and fund analysis to see who could make the most profit in a set time or the first to 250,000.

Anyone would like to offer a 1 mil first prize to make it interesting??


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## sam76 (17 January 2008)

trembling Hand said:


> Anyone would like to offer a 1 mil first prize to make it interesting??




I'll put it up.....














as long as i don't have to pay :


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## tech/a (17 January 2008)

> Mind you there are technical and Fundamental Traders and then there are technical and Fundamental traders---you know what I mean.




There is no arguement that BOTH styles can produce profit.
To me the arguement is the application of styles.

The above quote has embedded in it my point.
I would argue that this encompasses timeframe.

What I see in MOST Fundamental trading seen on this site is NO regard to risk management.
Post after post of 
"Ill continue to hold as I see this stock as UNDERVALUED".
Evidently in the majority of cases there are fundamental traders holding vast numbers of UNDERVALUED stock in definately at prices well below their initial buy.
Not a formula for profit!
This is letting you losses run.

APPLICATION of trading style will determine profit in my view.
NOT the type of analysis employed.


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## TheRage (17 January 2008)

Tech,

I will be honest and say that I have learn't from you and others on this site in terms of loss management. But I don't believe there are actually too many on this site who are true fundamentalist trader's/ investors. I believe most newbies fall into the category of fundamentalists becasue the first thing they do, as I first did was to chase yield and discount to P/E's which doesn't work if you don't actually know how to calculate intrinsic value. I don't believe that it matters whether you are fundamentalist or techie as long as you have rules and don't break them you will make money.


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## tech/a (17 January 2008)

> I don't believe that it matters whether you are fundamentalist or techie as long as you have rules and don't break them you will make money.




Just one question.

How do you know that the rules you are applying--be it fundamental or technical will turn you a profit.
Ive seen some god awful rules which do end in absolute disaster.

Ducati's rules were just crazy---but as a fundamental analyst he was/is pretty damned good.

Duc's thread
https://www.aussiestockforums.com/forums/showthread.php?t=2829&highlight=ducati


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## Julia (17 January 2008)

tech/a said:


> Just one question.
> 
> How do you know that the rules you are applying--be it fundamental or technical will turn you a profit.
> Ive seen some god awful rules which do end in absolute disaster.
> ...



Yes, Duc was probably the most obstinate person I've ever come across in terms of his belief in his rules.  It was perfectly obvious from his results that he was failing to achieve a profit, but he refused to reconsider what he was doing.


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## GreatPig (17 January 2008)

Although I basically only use technical myself, I might suggest that the last few years of bull market have favoured technical analysts.

I would imagine few stocks would have seemed fundamentally undervalued during the bull run, and I think the concept of buy undervalued and wait for them to rise is more a long-term strategy - not something you'd expect to perform outstandingly in just two or three years of a strong bull market.

So I'm not sure that it's really a fair comparison. Of more interest would be the comparison after 15 or 20 years, when the market has been through flat periods and bear periods. While I would personally expect a _good_ technical analyst to outperform the value investor, I would also think the technical analyst would have to spend a lot more hours doing so, and a not-so-good technical analyst may well be buried and gone by then.

Cheers,
GP


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## TheRage (17 January 2008)

tech/a said:


> Just one question.
> 
> How do you know that the rules you are applying--be it fundamental or technical will turn you a profit.
> https://www.aussiestockforums.com/forums/showthread.php?t=2829&highlight=ducati




I treat my portfolio like a business which I am sure you can appreciate.

Gross Profit = Distributions (Dividends) + Realised Capital Gains

Taxable Income = Gross Profit (50% Capital gains discount applied) - allowable deductions (Brokerage, capital losses) - 
Tax Liability = Taxable income applied at marginal rate adding back imputation credits.
Net Profit = Gross Profit minus Tax Liability


However I also have an Absolute net profit calculation including unrealised and realised gains and losses which essentially includes these items into the above calculation. While I conceed that adding realised and unrealised gains and losses into Net Profit is not perfect should I simply ignore the large internal gains that I might have in a few stocks. Moreover one could argue if I have been holding onto a dog, which I haven't, should I ignore this loss until realised. The only difference in our approach Tech is that if you have a share which has been affected by market weakness even if you have a massive gain within you will sell based on your stop loss. I hold if there is no specific stock weakness as the tax on the gain could be greater than the small market correction. If the stock has both fundamental weakness or technical weakness during a bull run I will sell but to sell all my current holding which will probably occur soon for most techies depending on what their % stop losses are would mean I would have a pile of cash and a pile of tax that I owe. Probably not a bad thing you might argue but again in 15 years I might have saved on tax, brokerage and have greater gains (through 1 yr holding rule) within a small number of shares or I might be on the dust heap with Ducatti and Realist. Only time will tell. 

I think GP hit the nail on the head also. A 15 year comparison between the two methods would be much more meaningful.


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## Real1ty (17 January 2008)

With all due respect to the Technical traders you certainly didn't need to be a Techie to see what was coming.

Apart from the long term investors i categorize the ones losing now in these brackets

1: Have not been trading long enough to have seen a bear market or long corrections.
2: Have seen bear markets but due to the fact that it has been so easy to make profits in recent years had forgotten all about risk tolerance.
3: The ignorant.

I must admit i waited too long to sell out last year and saw some worrying signs mid year, that, well i suppose i was hoping things would turn around.

I sold out every profit, apart from goldies, i had in early December amid the cries of "Lemming" from a few on here.
I also put all my super into cash and advised family and friends to do the same.

I didn't sell on fear i sold on facts.
There was so many signs that things were going to get nasty and the only uncertainty was how bad was it going to get.

My point being that as much as T/A is a fantastic tool, it wasn't needed to pick this one.

Even Blind Freddie saw this one coming.


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## tech/a (17 January 2008)

GreatPig said:


> I would imagine few stocks would have seemed fundamentally undervalued during the bull run, and I think the concept of buy undervalued and wait for them to rise is more a long-term strategy - not something you'd expect to perform outstandingly in just two or three years of a strong bull market.




The question I have is why do I see stock bought as undervalued then held while it devalues even more---without the analyst buying more---in Ducs case some stock fell a further 50% from his Under valuation.



> So I'm not sure that it's really a fair comparison. Of more interest would be the comparison after 15 or 20 years, when the market has been through flat periods and bear periods. While I would personally expect a _good_ technical analyst to outperform the value investor, I would also think the technical analyst would have to spend a lot more hours doing so, and a not-so-good technical analyst may well be buried and gone by then.
> 
> Cheers,
> GP




Well we wont see that and even if started now I probably wont see the result! The Techie would have the edge due to opportunity cost encountered by the Fundi holding through thick and thin.

The BIG advantage is OPPORTUNITY COST which Techies can take advantage of by using stops.



> The only difference in our approach Tech is that if you have a share which has been affected by market weakness even if you have a massive gain within you will sell based on your stop loss. I hold if there is no specific stock weakness as the tax on the gain could be greater than the small market correction.




Very valid point re tax one I learnt a few years ago!
Selling gain is normally governed by an exit rather than stop loss which is the initial risk----but I know what you mean.



> If the stock has both fundamental weakness or technical weakness during a bull run I will sell but to sell all my current holding which will probably occur soon for most techies depending on what their % stop losses are would mean I would have a pile of cash and a pile of tax that I owe. Probably not a bad thing you might argue but again in 15 years I might have saved on tax, brokerage and have greater gains (through 1 yr holding rule) within a small number of shares or I might be on the dust heap with Ducatti and Realist. Only time will tell.




True MIGHT.If I take the gain I put away the tax and carry on. 



> My point being that as much as T/A is a fantastic tool, it wasn't needed to pick this one.




May be so for some.
However I doubt you can beat T/A for *timing.*
Its common knowledge that I sold out of all longterm portfolio's 16/7/07.

Again APPLICATION.


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## Kauri (17 January 2008)

Real1ty said:


> With all due respect to the Technical traders you certainly didn't need to be a Techie to see what was coming.
> 
> 
> My point being that as much as T/A is a fantastic tool, it wasn't needed to pick this one.
> ...





  I am soooo dissapointed.. wit ..the number of fully sighted Freddies who saw this coming but declined to share it with their fellow punters on boards such as this one..  
Cheers
..........Kauri


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## MS+Tradesim (17 January 2008)

Kauri said:


> I am soooo dissapointed.. wit ..the number of fully sighted Freddies who saw this coming but declined to share it with their fellow punters on boards such as this one..
> Cheers
> ..........Kauri




Haven't the last few months on the forum just been one big argument between those who saw it coming and the permabulls who are now waiting at the abbatoir for their turn?  

Or maybe you're being sarcastic.....


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## Real1ty (17 January 2008)

Kauri said:


> I am soooo dissapointed.. wit ..the number of fully sighted Freddies who saw this coming but declined to share it with their fellow punters on boards such as this one..
> Cheers
> ..........Kauri




Oh but we did Kauri.

Thing is some bulls snort and make a lot more noise than a bear, hence the bear is drowned out and retreats to his cave.

Or is the bear a Lemming?......


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## Kauri (17 January 2008)

Real1ty said:


> *Oh but we did Kauri.*
> 
> Thing is some bulls snort and make a lot more noise than a bear, hence the bear is drowned out and retreats to his cave.
> 
> Or is the bear a Lemming?......




 Your posts indicate that you sold out on 17th December... 
 I personally don't see that as .. *seeing it coming*... 
 we were well into (by about 10%??) the correction by then
  I think even the _experts_ on TV were calling it by then..
   surely??
  or not??
Cheers
..........Kauri


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## MS+Tradesim (17 January 2008)

EDIT: deleted as Kauri was talking to someone else.


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## Real1ty (17 January 2008)

Did you actually read my above post or run off to prove it wrong without reading?


> I must admit i waited too long to sell out last year and saw some worrying signs mid year, that, well i suppose i was hoping things would turn around.
> 
> I sold out every profit, apart from goldies, i had in early December amid the cries of "Lemming" from a few on here.
> I also put all my super into cash and advised family and friends to do the same.




I have said repeatedly in this thread that i am not having a go at the Techies, they do great work, but it was very obvious, i suppose as you said, it just depends on when.
It appears you think i am having a go at the Techies or even you in particular as you seem to have taken exception to it.
So much so that you have searched my history in an attempt to discredit my statement.
There are many on here that still don't believe in it.
Each to their own.

Interesting i also spoke about how much worse it would be here and the risk of Australian banks lifting their rates but of course you didn't point that out, as it doesn't suit your argument.

Anyway i don't want to get into a tit for tat argument with you so i will leave it at that.


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## tech/a (17 January 2008)

Kauri.
I was a little earlier 27/7/07 (thought it was the 16th!)

But also gave you the XJO top. 6880 Well it made 6851!


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## Kauri (17 January 2008)

Real1ty said:


> Did you actually read my above post or run off to prove it wrong without reading?
> 
> 
> I have said repeatedly in this thread that i am not having a go at the Techies, they do great work, but it was very obvious, i suppose as you said, it just depends on when.
> ...




 No argument from me... I try to deal in facts... quite simple..really..
 I do however applaud your foresight in mid-December to anticipate rate rises.. and also seeing that it could get worse...
 Anyways.. this wont get either of us anywhere so I humbly withdraw to my paddock..

  Cheers
...........Kauri   :frosty:


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## Kauri (17 January 2008)

tech/a said:


> Kauri.
> I was a little earlier 27/7/07 (thought it was the 16th!)
> 
> But also gave you the XJO top. 6880 Well it made 6851!




 Hi Tech
            Long time- no hear.. hows the new trading set-up going?? 
   Your calls always interest me... one of the few I pay attention to  
   Like yours, mine are out there, posted in Real Time, warts and all, for all and sundry to see...  certainly keeps you honest    ..
 Cheers
...........Kauri


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## ithatheekret (17 January 2008)

I'm no techy but they have had a good run over the last few yaers , as I feel the whole market was technically traded .

It wasn't technicals that alerted me to the coming drop on our indices though , it was pure fundamentals .

I will *never* argue a point with a fundamentally minded trader , because they have done their math , and the math will show the bottom line .

Technicals show the trend that the market is in and that is important , because the markets always look forward in pricing and *always* goes too far either way .

Fundamentals bring it back into line and discipline enters the fundamental trader , whom I'm sure has looked at the chart for an entry level , based on his or her calculations .

I nearly posted this in the books versus forums thread , but firstly learn the math , secondly read all the technical books you can get your hands on , listen intently to the markets sirens and seperate them from the background noise . 

If you feel you aren't upto fundies , try taking on an external TAFE course to brush up your skills if you need to dust off and get the grey matter working again and bring yourself upto market speed .

I could quote quite a few posters here that have a complete understanding of this principle , but a short look about will find you many NPV solutions etc. plainly posted for you to brush your calculations up on .

If you want to succeed , first you must be willing to walk the walk , before you talk the talk .


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## Real1ty (17 January 2008)

Kauri said:


> Hi Tech
> Long time- no hear.. hows the new trading set-up going??
> Your calls always interest me... one of the few I pay attention to
> Like yours, mine are out there, posted in Real Time, warts and all, for all and sundry to see...  certainly keeps you honest    ..
> ...




LOL, have a sook mate.

"Oh the bad man made a comment that i didn't like, so i will make snide remarks until mummy kisses it better"

Have you thrown yourself on the floor in a temper tantrum yet?

Bit hard for me to put my thought in writing when i wasn't even a member at that stage.

Of course, i am just a BS artist, so you can safely disreguard anything i say from now on.

Would you like a tissue?


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## Kauri (17 January 2008)

Real1ty said:


> LOL, have a sook mate.
> 
> "Oh the bad man made a comment that i didn't like, so i will make snide remarks until mummy kisses it better"
> 
> ...



 
 Sorry mate.... that post was directed to Tech/A...  

Originally Posted by *Kauri* 

 
_Hi Tech
Long time- no hear.. hows the new trading set-up going?? 
Your calls always interest me... one of the few I pay attention to  
Like yours, mine are out there, posted in Real Time, warts and all, for all and sundry to see... certainly keeps you honest  ..
Cheers
...........Kauri_


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## Frank D (17 January 2008)

While you guys are sitting on your hands, i'm back into banking stocks this week, bought ANZ , WBC, and picked up CBA @ 51.70 today....

I'm looking for counter-trend rallies upwards back where we started from the Yearly sell-offs......

Place those stocks in the bottom draw and repeat the process next year....

cheers
Frank


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## GreatPig (17 January 2008)

I'm looking for a little of that myself. Picked up SGM and TOL on Monday, with SGM up 9.9% and TOL up 3.6% since purchase. I'm hoping TOL will break back up through the gap for another run up. Both are being closely watched however.

Cheers,
GP


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## dhukka (17 January 2008)

tech/a said:


> Ducati's rules were just crazy---but as a fundamental analyst he was/is pretty damned good.




Let me respectfully disagree. I admit to initially thinking that ducati knew what he was talking about. But as the months progressed it became more and more obvious that the didn't. I would ask anyone who can be bothered, to go back through the BHP thread and see ducati's analysis of BHP's FY07 results. It is woefully amateurish.  

The reason he doesn't post anywhere anymore is because I took him to task with some analysis on his blog. He put out his usually vitriolic analysis of a company that did not deserve it. I pointed out several glaring errors in his calculations and his understanding of balance sheets. He tried to defend himself but just ended up digging himself into a bigger hole. After a couple of days of back and forth on his blog about this particular stock he deleted his blog altogether and has not posted here since either.

Ducati called himself an arb trader but I suspect that is merely just a mask for the fact that he does not have the courage of his convictions to buy stocks based on the fundamentals he presumes to know. There are a few others on this forum, such as ROE, that know far more about fundamentals and estimating a company's intrinsic value than ducati ever did.


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## tech/a (17 January 2008)

> secondly read all the technical books you can get your hands on




Don't know about that.
Id be inclined to suggest specialising in one or a couple of Technical trading methodologies if trading shorter term.



> While you guys are sitting on your hands,




Frank its a discussion,doesn't mean we're doing SFA.



> Ducati called himself an arb trader but I suspect that is merely just a mask for the fact that he does not have the courage of his convictions to buy stocks based on the fundamentals he presumes to know.




Id say that's a fair assessment.


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## happytrader (17 January 2008)

Julia said:


> Yes, Duc was probably the most obstinate person I've ever come across in terms of his belief in his rules.  It was perfectly obvious from his results that he was failing to achieve a profit, but he refused to reconsider what he was doing.




Hi Julia

I thought it was rather sad that Mr Ducati put his ego above his burning desire to trade like a trader. 

We all have expectations about what we think should happen or how its supposed to be. I myself was waiting for a Santa Claus rally that did not eventuate. So there I was out in the middle of nowhere on my mobile trying to sell at market with an obviously new broker. But get me out he did. I love brokers who follow orders without offering an opinion. Anyway that stop was my assurance that I could and would live to trade another day. The market is always right is a definite.

Cheers
Happytrader


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## Smurf1976 (17 January 2008)

Timmy said:


> There is a role for fundamentals, but for me it is economic fundamentals.
> 
> I have no problem with a true value investment approach either - and like  you and doctorj have said, such investors without excess leverage will have no concerns.



I haven't actually checked the value of any of my long term stocks this year and don't feel any need to. Might now just for curiosity.

IMO if you're a "long term" investor and are getting a bit worried then you're not really a long term investor. Either that or you doubt your original decision to invest.


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## theasxgorilla (17 January 2008)

ithatheekret said:


> I'm no techy but they have had a good run over the last few yaers , as I feel the whole market was technically traded .




Proportionally I seriously doubt that technically traded money makes up hardly any of the market cap gushing around in the ASX.  Even the largest tech funds are dwarfed by the largest fundamentally or macro eco driven investors.

By matter of course technical trading depends on a greater proportion of fundamental or at least sentimental market activity.  That technical trading can self perpetuate sounds theoreticallys possible, but it would seem from what the informed say about it that when technically traded money gets too big relative to the aforementioned types then the techniques stop working.

ASX.G


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## BSD (17 January 2008)

Bit of a back slapping session here, so let me take the 'other' point of view. Not to denigrate techies, but to make a case for fundies. 

A couple of points:

1.
Ducati does not represent a good fundamental analyst. He was an often-wrong backward looking egotist. 

2.
Fundamentalists do sell. When the view of the fundamentals aren't what they used to be or when the price exceeds the value by a mile, they sell.

The stocks in my portfolios have not been sold (despite the horrid looking charts) because they continue to offer large upside to my valuation and their business model is unaffected by the things people are panicking about.

3.
I have been taking this opportunity to pick up some wonderful bargains. 

Many (not all) of the largest profits I have made in the past have been from buying 'falling knives' or other stocks that look terrible on charts.

When panic sets in - great opportunities abound because they look terrible on charts and the techs join with the overleveraged and bang-out shares at incredible prices. You get the 'panic discount'.

Nothing has changed, the business is still making the same amount as previously estimated or the copper/oil/gold etc is still in the ground, but the panic is letting me buy at 20%-50% discounts. Lovely. 

4.
The ten-baggers in my portfolio all looked terrible on charts many times during my holding periods and many times the greatest gains have been made in 'gaps' not able to be profited from through charts. 

The stock looked awful and then BAM it is 15% higher.

The flipside of this occurs too. Looks great, going up, then BAM - something actually changes and the stock is flogged. I have sold many times and sucked a sausage in this scenario. 

5.
Not all fundies are yield/PE obsessives, just as all techies aren't obsessed with RSI (which has been flashing oversold for the last week !) Good fundies are both micro and macro focussed and understand all the approriate means of measuring value and are able to match each technique to the appropriate scenario/industry. 

6.
Someone noted that green investors are likely to be fundies, I totally disagree. A great percentage of newbies are chartists with a margin loan and a discount broker / CFD account.

I am a massive advocate of getting ADVICE. Note the article in the Fin today stating that of the 500 Commsec margin calls, 90% were from accounts with no adviser.

Instos that operate billion dollar accounts are sponges for research from multiple parties - they take in research and ideas from multiple parties. I cannot understand why people trade their own money without being exposed to advice - you don't have to always agree!

7.
If you are a trader, buy the AFR daily FFS. How many times are there questions posted on here and 20 wrong replies are made, when the answer relates to an article in the Financial Review? Street Talk is laden with inside info!

8.
The best part of fundamental analysis is that if nothing has really changed, when the backside falls out of the market, you are excited about finally having something to buy and not sh!tting yourself about whether to hold or sell your rubbish portfolio full of previous high flyers.



I look at charts all the time - but to use them exclusively in managing an equities portfolio, for mine, is a bit of a mugs game. 


Oh and TechA, I dont think that by backtesting any 'system' you can prove any 'mechanical system' will make money. Don't be fooled by randomness.

 I could offer a historic comparison of some of my portfolios to 'compete' with your model - but nothing is proved because the next ten years in the market is going to be very different to the last ten. Backtesting proves very little. 

But, when will you re-stock your 'long-term portfolio'? 


Some serious questions for the chartists:

How much of a rally will the XJO need to make before the index is a buy?

Did you buy stocks post-August and how much of the rally did you miss?

Did you get sucked into the November rally?


A lot of this is irrellevent to the guys punting currency, indicies and commods - you are comparing apples to oranges.


----------



## theasxgorilla (17 January 2008)

BSD said:


> Oh and TechA, I dont think that by backtesting any 'system' you can prove any 'mechanical system' will make money. Don't be fooled by randomness.
> 
> I could offer a historic comparison of some of my portfolios to 'compete' with your model - but nothing is proved because the next ten years in the market is going to be very different to the last ten. Backtesting proves very little.




You're right.  Backtesting proves that you could find a path through historical data using mathematical equations, and that's all in essence.  That's where the concept of robustness comes in.

Markets are theoretically random but in practice trends occur in such a way that a robust system should stand a good chance of capturing them.  Adapting a system so that it can do so as the years roll on and the nuances of market activity change is the 'art' of system design.

ASX.G


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## theasxgorilla (17 January 2008)

BSD said:


> Some serious questions for the chartists:
> 
> How much of a rally will the XJO need to make before the index is a buy?




We should get Stevo in here...he uses an index, the XSO I believe, to switch his system on and off ie. to take new buy signals if he has the capital available.  But he doesn't buy the index (to the best of my knowledge).  And why would you...a market cap weighted portfolio is one of the best things you can do to sacrifice alpha.



BSD said:


> Did you buy stocks post-August and how much of the rally did you miss?




Once again, Stevo would be handy to have around here.  I believe he made 8% and 8% in the months following the August correction.



BSD said:


> Did you get sucked into the November rally?




As the saying about lotteries go, you gotta be in it to win it.

ASX.G


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## tech/a (17 January 2008)

*BSD.*

What you say relative to your own trading makes perfect sense. In fact not unlike in many ways to long term technical holding. The model which is still running live similar to those I have closed myself is now mostly cash and not a lot different from the sort of returns on capital I made back 6 mths ago when selling out.

*ASX*
Agree very few technical traders relative to Fundamental.



> Markets are theoretically random but in practice trends occur in such a way that a robust system should stand a good chance of capturing them.




Agree again but my view is that your trading crowd behaviour which is anything but random.The bigger the crowd the more likely it is to conform.

*BSD*



> Oh and TechA, I dont think that by backtesting any 'system' you can prove any 'mechanical system' will make money. Don't be fooled by randomness.




Well I don't agree.I can certainly prove that a losing tested system will lose in practice.
Every system I have developed and seen developed with sound testing methodology and positive expectancy has returned a profit.I'm yet to see one that hasn't.
Mind you I've only seen around 15 fully tested that meet the criteria for a robust system.

Seen 100s fail that don't.



> I could offer a historic comparison of some of my portfolios to 'compete' with your model - but nothing is proved because the next ten years in the market is going to be very different to the last ten. Back testing proves very little.




Proves little even in comparing in hind site as each is likely to have very different objectives.Profit being the common denominator.



> But, when will you re-stock your 'long-term portfolio'?




When I feel (Through analysis) that long term trading should be resumed. Technically there is another leg to go on monthly charts but this may take years to develop---let it unfold--patience is everything. If I've learnt one thing its "Let the trade COME to you."


Some serious questions for the chartists:



> How much of a rally will the XJO need to make before the index is a buy?




There will be many rallies that's not what this techie will be looking for LONG term---short term yes.
The index it self will be a buy often in this corrective bear market type phase,but a trend suitable for long-term holds will become clear.



> Did you buy stocks post-August and how much of the rally did you miss?




Yes short term trades did quite a few buggerised around with the pennies. Made a bit lost a bit--- got me thinking.



> Did you get sucked into the November rally?




Yes made a bit lost a bit. No better or worse than most I suspect.Trading short term only.


----------



## BBand (17 January 2008)

Hi,
Do investors use a business plan?

If so, surely they must have some price cut off point where its in their best interest to sell a stock and put their money to better use?
or
even sell a stock and buy it back later at a better price.

I trade my super - so I can't afford to gamble
Just now I'm 100% cash (I only trade long - at present)

Peter


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## IFocus (17 January 2008)

I struggle a little comparing the the two strategies and try to decipher if one is better than another.

How you take profits from the market and *KEEP IT* largely depends on having a well researched plan and the psychology to implement it FA or TA has little bearing.

From my own observations people using TA create cash flow (my own objective) people using FA create wealth real wealth.

One guy I know well has within ten years grown his account un-leveraged to be able to retire in his early 40's 3 years ago using FA. Richard Farleigh author Taming the Lion walked away with $100 mill or more from If remember correctly largely using FA.

I will say it again how you take profits from the market and *KEEP IT* largely depends on having a well researched plan and the psychology to implement it

IMHO using Fundamentals to identify mega trends and TA to time entry / exit is where the big money is.....I am not that smart so I just use TA thinking about two things at the same time is just beyond me! 


Focus


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## Wysiwyg (17 January 2008)

IFocus said:


> I struggle a little comparing the the two strategies and try to decipher if one is better than another.
> 
> How you take profits from the market and *KEEP IT* largely depends on having a well researched plan and the psychology to implement it FA or TA has little bearing.
> 
> ...




My thoughts too.Apart from the psychological bit.(lack discipline)Another gem posted earlier  was "let the trade come to you".How often (through boredom for me) does anyone buy in only to see the good trade show up within weeks.

I suppose it all connects somehow, the dud trade leads to the good trade and vice versa.Learning from `in the kitchen` experiences is the most direct i feel.


----------



## wayneL (17 January 2008)

OK First off, I never intended this thread to become a pie fight between TA and FA (though should have realized it would).

Clearly there are some expert FAers who, because of their time frame and method of investing have no need for TA at all. Equally clear, is that there are TAers who, because of their time frame and method, who likewise have no requirement of FA. There are also those who use a combination very successfully.

Nothing wrong with either approach and I hope folks stop bagging each other.

My point in the OP was not to try to get anyone to switch holus bolus to TA, not at all. But there are a number of folks who are trading non technically, whether it be fundamentally but with the wrong time frame, with inadequate FA skill, on sentiment, rumour, social proof or whatever, who would benefit from adding some technical aspects to their trading.

Thats all.



BSD said:


> Some serious questions for the chartists:
> 
> How much of a rally will the XJO need to make before the index is a buy? Should be irrelevant to most stock traders as there are components of the index which will be buys, even if the index is dreadful.
> 
> ...




It's not about comparing, but using tools that help.


----------



## weird (17 January 2008)

> with inadequate FA skill, on sentiment, rumour, social proof or whatever, who would benefit from adding some technical aspects to their trading.




I noticed you missed astrology ... 



> http://www.luckydays.tv/stock_markets.html,
> 
> "Update January 2, 2008:
> Right on cue, the markets started dropping in the new year, after the Sun-Jupiter conjunction a week ago. This is actually getting quite boring. I just want to talk about why I don't think that the markets will crash this year, around Monday, October 6, 2008, even though quite a few of the planetary conditions that cause crashes will be in effect at that time. Primarily, Saturn will be forming its opposition with Uranus: hard Uranus-Saturn aspects have definitely caused crashes and slumps in the past. The Sun will be square to Jupiter. Mercury will be turning retrograde on September 24th. But the reason I don't think it will crash that week is because of the benevolent aspects both Venus and Jupiter will be making to each other and the Sun and Saturn at the same time. This indicates that it is likely that there will be a big scare in the global stock markets around the first week of October, 2008, but that governments (Saturn/Jupiter) will inject massive amounts of money into the markets that will buoy them up for a while longer. Also, it is an even year. I think they will drop about 10 percent, then recover again in preparation for the huge double-crashes of 2009 and 2011. That is why I still maintain that the first big crash will be around August 14, 2009. "


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## cordelia (17 January 2008)

well..i don't feel embarrased about admiting this but I have been trading stocks for around five years based on whether or not I had a good feeling about them. Sometimes I just liked their name.... and ( before you start laughing ) I have made a lot of money. I guess I was just lucky that it was a bull market. 

 But recently my intuition stopped working and I began losing money. So I got myself a book on TA and stumbled across this forum. There has been a lot of good advice here..so thanks alot. I have saved a huge amount of money by exiting the market based on TA and assessing the opinions of people in this forum. isn't consumer sentiment a fundamental? 

I think both have a place....but I am deinitely no expert


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## BSD (17 January 2008)

*How much of a rally will the XJO need to make before the index is a buy? *

_Should be irrelevant to most stock traders as there are components of the index which will be buys, even if the index is dreadful._

Sure, but surely the all-knowing charts can predict the direction of the XJO? 

If they can pick the currencies and commodities they should also pick the winner of the Superbowl too (based on the charted price of the Patriots). Why not?

The majority of equity dealers at the moment are looking at charts to get a 'feel' for the bottom or the next 'target' for the market. 

Despite the apparent irrevelevence of the value weighted index that is the XJO - why would charts work any better for predicting the future on any other price/time function?

--

*Did you buy stocks post-August and how much of the rally did you miss?*

_Will depend on the individual technicians parameters_

Looking for someone who was a bold seller as the market crapped-out to own up to when they re-entered. How many re-entered above their sale price?

*Did you get sucked into the November rally?*.

_ Not a point of being sucked in, it's a point of entering and exiting according to your parameters_

Well I dipped heaps of cash into the market in the sucker rally in November fuelled by US data that turned out to be noise.

Point is, I didnt sell in Dec/Jan, because nothing (in my view) has changed apart from sentiment. A pure discliplened techo would be well in front of me now - but lets see how it is in May? 

*A lot of this is irrellevent to the guys punting currency, indicies and commods - you are comparing apples to oranges.*

_Not necesarily, a technical system is a technical system. I use exactly the same method whether stocks, gold, pork bellies, or 17th century thimbles_

Superbowl prediction please...

I am not trying to do anything but raise interest in the discussion and make people think. You guys obviously do well, so congrats and why change?

In the spirit of the thread, I am trying to note that rather than being panicked by margin calls, I am excited by opportunities and ambivalent to mark to mark losses.


----------



## wayneL (17 January 2008)

BSD said:


> *How much of a rally will the XJO need to make before the index is a buy? *
> 
> _Should be irrelevant to most stock traders as there are components of the index which will be buys, even if the index is dreadful._
> 
> ...



BSD,

A common criticism of technicals is that they try to "predict" direction. It's a fair criticism in those instances where it is actually true. This is restricted to a minority of Gannists and nooooobs who don't understand what they are doing.

In the vast majority of cases, technicians don't try to predict at all, rather they are reacting to market movements in various ways in order to create a positive result, using expectancy and demi-fancy concepts like that.

When I place a trade, I haven't a goddamn clue where it's going next, but, I still have a positive expectancy of profit. Sure, I try to up my odds by trying to pick trends, patterns etc., but as we all know, it's generally a 50/50 proposition.

It's the technicals that create the profit from the chances I have taken over a number of trades, not the fact that I predicted anything.

This is why fundies criticisms of techies are generally, misguided, misinformed and unfair.

The fact that some techie in an insto is trying to "predict", doesn't make him or here any less a muppet than the clown at home trading in his underware. It's the wrong application of TA.


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## BSD (18 January 2008)

I hope people listen and learn from you Wayne. I don't disagree with you, but I wont be stopping reading analyst reports and equity strategy any time soon.

I also don't think many traders have the same focus and discipline you must have. It is absolutely something required for your style - can you imagine working 10 hours a day in another role while still doing your trades? 

I actually believe what you do is 90% money management and discipline  rather than analysing patterns, shapes and graphs.

I also still have the nagging belief that if you focussed your seriously disciplined mindset on studying fundamentals, you would be doing even better than you must be doing now...

Tough firmly in cheek


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## wayneL (18 January 2008)

BSD said:


> I hope people listen and learn from you Wayne. I don't disagree with you, but I wont be stopping reading analyst reports and equity strategy any time soon.
> 
> I also don't think many traders have the same focus and discipline you must have. It is absolutely something required for your style - can you imagine working 10 hours a day in another role while still doing your trades?



Not the way I currently trade, however, I could simple morph my style to suit.

Working 10 hours a day, presumably would bring in a tidy income. Therefore I could stand a bit of drawdown in my trading. As trading is my income I trade to suit. (actually I have a little job over here )



BSD said:


> I actually believe what you do is 90% money management and discipline  rather than analysing patterns, shapes and graphs.



The best money management practices in the world cannot overcome a negative expectancy. MM is very important, but you MUST have a positive expectancy first.



BSD said:


> I also still have the nagging belief that if you focussed your seriously disciplined mindset on studying fundamentals, you would be doing even better than you must be doing now...
> 
> Tough firmly in cheek



There are actually two components to FA IMO, 1/ crunching the numbers 2/ analyzing how the market will perceive the numbers and extrapolating a value from there.

Let me be the first to admit that I have great trouble with 2/. This is shifting sand to me, I just don't get it. What the market perceives as cheap, or value, is entirely different to what I think.


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## tech/a (18 January 2008)

wayneL said:


> BSD,
> 
> A common criticism of technicals is that they try to "predict" direction. It's a fair criticism in those instances where it is actually true. This is restricted to a minority of Gannists and nooooobs who don't understand what they are doing.
> 
> ...




Wayne,good points.
But its more than that.

Radge put it best.

Prove,disprove,prove,disprove.
(If Trading Discretionary)

Take a technical set up.
Have it *Prove* it will do as the analysis suggests.
Then take the trade.

Question
If a fundie values a stock price to be $45 and its $34 they take the trade and 6 mths later its $24 then what?

Ive never heard of a fundie who has fessed up to copping a loss due to in correct valuation.
Even worse internals of a company can alter within a year that alter the valuation.
There seems to be no money management in the fundamental trading methodology.(Well that I've seen).
Even to position sizing,how is that governed,or just what you can afford.

To me 2 vastly different methods---cant be compared.


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## TheRage (18 January 2008)

Interesting discussion so far. I am enjoying reading both points of view.



tech/a said:


> Wayne,good points.
> 
> Question
> If a fundie values a stock price to be $45 and its $34 they take the trade and 6 mths later its $24 then what.
> ...




Tech I will attempt to answer your questions.

I try desparately not to buy a stock at intrinsic value. Rather depending on the risk of the stock as judged by micro and macro factors such as type of industry, previous range of Share Price movement etc I will have a criteria for % discount to Intrinsic valuation that I use. For higher risk stocks ie diversified financials I require a hgiher margin of safety before I will buy in, In this case 20% discount to intrinsic value. Safer less volatile stocks such as food retailers etc my intrinsic valuation would only require a valuation near intrinsic value. Therefore if I purchased a stock at discount, theoretically the stock should not retract further. Does this always work in practice of course not but the trick is analysing why the stock is at discount or near discount in the first place. If it is due to market weakness this presents a wonderful opportunity, if it is due to share weakness, then I am more wary but still intrested if I can analyse the impact and possible outcomes of the weakness. Perhaps the biggest mistake I have made in the past was jumping into a stock on my favoured businesses watch list and not timing my entry. Previously I did not have any discipline to buy except based on my valuation which can have it's problems as SP weakness is often due to sentiment. For this reason I start looking to time my entrys with a technical indicator. I look for a bit of support before buying in. Buying this way gives me twice the confirmation of my conviction or maybe twice as much chance of getting it wrong.

I am a fundie who is about to fess up to an incorrect valuation. When I first started out 7 years ago I bought based on P/E ratios and whether the company was at a discount to their industry average. This method is wrong!!! It is misleading. This is not a calculation of intrinsic value. Intrinsic value can be calculated using Discounted Cash Flow techniques as some on here employ or can be calculated using Equity growth in combination with a required rate of return. For instance I might require a return on a stock of 15% becasue it is higher risk than another stock which I might only require a 12% return. Again it depends on industry etc. Once I know what amount of compensation I require for the risk I am about to undertake I can calculate Sp based on hsitorical equity growth in a business. Equity growth (% change in Retained equity of time) in a company can't be bought but Earnings certainly can be as is the case with a number of ASX200 companies. If you buy another business with higher earnings than yourself it doesn't take a genius to figure out that the buying companies earnings will go up but so to will debt or dilution of equity will occur through a placement. Everyone looks to earnings as a guide to Sp movement but ultimately earnings are misleading. Once I understood this concept I have been able to value stocks more precisely but they require atleast 7 years of historical data to do so. 

Internals in a company can certainly change within a year that can change Sp, I will conceed this point. Usually though the internals will not affect long term growth if you have selected the company correctly.  But having an exit strategy is important also. I use stop losses but as I mentioned before if there is no specific fundamental change but Sp weakness is due to market weakness I will not intiate them as I will be taking open profits and creating a Gain. I would much prefer to hold for atleast 1 year to get 50% discount. I have two positions held for 2 years now and hope to hold indefinately. 

In terms of money management I do not diversify across ten positions of equal sizing. I split my sizing based on the potential risk reward. If I find a company at a large discount to intrinsic value for a reason which is insignificant to long term equity growth I will allocate a greater % of capital to this share. If I don't have money (Usually keep 20% in cash though) I will borrow. I have three shares in my portfolio that make up 70% of my  portfolio allocation. 

I agree you can't compare the methods, that's why I try to use both methods so that I get the best of both worlds.

By the way for the record it has taken me atleast 6years of mistakes to start to develop a plan for my investing/ Trading.

DYOR


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## tech/a (18 January 2008)

> Oh and TechA, I dont think that by backtesting any 'system' you can prove any 'mechanical system' will make money. Don't be fooled by randomness.




Just on this.
Systems testing design and implementation is generally misunderstood.

A system is simply a set of conditions with varying parameters (if you optimise),which if tested with sufficient data in in a robust manner and returns a positive expectancy---will return a profit within the range returned in Montecarlo testing---provided market condition do not fall outside the parameters used in testing.

All systems evidently will eventually fail as over the very long run market conditions alter---this could in the future be very much to do with technology as much as economic forces.

Has its place in trading.
*Rage *we crossed I'll have a read.
Thanks


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## tech/a (18 January 2008)

Rage.

Thanks for the comprehensive all be it condensed look at a fundies path.
I guess like a techie who has looked at 1000s of charts you can spot interesting annomolies very quickly,then spend the time honing a prospect.

Further question.
If the market or stock proves the analysis wrong (as it does with us techies) when do you "cop it" so to speak?
OR
When do you re value. If re valuation indicates still fair value have you or do you buy more?---regardless of market or company position---ie its falling in price for no apparent reason?


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## TheRage (18 January 2008)

tech/a said:


> Rage.
> 
> 
> Further question.
> ...




Tech you are making me think this morning aren't you .

You have identified what I call the faith aspect of a fundies conviciton. You are a clever possum for asking that. From my limited experience Sp fall is generally for a reason. Sometimes the reason doesn't become apparent until later on and hence why tech traders have exit points. Centro is perhaps a very good example of this. Sp weakness was there well before disclosure. However from a fundamentalist point of view Centro's intrinsic value was no where near $10. It was much lower especially given the risk involved. Highly leverage compaines like LPT's need a high return for me to be interested. I guess I haven't had a continually spiralling stock that I have had to contend with since improving my application. I don't buy falling knifes anymore. Use to but not anymore. The simple answer is if I bought at 20% discount to intrinsic value and Market fell 20% and Share did the same I would not sell. If share fell 10% for no apparent reason during an improving market, making it 30% to discount I would not proceed to buy more I would sell and see what was causing the ruckus and maybe wait for the waters to settle. Hasn't happened yet but I am aware that it might.

I revalue stocks at half yearly intervals when reports come out. Valuation should not change too dramatically because you have forecast the continuing assumption that the business will perform to your expecatation. If it does not then a revaluation is done and if the margin of safety no longer remains again time to sell. Hasn't happened yet but might. Again the technical indicators probably give some sign of this occuring before I have had time to analyse it and why I still look at them. If there is a definative downward trend forming in the absence of a general market downtrend I would sell. You are probably then going to ask me why wouldn't I just sell all of my positions in a falling market and buy back in when the dust settles. I guess this is something that I need to devise a calculation for what amount of further gain would be required to offset any potential tax. Once I have done this then maybe my reluctance for selling out during market weakness may not be so great. I hate paying tax and maybe this is my downfall in my applicaiton.


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## Trembling Hand (18 January 2008)

tech/a said:


> I guess like a techie who has looked at 1000s of charts you can spot interesting annomolies very quickly,then spend the time honing a prospect.






TheRage said:


> By the way for the record it has taken me atleast 6years of mistakes to start to develop a plan for my investing/ Trading.
> 
> DYOR




Both Techies and Fundies are doing the same thing.

Pattern recognition. Ones based on price the other on economic internals. 

Its the skill of trading that once the pattern is recognized that makes the dif no matter what the approach.


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## GreatPig (18 January 2008)

Frank D said:


> i'm back into banking stocks this week, bought ANZ , WBC, and picked up CBA



They would appear to have been good choices, as all four major banks are up a little today - nearly the only green stocks in my watchlist.

GP


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## Frank D (18 January 2008)

Banks are at 'fair value' pricing based on my model...

I buy banks when they hit these prices regardless of what the market is doing...  i'm not buying into Margin positions, it's all cash

It's not the time to be using margin atm ...

I understand the larger cycles in the market, and I know that markets can find support and consolidate for a number of weeks/months around certain levels.

I think in the bigger picture, markets will find support around these levels, maybe punch down a little, but will probably remain above these levels in this quarter...but not much upside either...

The next quarterly timeframe is then the big worry, because if this is the 2nd stage of a bear market, it will move to lower lows in the next Quarter and follows the larger yearly timeframes down, which will probably be into next year. 2009......

And i'll use 'fair pricing' again for 2009

I was looking for a 'blow-off' bottom in this Quarter, maybe today is the day...let's see where it closes

cheers
Frank


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## tech/a (18 January 2008)

*RAGE*



> You are probably then going to ask me why wouldn't I just sell all of my positions in a falling market and buy back in when the dust settles.




Funny you should mention this method.I've actually done some work in this area with regard to exiting or standing aside ---as a condition to be used as a filter for systems. Simply selling out when the market downturns doesnt help systems.However there is evidence that if a stock begins to under perform an index by X% then its exit could be beneficial.The amount of work required to test all variants of comparison with stocks and indexes is massive something that I don't currently have time for.

Another really interesting area Ive been working on is to create an index from your universe of stocks---in your case you have one the ASX 200 or XJO.Then make an index of your portfolio---compare the relative strength of your portfolio index to your index and or the Core index and use that as a filter.



> I guess this is something that I need to devise a calculation for what amount of further gain would be required to offset any potential tax.




This as we have mentioned is a very valid point however if the stock falls 30% and you still sell then you still have 50% capital gains if not held for 12 mths---actually compounding you dilemma.

The way I see it from your posts basically its hold tight if the market (Economic Conditions) are the cause of the down slide in your holding,if the market is OK and there is a noticeable slide without reason then sell.

Leads me to this question.

Economic slides CAN and do have an impact on the fundamentals of many businesses positive and negative,how do you pre-empt their effects on a company whilst holding it in the confidence that the down turn is economic rather than Company Fundamentals?

As You can see the only problems I have with Fundamentals is not the valuation getting in part but the getting out and evaluating risk.

For me its simply a line which if hit renders my analysis incorrect for the time being and my exposure limited to 1-2% of total capital.
I can always get back in.
However a 30% loss means I then need a 60% gain just to break even on any stock which blows out to the downside that amount or more!

Its not often you see a stock fall 30% then rise 60% in the near future.

*Not Saying one is better than the other* just finding those aspects I find difficult to comprehend and asking someone who knows far more about Fundamental trading that I probably ever will.


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## GreatPig (18 January 2008)

tech/a said:


> However a 30% loss means I then need a 60% gain just to break even



How do you figure that? Are you including tax or something?

Without considering tax or brokerage, a 30% drop needs a 43% gain to get back to break-even.

GP


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## TheRage (18 January 2008)

tech/a said:


> *RAGE*
> 
> 
> 
> ...




I am enjoying our conversation and have the utmost respect for some of the better technical traders on this site with yourself included. So I agree that there is not one better methodology.

To answer your questions I simply don't hold cyclic shares anymore. I buy into shares who's ultimate business growth is not dependant upon where the economy is going. As an example one share that I own has a significant marketshare over vitamins in this country with an ever increasing consumer base occuring due to the baby boom phase we are entering. I have confidence that the growth in this company will continue for some time yet despite an economy that might be busting.


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## tech/a (18 January 2008)

GreatPig said:


> How do you figure that? Are you including tax or something?
> 
> Without considering tax or brokerage, a 30% drop needs a 43% gain to get back to break-even.
> 
> GP




Sorry stand corrected.
Your correct.
However a 50% loss means a 100% gain to get back to even.
No wonder I'm a techie!

Rage.
Fair enough.
Some green technology stocks etc "Could" be placed in that lot.
Carnegie comes to mind.


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## The Barbarian Investor (18 January 2008)

Wysiwyg said:


> I have been meaning to say for ages, thankyou tech/a, for offering THE most valuable piece of investment strategy I have ever read.





And what was that


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## The Barbarian Investor (18 January 2008)

GreatPig said:


> They would appear to have been good choices, as all four major banks are up a little today - nearly the only green stocks in my watchlist.
> 
> GP




PKT was up 29% on my list


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## ROE (18 January 2008)

tech/a said:


> Sorry stand corrected.
> Your correct.
> However a 50% loss means a 100% gain to get back to even.
> No wonder I'm a techie!
> ...




Another way of looking at thing.

A stock can only go to down to Zero
and there is no limit going up 

for instance you buy 2 stocks each 10K each
1 stock can go to hell and hit 0 so you lose 10K
but the other stock could triple, quadruple or 10x


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## exberliner1 (18 January 2008)

I must admit it has been bl**dy easy here in Europe trading the indices on CFDs.... huge swings and double bottoms / tops galore making very easy change of direction triggers...

Shame it won't last - UK, Ireland and Germany have been like playing a computer sim for the past few days...only with real money.

Hopefully when it is all over my resource stocks will head back up again and the start of 2008 will just be a footnote in the history of the markets.

Be happy

EB


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## GreatPig (19 January 2008)

The Barbarian Investor said:


> PKT was up 29% on my list



Well I did say _nearly_, and I don't have PKT in my watchlist.

Cheers,
GP


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## dhukka (20 January 2008)

dhukka said:


> Let me respectfully disagree. I admit to initially thinking that ducati knew what he was talking about. But as the months progressed it became more and more obvious that the didn't. I would ask anyone who can be bothered, to go back through the BHP thread and see ducati's analysis of BHP's FY07 results. It is woefully amateurish.
> 
> The reason he doesn't post anywhere anymore is because I took him to task with some analysis on his blog. He put out his usually vitriolic analysis of a company that did not deserve it. I pointed out several glaring errors in his calculations and his understanding of balance sheets. He tried to defend himself but just ended up digging himself into a bigger hole. After a couple of days of back and forth on his blog about this particular stock he deleted his blog altogether and has not posted here since either.
> 
> Ducati called himself an arb trader but I suspect that is merely just a mask for the fact that he does not have the courage of his convictions to buy stocks based on the fundamentals he presumes to know. There are a few others on this forum, such as ROE, that know far more about fundamentals and estimating a company's intrinsic value than ducati ever did.




It seems I have been giving myself far too much credit. I was contacted by ducati, (you can read his comments on my blog at this post) who says that my claims about why he discontinued his blog and contributions to ASF are false. Actually he said 'lies'. 

The bit about him, (which is my opinion) not understanding company financials, as well as his self-proclaimed title of arb trader as a mask for his inability to apply fundamental analysis to stock picking, I steadfastly stand by.


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## tech/a (20 January 2008)

Actually never disliked duc,admired his guts to at least post up his convictions.
Albeit misguided as they were.

Few do this in the live arena.


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## ducati916 (20 January 2008)

I see this has gone public.
Fair enough.

The link to the blog pretty neatly sums up my stance.

What I dislike most is the cowardly manner of the attack. If you wish to have a brawl with me, then do it to my face like;

*tech
*BSD
*rederob
*others

To claim victory, when you achieved no such outcome.....pure lies.

jog on
d998


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## Mofra (20 January 2008)

wayneL said:


> As I read the tales of woe on this board and others, I can't help feeling a bit smug about being a technical trader.



wayneL,

Honest question - are you actually a technical trader?

I have read most of your posts over the years, noting you have a high degeree of technical literacy in terms of both charts & ETO greeks, and I have been struck by a strinking observation - for almost every technical position you have stated, you can provide the fundamental justification to support your positions. 

So does this fundamental understanding form part of your positon management (even as a confirmation)? If so wouldn't this make you closer to a techumentalist? (shaddup it is too a word!)


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## ducati916 (21 January 2008)

*dhukka*

I see that you have disabled the "comments" section of your blog already.
Didn't actually care to have the discussion face-to-face, man-to-man as it were.

I guess you just like to post comments behind peoples back's, months after the fact.

Here is the comment that I tried to leave on your blog 3mins ago;



> dhukka,
> 
> With regards to BHP. You state that it is not incumbent for you to to disprove my [or anyone elses's] analysis.
> 
> ...




jog on
d998

Note to management [Joe]

I realize that this is not particularly what you want on ASF.
It will be the last time that this matter is raised on ASF by myself.

d998


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## wayneL (21 January 2008)

Mofra said:


> wayneL,
> 
> Honest question - are you actually a technical trader?
> 
> ...




Well you've jolted me with this revelation, I can't say I ever "consciously" considered FA apart from in the macro sense. I'll have to ponder upon this.


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## ducati916 (21 January 2008)

*dhukka*

Here is my BHP analysis that appeared in August 2007 on this site.
As you are the ex-professional expert, and I am the inept bumbling amateur, perhaps you might wish to provide input?

After all, your comments within your post make it very clear what you think of my BHP analysis [along with CST of course]



> I originally posted this on the 29/August;
> 
> BHP released their financials early last week. Having now had a chance to read through them in-between Jury service, there are some interesting things going on.
> 
> ...


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## dhukka (21 January 2008)

ducati916 said:


> *dhukka*
> 
> I see that you have disabled the "comments" section of your blog already.
> Didn't actually care to have the discussion face-to-face, man-to-man as it were.
> ...




Yes I have enabled moderation on the comments section of my blog because as I said in my first reply to you, I want people to post comments about the posts themselves, not use it as a forum to vent over their bruised egos.

I have published your last two comments for the record but any subsequent posts from on that topic *will* be deleted. If you feel the need to clog up this forum with your nonsense go ahead. It's been publicly shown that your fundamental analysis skills are flawed but conveniently you deleted the evidence. Now you want to take up the debate again, sorry not interested. 

jog  on


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## Frank D (21 January 2008)

BHP hit my buy zone today....

Bought on open today....Dilernia Model fair Value pricing

Bottom draw holding...A new uptrend will take months to develop, or even longer.......

Aggressive bid on RIO will put a dampner on this stock imo


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