# Beginning an Investment Journey...



## Vader

I'm another newbie with delusions of granduer...

I've been inspired by Robusta's thread (great read btw), so in an effort to blunt any bad habits before they develop too far and accelerate my learning, I thought it would be a good idea to start documenting my progress on a public forum. At the very least, it will force me to own up to mistakes, better justify my decisions and hopefully make a positive contribution to this forum by providing a beginner-level, process-based perspective on my investment choices.

I've been lurking for some time now and have read many excellent threads from start to finish, but Robusta's in particular is one that I have been able to relate to a lot. Why's that? Well, 1. value investing makes sense to me, 2. I will also be using a Line of Credit to buy shares, and 3. I actually work for one of the companies Robusta currently has in his portfolio 

A little background... I'm in my late 30's, and while I haven't yet made a single trade in the sharemarket, it's been something I've been interested in for a long time... for one reason or another I haven't progressed it to the stage of actually buying shares, but now the time is right and preparations are well under way. Line of Credit will be finalised next week (just waiting on the valuation to see exactly how much they'll let me have, but everything is approved and ready to go). I haven't opened an online trading account just yet - will start that process in the next few days... I've done that on purpose so that I won't be tempted to jump in and start throwing money around the second the LoC money becomes available - kind of a forced cooling off period if you like 

...as for my trading plan - more on that in a few days (I'm in the process of sorting a few rules and getting some structure around it at the moment), but generally a focus on fundamentals and portfolio management are high on my ideals list.

Things I am currently doing now:

1. Reading "Bulls, Bears and a Croupier", by Matthew Kidman (and really enjoying it)
2. Putting together an Investment Plan... process is important on my list of priorities - and hopefully it will help me avoid a few mistakes.
3. Cleaning the house/yard getting it ready for valuation
4. Opening an online trading account 

...which brings me to a question.

After some examination and deliberation, I'm leaning towards Bell Direct as the place to open a trading account. It's not a decision that I am completely sold on yet... the only platform I've really had any sort of a play with before is ETrade (my father uses them), but even that was a pretty limited look around. 

Is there anything (obvious) I may have overlooked that should make me consider a different online broker? Comsec is the other main contender I was looking at - is there any compelling reason why you would recommend Comsec (or another broker) over Bell Direct? If you were starting from scratch today and could choose any online broker - what would you choose?

Anyway, that's long enough for my first post I think - will add some more detail over the coming days.


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## CanOz

You have now started the first phase of the beginners cycle. Expect a long painful experience.

Why would you even have a line of credit ready to deploy when you do not even have a trading plan yet? Its bad enough putting your own hard earned dollars at risk, but borrowed money WTF???

I doubt that you will be able to resist having a dip even though you haven't got a plan yet?

Once you have a plan, how do you know that it has a chance to work?

CanOz


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## McLovin

Vader said:


> After some examination and deliberation, I'm leaning towards Bell Direct as the place to open a trading account. It's not a decision that I am completely sold on yet... the only platform I've really had any sort of a play with before is ETrade (my father uses them), but even that was a pretty limited look around.
> 
> Is there anything (obvious) I may have overlooked that should make me consider a different online broker? Comsec is the other main contender I was looking at - is there any compelling reason why you would recommend Comsec (or another broker) over Bell Direct? If you were starting from scratch today and could choose any online broker - what would you choose?




Bell Direct's "cash account" is not a bank account, you are investing in Bell debentures which are used for margin loans to other clients. Just something to keep in mind.

I agree with CanOz, it's a pretty risky strategy to be getting a line of credit when you have never been involved with shares before. Stomaching a 40% paper loss is a lot different when you don't have your house on the line and you've experienced it before.


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## Julia

CanOz said:


> Why would you even have a line of credit ready to deploy when you do not even have a trading plan yet? Its bad enough putting your own hard earned dollars at risk, but borrowed money WTF???



+1.  I agree with Canoz and McLovin.  To *start off* with borrowed money is just asking for disaster.


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## CanOz

You know I've been swing trading stocks on and off for almost 7 years. 

When i recently decided to do this full-time, even with that previous experience and a mountain of capital, i stayed on the sim for nearly 8 months before putting real capital on the line.

I learned allot about myself.

Learn something about yourself first before you do this. You do not know how you will react when real $$$ are on the line.

CanOz


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## Vader

Yes, I know I'm about to start the 'beginner phase' and am aware of the implications that it brings... I'm not expecting to double my money in a year or anything crazy like that.  My trading plan, which is mostly complete, but will no doubt be strengthened and refined over time, should (hopefully) help me cut back on plenty of the usual beginner mistakes.

I've been paper trading for long enough - I very nearly bought shares in 2009 (had the Comsec application filled in), but our situation wasn't quite as comfortable and I held off... which I kind of regret to be honest, I set up the trades I would have made in portfolios in Google Finance at the time and the majority have done quite well, I've been tracking them on and off since then. 

...as for borrowing money.

Dual income, mortgage under control (payments well ahead), only borrowing to 80% of equity, interest paid will be tax deductible... in short, while it would certainly hurt if I lost all the funds, it would in no way be terminal. Would it make more sense to just invest the spare cash I have? Probably... but I would prefer to have a reasonable amount of cash at hand in case of emergencies and the leverage I can gain (whether good or bad) from a Line of Credit appeals to me... I won't be touching margin lending, the LoC will strictly be for investments only, so interest charges will only apply when I deploy the funds into shares and the interest rate is a very reasonable 6.73%.

Sometimes you just have to extend outside of your comfort zone... managing the risk can be a challenge, but I'm comfortable with the level of risk I'm taking on.


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## Vader

McLovin said:


> Bell Direct's "cash account" is not a bank account, you are investing in Bell debentures which are used for margin loans to other clients. Just something to keep in mind.




Thanks - that did concern me when I first read it, but I'm not planning on having cash sitting in their cash account for extended periods of time, I'll be moving it in and out depending on when trades need to be settled etc. (i.e. reducing the LoC instead of sitting in a cash account).


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## Trembling Hand

Vader said:


> Yes, I know I'm about to start the 'beginner phase' and am aware of the implications that it brings... I'm not expecting to double my money in a year or anything crazy like that.  My trading plan, which is mostly complete, but will no doubt be strengthened and refined over time, should (hopefully) help me cut back on plenty of the usual beginner mistakes.




I bet the trading plan wouldn't hold up to 2 minutes of scrutiny if you posted it here.

The "refined" over time is just out right crazy. What you are saying is that you will forward test your plan with borrowed money.

The "should (hopefully) help" is even worst from a reasonable guess you actually have no idea how your plan will perform or when its broken. 



Vader said:


> ...as for borrowing money.
> 
> Dual income, mortgage under control (payments well ahead), only borrowing to 80% of equity, interest paid will be tax deductible... in short, while it would certainly hurt if I lost all the funds, it would in no way be terminal. Would it make more sense to just invest the spare cash I have?



It would make more sense to pay it off quicker rather than digging another hole.


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## CanOz

Vader said:


> only borrowing to 80% of equity, interest paid will be tax deductible... in short, while it would certainly hurt if I lost all the funds, it would in no way be terminal.




Take half of your capital and go to the window on a dark and windy night.....open the window and throw out half of it....watch it fly away in the wind.....think about how that made you feel....

If your ok with it then off you go, knock yourself out. 

If not then go back and learn some more about your system until you have it fully validated and tested.



CanOz


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## Gringotts Bank

Vader, consider CMC stockbroking.  Bank-backed. $10 trades.

I'd say go for it, but not with borrowed money.

Also realize the odds of you making money are low.  About 10% of people who trade make money.  Roll the dice with some small trades and see how you go.  Get a feel for whether you enjoy it, and whether you can make money.


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## McLovin

Gringotts Bank said:


> Also realize the odds of you making money are low.  About 10% of people who trade make money.  Roll the dice with some small trades and see how you go.  Get a feel for whether you enjoy it, and whether you can make money.




I don't think Vader wants to trade (hence he posted in this forum). However, I think generally, long term investing (growth/value/whatever) is less suited to leverage than short term trading.


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## Vader

Thanks for all the concern 

Obviously I don't want to throw the money away, the aim is to increase it.

Would I be content with a 7% ROI in the first 5 years. Yes.
Is a 20% loss, even over that time frame possible. Yes.
Is a 50%+ loss possible. Yes.
Will I be using stop losses. Yes.
Do I think stop losses remove most of the risk. No.

...as for the mortgage - that will still be paid down with additional payments.

Should returns above 7% be realised, they will be used as further additional payments to pay it down even quicker. This is obviously the preferred situation to be in.

If returns are less than that. I can deduct the interest from my salary and carry forward any capital losses... I am aware that many of you would change 'If' to 'When'.

...as for forward testing vs back testing a 'plan', I will be investing for medium to long term in solid companies that I have some confidence in the underlying fundamentals. I'm not going to get into the fundamentals v TA argument that is adequately covered off in Robusta's thread. I will be posting my trading plan / strategy... I fully expect you all to pull it to pieces in 5 minutes... and I'm more than happy to take those comments on board and make it stronger.

This isn't a decision I've approached lightly. I am aware of the risks. I am comfortable with the risks. Feel free to call me an idiot now or in several months time if things are looking quite sick... I am an optimist though... I'll let you know in 6 months if I'm still optimistic


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## herzy

Interesting thread though, and good on you for opening yourself up to criticism! Very impressed, will follow this thread with interesting. I'm yet to make a trade myself, so no real advice to give (sorry!). 

The idea of using a LoC based on your house seems scary though, and something I would definitely try to avoid... I agree with the comment above, that borrowing would be more suited to trading than investing (long term).


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## Vader

herzy said:


> Interesting thread though, and good on you for opening yourself up to criticism! Very impressed, will follow this thread with interesting. I'm yet to make a trade myself, so no real advice to give (sorry!).




Oh believe me, I fully expected the responses I've got so far... I actually wrote the opening post three days ago and have been debating whether to post it or not 

As I said though, Robusta's thread has inspired me and while he's made a few mistakes along the way, he's also received some very good advice... is it a good start that I'm already ignoring the first piece of advice I'm getting? Probably not, we'll see... but in my defence all I can say is that the responses are not unexpected, they are arguments I have given considerable thought to before today, and ones that I have made a conscious decision to proceed against.

I did consider leaving the Line of Credit details out of my post, but ultimately that would have gone against what I wanted this thread to achieve... even if I can't justify my decision to everyone - I want to be comfortable that I can justify those decisions to myself.


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## lenny

Vader

Has your system got positive expectancy?

Lenny


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## CanOz

lenny said:


> Vader
> 
> Has your system got positive expectancy?
> 
> Lenny




OR even - do you understand what a positive expectancy is?

CanOz


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## tech/a

LOC

Youll need to return 10% on your money to B/E of costs.
If you drop 10% then youll be down 20%

You said you were going to pay attention to portfolio management.
Just interested in what it is you would do to manage your portfolio.
How will you position your stop loss--what criteria?
How will you position size?
How many in your eventual portfolio.

Have you considered a catastrophic even like Spain cant pay its debts and the market drop 400 points in a few days.
What if that happened and your were down 50% through ALL your stops.
What would you do?
Its happened more than once to me so it will one day happen to you!
The What would you do---will indicate where your at to many of us here.


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## Vader

tech/a said:


> LOC
> 
> Youll need to return 10% on your money to B/E of costs.
> If you drop 10% then youll be down 20%
> 
> You said you were going to pay attention to portfolio management.
> Just interested in what it is you would do to manage your portfolio.
> How will you position your stop loss--what criteria?
> How will you position size?
> How many in your eventual portfolio.
> 
> Have you considered a catastrophic even like Spain cant pay its debts and the market drop 400 points in a few days.
> What if that happened and your were down 50% through ALL your stops.
> What would you do?
> Its happened more than once to me so it will one day happen to you!
> The What would you do---will indicate where your at to many of us here.




Thanks T/A - Yes those are questions I have considered and over the next couple of days I plan to have them all written down, plastered to my wall and posted here for criticism.

@CanOz, @lenny
As for positive expectation and edges... yes I know what they are, I spent several years working in the gambling industry. In my teen years I spent countless hours trawling through data bases trying to back test horse racing 'systems' (btw, if anyone has a spare office on the Gold Coast, I've got a couple of fully back tested horse racing systems we could sell... they just don't work too well going forward).

Just to get it all out of the way now - I'm not going to be looking at a short term investment strategy that has been back tested and has a defined edge... I'm not sold on the future performance of historically tested metrics. That may change in the future - I love playing with data and databases - and I'm aware that there is sufficient evidence in predicting bevhaviour of a group and that many of you (and many others) make fantastic profits from this type of trading, but there are also plenty of others that aren't successful. I fully realise that trading with that kind of style should not be attempted without a significant amount of trial and error first.


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## CanOz

Well Vader, i echo others in their compliments to you doing this on ASF, I tried to do the same things years ago but my intermittent access to overseas sites disabled my attempt.

Godspeed!

CanOz


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## robusta

Thankful for the compliments on the thread I started, there have been a lot of quality posts from many investors I have learned a lot from.

Funny thing I do not remember such a hammering when I started maybe that is just a perspective thing. About the only advise I will give you is no matter what you do someone will disagree with you, just be honest with yourself and clear on your strategy. Having said that I have found it a positive experience.

I look forward to seeing your strategy and wish you the quality of criticism, advise, encouragement and discussion I have received.


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## peter2

Good to see you are using stop losses. Investors using FA can get their timing wrong just as often as the rest of us. Protecting the banks capital should be high on your trade management process. 

Since you are using SL's you will know how much you are risking in each trade and therefore the total portfolio heat. Keep your eye on this figure more than how much you have invested. As you move your SL's up your total risk is reduced allowing you to invest more until you are fully invested. I don't expect you to go from zero to hero (100%) within a few weeks of starting. 

The main message I would tell an FA investor is that it is OK to sell. You don't have to experience a horrendous draw down when economic conditions are bad.


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## So_Cynical

Good stuff Vader and welcome to the forum. 

You seem to have many thoughts similar to mine and a back ground fascination with gambling, particularly the pony's...the LOC is a risk for sure so just take it easy and bet conservatively on "good things" at the right time and at the right price.

-----------------------

In another thread recently i compared the stock market to a 1001 slot roulette wheel but you could also easily compare it to a race with 101 starters, all with identical form and weight etc, so the only thing between them at the end of the race will be luck in running.

The one massive advantage stock market punters have over sport punters is we get to choose to either accept or reject the result  you can choose to take your money off the table win/lose or let your money ride again for free...over and over and over and even get dividends along the way.

-------------

Beware the stop loss order as like pretty much everything in the market its a 2 edged sword, on the one hand it well get you out of a trade with only a small loss, on the other hand it can get you out of a trade at pretty much the exact time you should be entering/buying more....just look at all the times robusta sold stocks (over traded) that he should of been averaging down into or simply holding and giving the trade time to come good.

Anyway good luck.


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## cynic

After reading your various posts I can see that you're determined to engage the markets and I am satisfied that there is precious little that anyone could say to dissuade you. I believe you are about to have some experiences that  will be firmly implanted in your memory for many years to come.

The stockmarket is one of the more seductive and deceptive animals I've encountered within my current lifetime.
I believe that no amount of reading, backtesting, fronttesting/paper trading can adequately prepare one for the shocking experience one has when engaging the real market with real money. 

When I meet a newcomer to the market  I normally recommend that one keeps one's position sizes as conservative as practicable for as long as possible and to only invest/speculate/trade with money that one can readily afford to lose.

In my opinion, any newcomer to the current market is likely to sustain a significant loss of original capital within their first couple of years. I'd be more than happy for you to prove me wrong. 

Best of luck (coz I believe you're gonna really need it!)

P.S. Thanks for having the courage and conviction to post your ideas on this forum and please, regardless of what events transpire-keep posting your results/experiences. They may prove invaluable to other prospective newcomers.


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## Reasons

McLovin said:


> I don't think Vader wants to trade (hence he posted in this forum).




An astute observation and hopefully true.



CanOz said:


> Godspeed!




I think *CanOz* was being particularly polite and what he was really saying was if you actually *are *serious, he will send you his BSB and bank account number and get you to send him the total amount of your LoC in one transaction - it will save him having to pay brokerage and you will both achieve the statistically probable outcome in ‘Godspeed’.

Alternatively, learn about trading via a CFD platform like IG Markets, etc, where you can trade indicies, Forex, shares, etc for $1.00 per point or 1 share at whatever the going rate is for that share, test your theories, develop your trading processes (the objective is just to survive and learn, not make money) and you should then have enough capital to keep trading for a considerably long time until you (possibly) get your head around how complex this game is to play – and how simple it needs to be to eventually succeed.


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## Vader

peter2 said:


> Good to see you are using stop losses. Investors using FA can get their timing wrong just as often as the rest of us. Protecting the banks capital should be high on your trade management process.
> 
> Since you are using SL's you will know how much you are risking in each trade and therefore the total portfolio heat. Keep your eye on this figure more than how much you have invested. As you move your SL's up your total risk is reduced allowing you to invest more until you are fully invested. I don't expect you to go from zero to hero (100%) within a few weeks of starting.
> 
> The main message I would tell an FA investor is that it is OK to sell. You don't have to experience a horrendous draw down when economic conditions are bad.




Completely agree with everything you say Peter.

@ So_Cynical - yes I hear what you're saying and while I agree that stop losses can be double edged, the downside is a bit worse than the upside... but finding that happy medium is going to be a compromise either way.

My basic strategy (it will be more detailed than this) will be an initial stop loss of 20% below the buy in value of the trade. If something drops further than that after I buy I won't be averaging down, I'd rather accept it as a bad call or bad timing and regroup and reassess at a later date... is 20% too big? that's one of the questions I'm going through at the moment, but from a capital risk perspective I think that is a reasonable place to start.

I will also be setting a maximum % per stock (of the total portfolio size - probably 15% at this stage, but that may change) and if I plan on taking the full 15% for a stock I will average it out over a minimum of 30 days between trades (e.g. 7.5% initially, wait 30 days, reassess, if still doing ok purchase remaining 7.5%). 

...and no I won't go to 100% invested in a few days. I will be setting the first month at 25% max - I'm still in two minds about how I set the rules beyond the first month, but will sort it out in the next few days.

...and thanks for bring up the point about the total portfolio heat Peter - I hadn't really crystallised that thought process yet (it was in the back of my head floating around somewhere), but that is definitely a metric I will be keeping a close eye on.


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## StumpyPhantom

All good advice I've read so far Vader (I'm intrigued to find Robusta's thread now to see what inspired you).

My comments/observations are pretty much in the same line as theirs, with my added experience that I was a first time investor at the market nadir in late 2008/early 2009, like you having thought about it for a few years but done nothing about it.

But reflecting on that experience in hindsight is not the same as crystal-ball gazing now.  Your trial portfolio in 2009 probably also raises unrealistic expectations given that 2009 was a 30-40% gain, depending on when you started.  The point is, when the market is tanking 5%-plus on a 2-in-5 days basis, it takes quite some nerve to hang in there.

To cite just one example, I kept dollar cost averaging on GMG as the REIT industry dived throughout that period (started at 93c and bought as low as 21c), to end up with a large parcel averaged at 38.3 cents (bought some more at equity raising for about 30c).  All because I believed in their business model and their CEO's capacity to persuade big pension funds to buy in.  They're now at about 72-73 cents equivalent.

But I repaid my margin loan very quickly because I realised it was 10% going nowhere fast.  The market has to rise 30% to make a margin loan (or line of credit - I don't see the difference) worthwhile.  Anyone with margin loans over the last 2-3 years would be operating at a loss, and no one I know is anticipating a 30% rise this year.

So 2008/2009 was my rocket boost and I'm back to even on the loan, and won't dip back in unless there is a black swan event.  H S Dent is expecting one (as are others), but you need nerve when everybody is panicking because nobody rings a bell at the bottom of the market.


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## odds-on

Best of luck Vader! Enjoy the journey. My advice is to treat it as a game and do not stop reading. 

Cheers

Oddson


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## StumpyPhantom

Oh -and I also forgot to add.  Your stated wish is to be a long term investor, but you seem to have the words of a trader.

You seem to be planning an instant portfolio (allocating percentages far and wide).  I would read Roger Montgomery's value.able and his blogs.  The reality is a long-term investor's portfolio should be much more 'glacial' in its build up.

Just because you're ready to start, doesn't mean there's a portfolio of shares out there that is ready to be bought by you.  Are you prepared to sit there for 35 weeks waiting for the one stock that a number of experts recommend buying because it's 30% or more below its intrinsic value (to give you a good margin of safety)?

And then, wait another 15 weeks before something else comes up?  For more than half the year, your portfolio would be 100% allocated to one stock, and then 50% (when you got 2) simply because they're the only worthwhile buys.  Don't go out there and spend your load (whatever that is, boosted or not by loans), just because you're at Day 1 of your investing life.


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## tech/a

StumpyPhantom said:


> Oh -and I also forgot to add.  Your stated wish is to be a long term investor, but you seem to have the words of a trader.
> 
> You seem to be planning an instant portfolio (allocating percentages far and wide).  I would read Roger Montgomery's value.able and his blogs.  The reality is a long-term investor's portfolio should be much more 'glacial' in its build up.
> 
> Just because you're ready to start, doesn't mean there's a portfolio of shares out there that is ready to be bought by you.  Are you prepared to sit there for 35 weeks waiting for the one stock that a number of experts recommend buying because it's 30% or more below its intrinsic value (to give you a good margin of safety)?
> 
> And then, wait another 15 weeks before something else comes up?  For more than half the year, your portfolio would be 100% allocated to one stock, and then 50% (when you got 2) simply because they're the only worthwhile buys.  Don't go out there and spend your load (whatever that is, boosted or not by loans), just because you're at Day 1 of your investing life.




At last something of interest.


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## Vader

StumpyPhantom said:


> Oh -and I also forgot to add.  Your stated wish is to be a long term investor, but you seem to have the words of a trader.
> 
> You seem to be planning an instant portfolio (allocating percentages far and wide).  I would read Roger Montgomery's value.able and his blogs.  The reality is a long-term investor's portfolio should be much more 'glacial' in its build up.
> 
> Just because you're ready to start, doesn't mean there's a portfolio of shares out there that is ready to be bought by you.  Are you prepared to sit there for 35 weeks waiting for the one stock that a number of experts recommend buying because it's 30% or more below its intrinsic value (to give you a good margin of safety)?
> 
> And then, wait another 15 weeks before something else comes up?  For more than half the year, your portfolio would be 100% allocated to one stock, and then 50% (when you got 2) simply because they're the only worthwhile buys.  Don't go out there and spend your load (whatever that is, boosted or not by loans), just because you're at Day 1 of your investing life.




Understood.

While long term trading is the overall goal, I'm not going to just set and forget... I don't see the logic in watching a stock fall 80% calm in the knowledge that it'll get back up eventually if there is any chance whatsoever you can negotiate a path out of that trade before things get quite so bad (I know there may still be times where you don't have a choice).

I plan to break my portfolio up into a few broad categories, but most of the shares I buy I will be looking to hold for about 1-3 years... and yes I've read a lot of posts on Roger's blog - among other things (subscribed to it in google reader) and will have an exit strategy in mind for both good and bad results... I don't necessarily agree with everything he says, but he also has some very interesting things to say.

There will also be shares that I plan to hold for a lot longer than 1-3 years (think major banks etc.). Those I am expecting to be a lot slower to pick up at the prices I want (but who knows, Spain might help me out sooner rather than later, lol).

Of course, whether it works out like that or I go on a few unplanned 'portfolio corrections' like Robusta has needed to do is another thing to watch out for.

... BUT I also doubt I will be able to resit one or two more 'speculative trades'.  The potential damage will be kept very low for those and be based around an upcoming catalyst, but I do need a few rules about how to handle those.

...and the one company I am currently considering in this category is more of a long-term speculative stock overall, but has a couple of interesting twists coming up in its near future. I'm not quite sure how to handle that one to be honest if I do decide to dip my toe in - I do plan on discussing that one here prior to any purchases of it btw.


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## Julia

StumpyPhantom said:


> Just because you're ready to start, doesn't mean there's a portfolio of shares out there that is ready to be bought by you.



+1.  I'm always bothered by the dollar cost averaging thing.  Don't understand why you'd just buy a stock on a random day without regard for its price on that day.
If you're going to allocate 15% to a particular stock, why wouldn't you be more selective as to when you purchase that 15%?

But congratulations on your openness and willingness to consider responses.
Submitting yourself to criticism is pretty brave imo.


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## So_Cynical

Vader said:


> Completely agree with everything you say Peter.
> 
> @ So_Cynical - yes I hear what you're saying and while I agree that stop losses can be double edged, the downside is a bit worse than the upside... but finding that happy medium is going to be a compromise either way.
> 
> My basic strategy (it will be more detailed than this) *will be an initial stop loss of 20% below the buy in value of the trade*. If something drops further than that after I buy I won't be averaging down, I'd rather accept it as a bad call or bad timing and regroup and reassess at a later date..*. is 20% too big? that's one of the questions I'm going through at the moment,* but from a capital risk perspective I think that is a reasonable place to start.




Lets look at the alternatives.


 5% stop loss
 10% stop loss
 15% stop loss
 20% stop loss
 25% stop loss
 Buy More

Your trade can turn around on you at any time, if you have chosen well it will almost certainly come back at some point...most will suggest a 5% stop loss as trend following requires you to have lots of small losers so the few big winners can cover the small losers and make the system profitable.

But your not going to be a trend follower so why buy into the trend following rules? accepting losers of over 10% would generally be considered bad...3 or 4 in a row and your confidence would be rock bottom and the moneys gone..locked in.

20% Jeez i don't think that's gone fly...hows your comfort zone gona be losing 2K outa a 10K trade, only to watch that loser turn around over the next 5 or 6 months...i know id feel sick.

My losers tend to be of 2 types..very small (1 > 5%) and very big (30 > 100%) but i don't have many so overall my strategy is profitable and after almost 4 years has reliable expectancy...also i will hold an average loser for over 300 days...i give my trades lots of room to move.

---

Just today my 2 year old PTM trade come into profit for the first time in like 11 months, i have 3 average downs with the last one being substantial (actually caught the bottom )....seriously 2 years in and 11 months to come good and come good it has....so glad i didn't sell.


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## robusta

So_Cynical said:


> Beware the stop loss order as like pretty much everything in the market its a 2 edged sword, on the one hand it well get you out of a trade with only a small loss, on the other hand it can get you out of a trade at pretty much the exact time you should be entering/buying more....just look at all the times robusta sold stocks (over traded) that he should of been averaging down into or simply holding and giving the trade time to come good.




Good point, admit the mistakes but sometimes a good investment is sold off and the best decision is hold or even maybe even buy some more.




StumpyPhantom said:


> Just because you're ready to start, doesn't mean there's a portfolio of shares out there that is ready to be bought by you.  Are you prepared to sit there for 35 weeks waiting for the one stock that a number of experts recommend buying because it's 30% or more below its intrinsic value (to give you a good margin of safety)?
> 
> And then, wait another 15 weeks before something else comes up?  For more than half the year, your portfolio would be 100% allocated to one stock, and then 50% (when you got 2) simply because they're the only worthwhile buys.  Don't go out there and spend your load (whatever that is, boosted or not by loans), just because you're at Day 1 of your investing life.




This is a excellent point good to see you are all over it vader.


----------



## craft

peter2 said:


> Good to see you are using stop losses. Investors using FA can get their timing wrong just as often as the rest of us. Protecting the banks capital should be high on your trade management process.
> 
> Since you are using SL's you will know how much you are risking in each trade and therefore the total portfolio heat. Keep your eye on this figure more than how much you have invested. As you move your SL's up your total risk is reduced allowing you to invest more until you are fully invested. I don't expect you to go from zero to hero (100%) within a few weeks of starting.
> 
> The main message I would tell an FA investor is that it is OK to sell. You don't have to experience a horrendous draw down when economic conditions are bad.




This is a very good post but I have a slightly different take. 

Yes you will get your timing wrong with FA.  But a price based stop is not the answer if your entry is not price based.

If your entry is business performance based then your stop needs to be business performance based.  This leads to the inevitable fact that you can get seriously stung if your analysis is suspect. Valuation is more an art then a science and it takes time to develop.

Your only protection against poor valuation is to manage your risk through small positions.

Given that you are using a LOC I would say baby steps (and I mean really small) in your position size and number until the market has revealed its lessons.

If you think you need a price stop for risk management (and you probably do) then I would say you should be looking at trading/investing based on price alone. You could use FA as a subordinated means of identifying your universe but I’m not sure that that wouldn’t reduce the effectiveness of the TA.

Just because you have a FA bent doesn’t mean that for a time at least TA will not be a more effective tool – It has more means of controlling volatility without killing its edge.


----------



## robusta

While our methods differ slightly craft ther are not too many posts by you where I do not either learn something , nod my head in agreement or both.

May have ripped this line off from Roger Montgomery but it would be ideal to have a stop loss that would stop you out in a stock market crash but not sell when something cheap gets even cheaper.


----------



## skc

robusta said:


> Good point, admit the mistakes but sometimes a good investment is sold off and the best decision is hold or even maybe even buy some more.




MCE?:



craft said:


> This is a very good post but I have a slightly different take.
> 
> Yes you will get your timing wrong with FA.  But a price based stop is not the answer if your entry is not price based.
> 
> If your entry is business performance based then your stop needs to be business performance based.  This leads to the inevitable fact that you can get seriously stung if your analysis is suspect.




Exactly what I wanted to say. Find a coherent set of entry and exit criteria. Don't buy fundamental and sell on price. 

To Vader..

Here's something on position sizing and risk management in lieu of price based stops.
https://www.aussiestockforums.com/forums/showthread.php?t=22396&p=626488&viewfull=1#post626488

BTW, have you seen the thread that inspired Robusta's thread that inspired you 
https://www.aussiestockforums.com/forums/showthread.php?t=21005. This imho is a far more efficient use of your LOC capital than 1-3 year holds.


Good luck.


----------



## tinhat

craft said:


> This is a very good post but I have a slightly different take.
> 
> Yes you will get your timing wrong with FA.  But a price based stop is not the answer if your entry is not price based.




I choose companies for my capital growth watch list based on FA. Companies with balance sheets that are in order with good growth metrics and with good capital gain potential. So, I use FA, intrinsic value, whatever, to determine the companies I'm interested in holding.

I have however become absolutely convinced that the entry must be made on the basis of price. Firstly, as most FA/value investors will agree, the price must be at a discount to their judgement of where fair value lies. I think this is implied even though you suggest one can purchase a stock without regard to its price.

Timing entry based on technical analysis, which I think is what you are alluding to, for me is imperative even though I choose stocks based on FA.

Just think for a moment about prices and markets from simple economics. Price is *the* mechanism that reaches an equilibrium between supply and demand. It is the fulcrum point at which supply and demand are in balance. Like all markets, expectations shift the demand and supply curves. If buyers expect that prices may fall they will defer purchase and sellers will fulfil the buyers prophecy by seeking to sell before price falls further (supply exceeds demand -> price deflation). Conversely, if sellers expect that prices will rise they will limit supply in anticipation of receiving a higher price in the future whereas buyers will rush to purchase in anticipation of price increasing (demand exceeds supply -> price inflation).

Why wouldn't we expect value investors to also behave as rational economic agents in the stock market just like any other market? As tech/a mentioned in another thread about value investing, why would any investor incur unnecessary opportunity cost? The answer is of course that as individual economic agents we are not perfectly rational, we are humans. Collectively we would expect markets to tend towards rational behaviour in the long run. In the short run and as individuals we are constantly making imprecise judgements based on incomplete information.

The importance of price for me becomes so obvious whenever I run the figures when looking to buy for the income portfolio for my SMSF. This portfolio is paying pension income. As an example buying ANZ at $20 versus $23.30 represents a difference in yield (gross with franking credits) of 1.4% per annum. It's a significant amount. You'd shop around to get 1.4% off your home loan interest rate.

Following the trend should also reduce the chances of being falsely stopped, whip-sawed, out of a stock. Some people on these forums will tell you they can sit zen like upon their share portfolio without worrying about volatility knowing that in the fullness of time the universe will ensure that all their stocks will reach their true potential and will resonate to the cosmic singularity. I can't do that. I need to preserve capital and generate income and as we have witnessed in the past couple of years there is sufficient uncertainly and risk of significant cyclical swings in stock prices. Timing entry to the trend has become important to me in increasing the chances that I won't get unduly stopped out of a promising stock selection.

As for exiting based on price, every man has his price. Just as when I am willing to buy based on my belief that the price is at a discount to fair value, why wouldn't I exit when I believe the price is at a significant premium to the fair value? Why wouldn't I use a stop loss to lock in capital gains and preserve capital?

In this sideways market IMHO the trend is important and buy and hold is not necessarily the best strategy for capital gains.


----------



## burglar

skc said:


> ...
> BTW, have you seen the thread that inspired Robusta's thread that inspired you
> https://www.aussiestockforums.com/forums/showthread.php?t=21005. ...




Sure did, skc, ...
I was impressed!


----------



## sinner

Hi vader, I didn't read the whole thread since it managed to grow so quickly.

Although, I am pretty sure what everyone has said already.

You'd be amiss to listen to these people! 

Someone on this forum a while ago pasted a link to this blog 

http://venturepopulist.com/2009/06/hybrid-portfolio-theory/

You are looking to borrow money and gain >100% account exposure to equities. Rather, in the blog post proposed above, the idea is instead of paying interest, earn interest. The majority of the account invested in highly liquid, very safe cash securities. Basically, this would be Gov 90 day bills or cash in a bank account, or a mix of cash and rolling 90 day term deposits in a bank account.

Then the remainder of the account is exposed to positive asymmetric outcomes by whatever mechanism you feel appropriate. If it was me, I'd be investing in a trend following futures managed fund, but there are other options. The blog authors later recommended something like this in another post on Hybrid Portfolio Theory.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1675108##

which they seem to believe returns matches closely investing in venture capital.

Assuming nobody dumped the money you wish to invest in your lap, it's highly likely that you worked very hard for it. Keep that in mind at all times.


----------



## Vader

Thanks for all the replies guys (and the links)... some very interesting stuff there - to give my thinking on a couple of the points raised:

1. The reason why I'm thinking of a hard 20% stop loss is definitely risk based - I think that gives a stock quite a bit of room to move and recover, while giving some protection against a really bad fall... I've definitely done some looking at charts, and while it's not comprehensively back tested, it seems to be in the ball park for what I want it to do.

If I think a stock is a bit riskier though, then I'll set the stop loss tighter - I shouldn't have too many of those, but the option is there.

2. Definitely agree about entry via price - the only reason why I would split the larger holdings over two purchases is purely risk management... the biggest thing I need to protect against is a big correction, especially early on - if I was fully invested right away and there was a big correction, that's going to hurt a lot more than one that comes say 12 months down the track when half of my stocks have had a chance for a bit of growth to offset it.

...and yes, I'm sure I won't avoid a bit of basic TA, and I agree it's going to be more touchy feely than definitive edge, but once I've identified a stock with good financials, that represents what I believe to be good value, I'm not going to just jump in at the first available point and continue to ride a downward trend even lower.

I haven't read through SKC's Fundamental thread yet (I missed that one somehow, will read it today), but yes, supply v demand is certainly something I understand - another simple indicator I have noticed after looking over heaps of charts and their performance over the last year or so is that when the 5d moving average climbs above the 30d moving average (and the 30d moving av is trending upwards), there is usually a decent period of growth that follows.

I'm sure I'll get yelled down for even considering something like that without back testing it further (but the discretionary decision making of the fundamentals obviously makes that a challenging task), but a few of the stocks I'm keeping an eye on at the moment look like they may be approaching that mark before too long.


----------



## skc

tinhat said:


> I have however become absolutely convinced that the entry must be made on the basis of price. Firstly, as most FA/value investors will agree, the price must be at a discount to their judgement of where fair value lies. I think this is implied even though you suggest one can purchase a stock without regard to its price.
> 
> Timing entry based on technical analysis, which I think is what you are alluding to, for me is imperative even though I choose stocks based on FA.




I think you misunderstood what Craft and I were trying to say. There is certainly noting wrong about making an entry at the most advantageous price, and it's perfectly OK to time your entry on whatever TA method one deems useful. 

But ultimately the decision to buy XYZ was based on the company's prospects (may be low PE, may be high growth, may be special event). Timing your entry using TA doesn't make it a "price based" entry. Or more correctly, price-action based entry. 

So it makes no sense to exit based on price action (i.e. 20% stop loss or whatever). You should exit when earnings fall, or growth does not eventuate, or event no longer offer the right reward/risks.



tinhat said:


> As for exiting based on price, every man has his price. Just as when I am willing to buy based on my belief that the price is at a discount to fair value, why wouldn't I exit when I believe the price is at a significant premium to the fair value? Why wouldn't I use a stop loss to lock in capital gains and preserve capital?




When you exit because price has reach a premium to fair value... that is NOT what I deemed price-based exit. It is valuation-based exit and it's exactly what one would do.

As to price-action based stop at a loss for capital preservation - there are other ways to manage risk, with the three key pillars being position sizing, expertise in research/analysis and margin of safety.



Vader said:


> If I think a stock is a bit riskier though, then I'll set the stop loss tighter - I shouldn't have too many of those, but the option is there.




What does it mean when the stock is riskier? 
Doesn't it mean it is more likely to have larger volatility in price? 
So does it make sense to have a tighter stop loss? 

On a riskier stock a tighter stop loss will only whipsaw you out of position easier. You don't give the stop the opportunity/time/space to work out. If you want to enter a riskier stock, you need *wider *stop (if it must be price-based). And the way you manage risk is by having a smaller position.

Say I am buying a biotech company with a potential blockbuster drug approval in 3 months, yet if such approval is denied the share price can fall up to 60%... you size your position based on a 60% loss being an acceptable amount to lose. E.g. You want to risk $600 on this so you can only buy $1000. Don't go and buy $5000 position and have a 10% stop. It will be a complete waste of money. 

Many newbies will say "$1000 position will only make me not a lot of profit"... but looking at reward before/without looking at risk with the same objectivity is the downfall of most investors/traders. 

Chew on this for a bit more until you have a good understanding of the difference between price based stop (which is what you are proposing) and what Craft and I are saying.


----------



## Trembling Hand

skc said:


> What does it mean when the stock is riskier?
> Doesn't it mean it is more likely to have larger volatility in price?
> So does it make sense to have a tighter stop loss?
> 
> On a riskier stock a tighter stop loss will only whipsaw you out of position easier. You don't give the stop the opportunity/time/space to work out. If you want to enter a riskier stock, you need *wider *stop (if it must be price-based). And the way you manage risk is by having a smaller position.
> 
> Say I am buying a biotech company with a potential blockbuster drug approval in 3 months, yet if such approval is denied the share price can fall up to 60%... you size your position based on a 60% loss being an acceptable amount to lose. E.g. You want to risk $600 on this so you can only buy $1000. Don't go and buy $5000 position and have a 10% stop. It will be a complete waste of money.
> 
> Many newbies will say "$1000 position will only make me not a lot of profit"... but looking at reward before/without looking at risk with the same objectivity is the downfall of most investors/traders.
> 
> Chew on this for a bit more until you have a good understanding of the difference between price based stop (which is what you are proposing) and what Craft and I are saying.






Glad you posted that. Saved me finishing what I was about to start.

I'd still like to see the "plan". It will no doubt be riddled with this kind of nonsense.


----------



## tinhat

skc said:


> I think you misunderstood what Craft and I were trying to say...




Thanks for your clarification.


----------



## craft

skc said:


> I think you misunderstood what Craft and I were trying to say. There is certainly noting wrong about making an entry at the most advantageous price, and it's perfectly OK to time your entry on whatever TA method one deems useful.
> 
> But ultimately the decision to buy XYZ was based on the company's prospects (may be low PE, may be high growth, may be special event). Timing your entry using TA doesn't make it a "price based" entry. Or more correctly, price-action based entry.
> 
> So it makes no sense to exit based on price action (i.e. 20% stop loss or whatever). You should exit when earnings fall, or growth does not eventuate, or event no longer offer the right reward/risks.
> 
> 
> 
> When you exit because price has reach a premium to fair value... that is NOT what I deemed price-based exit. It is valuation-based exit and it's exactly what one would do.
> 
> As to price-action based stop at a loss for capital preservation - there are other ways to manage risk, with the three key pillars being position sizing, expertise in research/analysis and margin of safety.





And I'm glad you posted that as well. Saved me finishing what I was about to start


----------



## lenny

Hi vader,

If you haven't tested your strategy how far of a drawdown do you go into before you concede your strategy doesn't work? 20% or 30% or 40%?

Lenny


----------



## Trembling Hand

lenny said:


> Hi vader,
> 
> If you haven't tested your strategy how far of a drawdown do you go into before you concede your strategy doesn't work? 20% or 30% or 40%?
> 
> Lenny



 When the wife loses 100 % confidence in your ability to repay the debt with "investment" gains. :whip


----------



## Vader

Trembling Hand said:


> When the wife loses 100 % confidence in your ability to repay the debt with "investment" gains. :whip




Got it in one, lol...

I hear what you're saying about a priced based stop vs a fundamentals based stop, and yes I agree a fundamentals based stop is better (and in some cases will get me out earlier, so using both is probably a good thing), but using only fundamental based stops doesn't allow for the possibility that you may have been wrong in the first place. Hopefully research will have turned up some looming disaster that everyone seems to know about except me, but I know that's not always going to be the case. Even if it's just a momentum based move, I'd rather bail out at an acceptable level and cut losses and sit back for a bit - sure, it might start to recover the second I hit sell, but it's just as likely to drop further.


----------



## CanOz

If i could contribute something of value here to help you then i would like to recommend that you at least try to incorporate some kind of a filter to keep out of trouble when the inevitable market downturn happens....

Perhaps you could use an index, such as the VIX, if the VIX is above a certain level (the bear market barometer) then you go to cash?

Also, have you thought of giving your system an slight edge using seasonal biases?

You could sell in May and buy in November, as an example.

CanOz


----------



## tech/a

Done a few years research and testing stops. Based on Purchase price. *INITIAL STOPS*.

(1) 13-20% most trades dont get stopped out at this level (+50%) but what you do get is many which become stuck in no mans land where your below your stop but not in profit!--or swing in and out of profit
.
(2) Less than 8% higher stop out rate some 50% + But greater oppotunity.More trades.

(3) 8-12% the sweet spot ---where there seems to be a balance with being stopped out too early and wide enough to give it room.

Remember that if you split your capital into 10 lots then a 20% hard stop is a 2% risk.
20 Lots 1.
Not that thats how I would position size but is one method. I used it for techtrader.


----------



## CanOz

tech/a said:


> Done a few years research and testing stops. Based on Purchase price. *INITIAL STOPS*.
> 
> (1) 13-20% most trades dont get stopped out at this level (+50%) but what you do get is many which become stuck in no mans land where your below your stop but not in profit!--or swing in and out of profit
> .
> (2) Less than 8% higher stop out rate some 50% + But greater oppotunity.More trades.
> 
> (3) 8-12% the sweet spot ---where there seems to be a balance with being stopped out too early and wide enough to give it room.
> 
> Remember that if you split your capital into 10 lots then a 20% hard stop is a 2% risk.
> 20 Lots 1.
> Not that thats how I would position size but is one method. I used it for techtrader.




Well at least we are starting to QUANTIFY his possible risk now...that's a great start!

I still shake my head when i remember that its not your money Vader...sends a chill up my spine. Why is it again, that you cannot wait until you have cash to invest? _Fear of missing out?_

CanOz


----------



## peter2

Naturally I differ from my fundamental colleagues on their preference for a fundamentally based exit over a price based exit. No matter how much work to put in to learn about a company you will never know as much as the specialists who analyse the company for financial organisations. The longer term financial investors will sell down their holdings months before any news is released to the market. They will sell their large holdings on "good" news. Astute chartists may notice this reasonably quickly as will a retail investor using a price based exit. At the very least the price based stop should be an early warning indicator that all is not well at the company. Further research and commonsense can determine if the bad news is temporary or toxic. All types of exits will be stated in your plans of course.

A few have suggested (skc especially) quite wisely, to consider small position sizes as a form of risk management. Smaller sizes mean you can use very wide exit stops. Your suggested maximum of 15% in one stock would send a few shudders through the more experienced investors. My max size as a trader is 15% but my hold time is only a few weeks. I would imagine a core holding of an investor may get to 15% after many years of incremental buying and price appreciation. 

It's definitely all about the plan, which is never perfect. You will be modifying it constantly as your understanding and experiences evolve.


----------



## ENP

*How many annual reports have you read? *

*Do you know what you want to look for in a company?*

I read a quote by Buffett saying if you can't handle a 50% or more decline in your portfolio then you shouldn't be investing in stocks. You say you want to be a long term value investor but then you have a 20% stop loss? Meaning you will lock in a sell when a value investor should be buying. You also said you would sell when you reach a certain % increase in your stock. Why limit your upside like that?


----------



## Julia

Has the OP actually declared himself a 'value investor'?
Plenty of successful TA followers who never look at a company report.


----------



## Trembling Hand

ENP said:


> You say you want to be a long term value investor but then you have a 20% stop loss? Meaning you will lock in a sell when a value investor should be buying. You also said you would sell when you reach a certain % increase in your stock. Why limit your upside like that?




Because he hasn't a clue what he's doing. Clearly. But we shouldn't really be too upset. After all its the continual stream of new funds that make it possible for the experienced to stay and make money.


----------



## McLovin

Julia said:


> Has the OP actually declared himself a 'value investor'?
> Plenty of successful TA followers who never look at a company report.




Not explicitly but he did infer it in the OP. 



			
				Vader said:
			
		

> Value investing makes sense to me


----------



## robusta

Trembling Hand said:


> Because he hasn't a clue what he's doing. Clearly. But we shouldn't really be too upset. After all its the continual stream of new funds that make it possible for the experienced to stay and make money.




Nothing like giving him a chance, why dont you wait to see his strategy and execution before declaring he has no idea.


----------



## Trembling Hand

robusta said:


> Nothing like giving him a chance, why dont you wait to see his strategy and execution before declaring he has no idea.




He has already stated his going to leverage his home and forward test his unproven "plan" which from the little we have seen he's all lost at see as far as stops and position sizing. Yet to see anything that is a sound plan.

My point stands because of what I have seen.


----------



## Julia

Vader said:


> ... BUT I also doubt I will be able to resit one or two more 'speculative trades'.  The potential damage will be kept very low for those and be based around an upcoming catalyst, but I do need a few rules about how to handle those.






Vader said:


> ...and yes, I'm sure I won't avoid a bit of basic TA, and I agree it's going to be more touchy feely than definitive edge, but once I've identified a stock with good financials, that represents what I believe to be good value, I'm not going to just jump in at the first available point and continue to ride a downward trend even lower.






> I haven't read through SKC's Fundamental thread yet (I missed that one somehow, will read it today), but yes, supply v demand is certainly something I understand - another simple indicator I have noticed after looking over heaps of charts and their performance over the last year or so is that when the 5d moving average climbs above the 30d moving average (and the 30d moving av is trending upwards), there is usually a decent period of growth that follows.






Vader said:


> using only fundamental based stops doesn't allow for the possibility that you may have been wrong in the first place






ENP said:


> *How many annual reports have you read? *
> 
> *Do you know what you want to look for in a company?*
> 
> I read a quote by Buffett saying if you can't handle a 50% or more decline in your portfolio then you shouldn't be investing in stocks. You say you want to be a long term value investor but then you have a 20% stop loss? Meaning you will lock in a sell when a value investor should be buying. You also said you would sell when you reach a certain % increase in your stock. Why limit your upside like that?






McLovin said:


> Not explicitly but he did infer it in the OP.



OK.  But, as someone else has pointed out, Vader's language is definitely not exclusively that of the fundamentalist.

I don't care one way or the other.  I think it's nuts to be experimenting with borrowed money, especially when there doesn't appear to be a clear plan.

But essentially I was just responding to the rather aggressive tone of ENP's post above, and defending Vader's right to not be a fully committed fundamentalist, if you like.
That's all.


----------



## McLovin

Julia said:


> OK.  But, as someone else has pointed out, Vader's language is definitely not exclusively that of the fundamentalist.
> 
> I don't care one way or the other.  I think it's nuts to be experimenting with borrowed money, especially when there doesn't appear to be a clear plan.
> 
> But essentially I was just responding to the rather aggressive tone of ENP's post above, and defending Vader's right to not be a fully committed fundamentalist, if you like.
> That's all.




Fair enough. And I agree about using borrowed money, especially with a long term style FA strategy.

I kind of zoned out of this thread but I will be interested in seeing how Vader gets on.


----------



## So_Cynical

Trembling Hand said:


> He has already stated his going to leverage his home and forward test his unproven "plan" which from the little we have seen he's all lost at see as far as stops and position sizing. Yet to see anything that is a sound plan.
> 
> My point stands because of what I have seen.




Investing with a reasonable degree of success is not rocket science, not even close...plans will evolve, he will find out where his comfort zones are, what works for him and what doesn't....all people need to learn by doing...books, study and thinking will only get you so far.


----------



## tech/a

So_Cynical said:


> Investing with a reasonable degree of success is not rocket science, not even close...plans will evolve, he will find out where his comfort zones are, what works for him and what doesn't....all people need to learn by doing...books, study and thinking will only get you so far.




I agree.
But most turn it into Something akin to rocket science or brain surgery.
If it was that simple
We would have seen that ( simple ) from the poster.
We haven't --- I see what T/H is seeing.

What we are saying is do as you say and he sees fit
BEFORE he invests a cent.
Sadly he's going to blast into space without knowing his chances for success.
Risking his house and possible happiness in the process.

If he eventually posts up a plan I for one will be happy to critique it with practical suggestions--- look forward to it.


----------



## McLovin

So_Cynical said:


> Investing with a reasonable degree of success is not rocket science, not even close...plans will evolve, he will find out where his comfort zones are, what works for him and what doesn't....all people need to learn by doing...books, study and thinking will only get you so far.




Do you think taking that journey with a LoC secured by a charge over your home is the best way to go?


----------



## So_Cynical

McLovin said:


> Do you think taking that journey with a LoC secured by a charge over your home is the best way to go?




NO

------------------------

When i started my investment journey in mid 2007 my original plan was to take out a margin loan and use very low margins as a safety net, something like 50/50 on stocks with margin ratios of 70/30 and 80/20

For no particular reason (well thinking about it now) i didn't feel 100% comfortable with taking out the loan later so i just kept it in the back of my mind....lucky for me cos even with 50/50 margin ratios i would of ended up running out of money in the GFC and being a forced seller...i would of lost the lot, well 80% of my net worth.

Personally, as far as my investment journey goes...in the time period before March 09 having borrowed money would of been a big negative and in the period of time after till now a big positive...the market and the 2 edged sword again.


----------



## tech/a

So_Cynical said:


> NO
> 
> ------------------------
> 
> When i started my investment journey in mid 2007 my original plan was to take out a margin loan and use very low margins as a safety net, something like 50/50 on stocks with margin ratios of 70/30 and 80/20
> 
> For no particular reason (well thinking about it now) i didn't feel 100% comfortable with taking out the loan later so i just kept it in the back of my mind....lucky for me cos even with 50/50 margin ratios i would of ended up running out of money in the GFC and being a forced seller...i would of lost the lot, well 80% of my net worth.




Like most you don't know how to position size using magin.
You see margin as extra start capital THAT YOU PUT AT RISK.
Used correctly you won't increase your risk at all.

It's all about learning how to correctly position size.


----------



## So_Cynical

tech/a said:


> Like most you don't know how to position size using magin.
> You see margin as extra start capital THAT YOU PUT AT RISK.
> Used correctly you won't increase your risk at all.
> 
> It's all about learning how to correctly position size.




Yes

I only recently learned (Thanks SKC) what i was position sizing for return and not risk.


----------



## Trembling Hand

So_Cynical said:


> For no particular reason (well thinking about it now) i didn't feel 100% comfortable with taking out the loan later so i just kept it in the back of my mind....lucky for me cos even with 50/50 margin ratios i would of ended up running out of money in the GFC and being a forced seller...i would of lost the lot, well 80% of my net worth.
> 
> Personally, as far as my investment journey goes...in the time period before March 09 having borrowed money would of been a big negative and in the period of time after till now a big positive...the market and the 2 edged sword again.




So S_C we now agree. Remember he is 100% leveraged.


----------



## Trembling Hand

tech/a said:


> Like most you don't know how to position size using magin.
> You see margin as extra start capital THAT YOU PUT AT RISK.
> Used correctly you won't increase your risk at all.
> 
> It's all about learning how to correctly position size.





Thats if you do have cash in the first place where Vadar hasn't any.


----------



## tech/a

Trembling Hand said:


> Thats if you do have cash in the first place where Vadar hasn't any.




Of course.


----------



## Julia

With apologies for the diversion:  why is it that everyone is 'on a journey' these days?
It seemed to start with the dreaded Masterchef where all the contestants as they were eliminated offered profuse thanks to the judges for guiding them on their 'passionate journey with food'.

Sorry.


----------



## Ves

Julia said:


> With apologies for the diversion:  why is it that everyone is 'on a journey' these days?
> It seemed to start with the dreaded Masterchef where all the contestants as they were eliminated offered profuse thanks to the judges for guiding them on their 'passionate journey with food'.
> 
> Sorry.



It has nothing to do with Masterchef, and has long been used before that reference.

jour·ney
   [jur-nee] Show IPA noun, plural jour·neys, verb, jour·neyed, jour·ney·ing.
noun
1. a traveling from one place to another, usually taking a rather long time; trip: a six-day journey across the desert.
2. a distance, course, or area traveled or suitable for traveling: a desert journey.
3. a period of travel: a week's journey.
*4. passage or progress from one stage to another: the journey to success. *


----------



## CanOz

CanOz said:


> If i could contribute something of value here to help you then i would like to recommend that you at least try to incorporate some kind of a filter to keep out of trouble when the inevitable market downturn happens....
> 
> Perhaps you could use an index, such as the VIX, if the VIX is above a certain level (the bear market barometer) then you go to cash?
> 
> Also, have you thought of giving your system an slight edge using seasonal biases?
> 
> You could sell in May and buy in November, as an example.
> 
> CanOz




By coincidence, the May edition of Technical Analysis of Stocks and Commodities has very simple seasonal system presented. It's based on the "sell in May and Go away" theory. Actually the dates used are April 20th and November 1st. The author actually uses a simple MACD for the signal and an etf to trade, but you could use this as your filter. Then pick some 'good value' stocks and you could actually have an edge....

Throw in some money management to limit your risk of ruin and you're in business!

CanOz


----------



## Julia

Ves said:


> It has nothing to do with Masterchef, and has long been used before that reference.



Um, I do know the meaning of the word.  My comment related to the way it has become such a cliche in recent times.
However, an unimportant point and one I should probably have kept to myself.


----------



## Vader

Alrighty then... I'm not sure how far we're going to get beyond some of the recurring themes here, but I am getting some good things to think about, so pressing on.

Yes, I can see my language is a bit inconsistent - that would be the beginner tag I lumped on myself from the start, combined with the fast pace of this thread and the continual reassessment and learning that is going on... I expect that to continue for some time as I learn more... does that mean I should quit until I've learned everything? Not a chance - where's the fun in that  (you can't succeed by sitting on the sidelines... ready, fire, aim).

Now for my trading strategy/plan... at one point during the already fast pace of this thread I was thinking of adding a lot of different elements into this plan, but the best course of action is usually to keep things simple - not only is it easier to understand, but easier to execute. I have also trimmed back a couple of the numbers from my original thoughts... so here it is - critique away.

-----------------------------------------------------------------

Total Amount of Available Funds: $100k, consisting of:
Line of Credit: $70k (interest on balance @ 6.73%)
Cash*: $30k

(Note: In this instance 'Cash' is not 'free cash', it is a combination of money sitting in an offset account and advanced payments on the mortgage. It has the same liquidity as cash i.e. I can access it immediately, but using it does come as a cost i.e. mortgage rate of 6.63%).

* Maximum position size when purchasing a new company: 7% (i.e. $7,000)

* Maximum funds invested in one calendar month: 17.5%

* Maximum funds to be used for share purchases: 70%

Note: this equates to $70k being used as capital (LoC). The remaining $30k in cash is a reserve amount that may be used for short-term funds if fully invested (e.g. take advantage of a SPP etc.) but must be restored through the sale of other shares in the portfolio within two weeks of use.

* All purchases will have documented entry and exit criteria before purchasing.

* All purchases will have a 20% stop loss set below the average purchase price. If the share price rises, this stop will be raised with it until it reaches the average purchase price. This stop loss is in addition to the documented exit criteria.

* All purchases will be made with an investment time frame of 1-3 years (though will obviously continue longer if the exit criteria conditions allow), with the exception of:

* Up to two positions at any one time may be for a shorter-term investment time frame (up to 6 months). These purchases must include a specific catalyst that determines the time frame. The maximum position size for these purchases is 3.5% (i.e. $3500).

* Metrics to monitor: Total capital invested; Total capital at risk (based on stop losses); Total realised gain/loss; Total portfolio value; Total portfolio gain/loss.

* Continually monitor and reassess my strategy

----------------------------------------------------------------------

Ok, a couple of things that aren't there - most notably how I pick the stocks and how I arrive at entry and exit criteria... none of which I'm going to set in stone at this point as that is one area that will change over time especially early on... I realise that's not going to sit well with a few people, but I feel it is the best course of action. Keep in mind that I will be documenting these decisions for each purchase I make and in many cases I will document them here BEFORE I make the purchase.

It also doesn't factor in how holdings will grow above the 7% level (e.g. dividend reinvestment etc.) and what that means to the overall portfolio mix. This isn't a month one problem and will be added in time - as will other situations that need to be defined... this is one aspect to the monitor and reassess, I can see that there will be many questions that need to be added over the coming months.

Goals... at this stage my goals are pretty simple. Do not commit more than 7% on a single purchase, do not purchase more than 17.5% in one month.

What else is there, what parts don't make sense, what parts could be better?

Finally, if I don't take your advice on something, don't be offended... you'll get a chance to say "I told you so" at some point if things don't work out I'm sure 

...and if you think I'm bonkers, I honestly don't mind you saying that either. While it's extremely unlikely you're going to convince me to stay out of the market (and yes I'm well aware that my 'plan' hasn't been tested by 17 virgins and anointed by the dalai lama and verified to give me a positive expectation of returning 34.721 cents per dollar invested), but I am listening and thinking about everything being said, in fact the conversation to this point has definitely reigned in my risk perception a notch or two.

...and finally, I do appreciate the concern about using borrowed funds (in fact a lot of the companies I'll be investing in will have low debt levels), but I am comfortable with the risk that I am taking on. Even if I were to lose the entire amount it would not cause me to lose my house or anything overly extreme... yes the wife will be pissed (ok, more than usual) and my chances of retiring before 65 will take a hit, and yes - that is easy to say *before* it happens... but there is also the upside to consider, and it is that upside that bring us all here.


----------



## Trembling Hand

Hopefully my last word on this,


> appreciate the concern about using borrowed funds (in fact a lot of the companies I'll be investing in will have low debt levels),



Some irony in that.


----------



## So_Cynical

Vader said:


> * Maximum position size when purchasing a new company: 7% (i.e. $7,000)
> 
> * Maximum funds invested in one calendar month: 17.5%




For the moment ill just comment on these 2 points drawing from my own experiences. 

My current position size is/was 7K and i have to say it hasn't really worked for me and that's perhaps because i often average down so ive typically ended up with 12 or 14K in a single stock and that's way to much for me...i was position sizing for profit/reward so now im going back to sizing for risk 4>5K. 

17.5% per month? ..in any given 12 months there will be a couple of great months to enter and a couple of shockers, if you could just avoid the worst 2 months of every year you wiil be way ahead of the game..read back over robusta's thread and you'll notice that he started at a very bad time to be buying any stock as sentiment had just turned...there are some months where you shouldn't be buying anything.


----------



## skc

Vader said:


> Total Amount of Available Funds: $100k, consisting of:
> Line of Credit: $70k (interest on balance @ 6.73%)
> Cash*: $30k
> 
> (Note: In this instance 'Cash' is not 'free cash', it is a combination of money sitting in an offset account and advanced payments on the mortgage. It has the same liquidity as cash i.e. I can access it immediately, but using it does come as a cost i.e. mortgage rate of 6.63%).
> 
> ...and finally, I do appreciate the concern about using borrowed funds (in fact a lot of the companies I'll be investing in will have low debt levels), but I am comfortable with the risk that I am taking on. Even if I were to lose the entire amount it would not cause me to lose my house or anything overly extreme... yes the wife will be pissed (ok, more than usual) and my chances of retiring before 65 will take a hit, and yes - that is easy to say *before* it happens... but there is also the upside to consider, and it is that upside that bring us all here.




$30k is more than enough capital to learn on the fly. Whatever amount you think you are comfortable losing now, half that, and half again, and that would still hurt twice as much as you think it would now. 

Ditch the LOC. Or at least delay it by 6-12 months. The market will always be here when u get good at it. I don't know your financial circumstances but you wouldn't buy a $100k car with borrowed money just to learn driving, would you?


----------



## ishakeel

Very useful info in this thread. Thanks


----------



## herzy

robusta said:


> Exactly what I wanted to say. Find a coherent set of entry and exit criteria. Don't buy fundamental and sell on price.




This is a theme that has come up quite a lot in this thread. This may seem like a silly question, but why not? FA / TA debate aside, what is the lack of logic that underpins this rule? I'm sure I'm missing something obvious...



tinhat said:


> Some people on these forums will tell you they can sit zen like upon their share portfolio without worrying about volatility knowing that in the fullness of time the universe will ensure that all their stocks will reach their true potential and will resonate to the cosmic singularity. I can't do that. I need to preserve capital and generate income and as we have witnessed in the past couple of years there is sufficient uncertainly and risk of significant cyclical swings in stock prices.
> 
> As for exiting based on price, every man has his price.




 Well said. Just a question of finding what price that should be.


----------



## craft

herzy said:


> This is a theme that has come up quite a lot in this thread. This may seem like a silly question, but why not? FA / TA debate aside, what is the lack of logic that underpins this rule? I'm sure I'm missing something obvious...



For me the problem is that you can’t have two masters. Who do you obey when the action that each demands is different. I think this is the crux of so many TA vs FA debates. For me both are excellent tools but I have never been able to mix them with any success. 

I know plenty of people say you can combine, so you will have to work out for yourself what your truth is.  Only having exposure when both agree might be one answer – but the market doesn’t seem to pay well for consensus, in my view you are likely to get needlessly whipsawed on your correct FA calls and miss some of the best TA signals – because speculative or highly leveraged / cyclical business that FA doesn’t lend itself to tend to give some of the best short/medium term trends when they go.


----------



## craft

Vader said:


> (you can't succeed by sitting on the sidelines... ready, fire, aim).




In effect you are saying that you will learn from your mistakes. fair enough.

Bear in mind though you stay in this game if your exposure to your mistakes is not too large. I think you are still planning to take on too much risk too early. The upside is only consistently accessible through controlling risk.

Baby step your exposure. The more you don't loose the more you will have to apply after you have learnt some things.


----------



## herzy

craft said:


> For me the problem is that you can’t have two masters. Who do you obey when the action that each demands is different. I think this is the crux of so many TA vs FA debates. For me both are excellent tools but I have never been able to mix them with any success.
> 
> I know plenty of people say you can combine, so you will have to work out for yourself what your truth is.  Only having exposure when both agree might be one answer – but the market doesn’t seem to pay well for consensus, in my view you are likely to get needlessly whipsawed on your correct FA calls and miss some of the best TA signals – because speculative or highly leveraged / cyclical business that FA doesn’t lend itself to tend to give some of the best short/medium term trends when they go.




Thanks for the reply: What I meant to ask though, is that even if you make a fundamentally sound decision, surely there is merit in the idea of not staying invested in a share when sp dips significantly (even if the fundamentals are the same)? Assuming you're good enough of course, couldn't you sell out and then buy back in lower? Why wait till a purely fundamental change in the company if the share price is tanking anyway? I assume Tech/A would mention opportunity cost at this point: even if sp will eventually go up due to the solid fundamentals, isn't there a danger in waiting and riding it out, ups-and-downs, warts-and-all?


----------



## tech/a

herzy said:


> Thanks for the reply: What I meant to ask though, is that even if you make a fundamentally sound decision, surely there is merit in the idea of not staying invested in a share when sp dips significantly (even if the fundamentals are the same)? Assuming you're good enough of course, couldn't you sell out and then buy back in lower? Why wait till a purely fundamental change in the company if the share price is tanking anyway? I assume Tech/A would mention opportunity cost at this point: even if sp will eventually go up due to the solid fundamentals, isn't there a danger in waiting and riding it out, ups-and-downs, warts-and-all?




As a technical trader this is my argument.

If I buy a stock I want it to go NOW and KEEP GOING.
I can trade short term INITIALLY and convert to longer term if price action warrants.
If you take a look at the OST thread you'll see a trade I have posted there.
My stop is now close enough to Break even.
Its around 30% up since I purchased so at B/E I'm happy to keep longer term
as I'm not trading for income. Why would I let it fall past B/E ???
If you want to survive in this industry then zero risk takes you a long way.

*Question.*

Why would you buy back into a company at a lower price if its dropping.
Wouldn't it make sense to see it reversing before committing.


----------



## craft

herzy said:


> Thanks for the reply: What I meant to ask though, is that even if you make a fundamentally sound decision, surely there is merit in the idea of not staying invested in a share when sp dips significantly (even if the fundamentals are the same)? Assuming you're good enough of course, couldn't you sell out and then buy back in lower? Why wait till a purely fundamental change in the company if the share price is tanking anyway? I assume Tech/A would mention opportunity cost at this point: even if sp will eventually go up due to the solid fundamentals, isn't there a danger in waiting and riding it out, ups-and-downs, warts-and-all?






> surely there is merit in the idea of not staying invested in a share when sp dips significantly




Yes there is  - please tell me when these dips are starting and I will get out of my sound business and buy them cheaper later.



> Assuming you're good enough of course, couldn't you sell out and then buy back in lower



 following momentum the good guys are right around 40% of the time - they make their money by cutting loses.

FA makes its money from the return from the underlying asset. implementing a MOS on the buy price means there is a possability of some price/value arbitrage. but overtime that is overwhelmed by the retun from a good asset. I would rather be exposed to the best assets that can produce my minimum CAGR over time with one buy decision, then putting that at risk by second guessing market moves.

I do not feel the need to have the market verify my opinion of a businesses value. Acceptable buy prices generally only come around when we are in disagreement.


----------



## tech/a

craft said:


> Yes there is  - please tell me when these dips are starting and I will get out of my sound business and buy them cheaper later.




Give me a list of your "sound Businesses and Ill post up "When " when it is seen.

But I personally wouldn't be looking at buying at a "cheaper" price.
Id be looking for a clear return to an upward trend.

You can of course sell out at a point and if it goes say 5% higher buy back in ---if price continues and proves your decision to protect profit to be wrong.



> following momentum the good guys are right around 40% of the time - they make their money by cutting loses.




Depends of Time frame can be much higher for shorter term.
They actually make money from constantly working on their reward to risk.
Over their whole portfolio *NOT* a single stock.



> FA makes its money from the return from the underlying asset. implementing a MOS on the buy price means there is a possibility of some price/value arbitrage. but overtime that is overwhelmed by the return from a good asset. I would rather be exposed to the best assets that can produce my minimum CAGR over time with one buy decision, then putting that at risk by second guessing market moves.




All good if in profit or at no risk.
Not so good if you trading below your buy point.



> I do not feel the need to have the market verify my opinion of a businesses value. Acceptable buy prices generally only come around when we are in disagreement.




Generally?? 40%??

Hell I sure as hell do.
So will you.
Id like to know how you profit if both dont align?


----------



## craft

tech/a said:


> As a technical trader this is my argument.
> 
> If I buy a stock I want it to go NOW and KEEP GOING.
> I can trade short term INITIALLY and convert to longer term if price action warrants.
> If you take a look at the OST thread you'll see a trade I have posted there.
> My stop is now close enough to Break even.
> Its around 30% up since I purchased so at B/E I'm happy to keep longer term
> as I'm not trading for income. Why would I let it fall past B/E ???
> If you want to survive in this industry then zero risk takes you a long way.
> 
> *Question.*
> 
> Why would you buy back into a company at a lower price if its dropping.
> Wouldn't it make sense to see it reversing before committing.






> As a technical trader this is my argument.



for a technical trader your argument is fine. FA works on different rules. Why didn’t you sell your business before this last down turn?



> Why would you buy back into a company at a lower price if its dropping.
> Wouldn't it make sense to see it reversing before committing




I've had a go at explaining this here.

https://www.aussiestockforums.com/forums/showthread.php?t=9854&p=686441&viewfull=1#post686441


----------



## craft

tech/a said:


> Give me a list of your "sound Businesses and Ill post up "When " when it is seen.
> 
> But I personally wouldn't be looking at buying at a "cheaper" price.
> Id be looking for a clear return to an upward trend.
> 
> You can of course sell out at a point and if it goes say 5% higher buy back in ---if price continues and proves your decision to protect profit to be wrong.
> 
> 
> 
> Depends of Time frame can be much higher for shorter term.
> They actually make money from constantly working on their reward to risk.
> Over their whole portfolio *NOT* a single stock.
> 
> 
> 
> All good if in profit or at no risk.
> Not so good if you trading below your buy point.
> 
> 
> 
> Generally?? 40%??
> 
> Hell I sure as hell do.
> So will you.
> Id like to know how you profit if both dont align?




Tech

I have done my best to explain my FA approach over many posts over the past few months. However people like you who have a mind set that only their way is the right way - never get it and to be blunt you annoy me and I give up.

I'll leave you to show everybody the light.

I'm going back under my rock to save myself the agitation.


----------



## tech/a

craft said:


> for a technical trader your argument is fine. FA works on different rules. Why didn’t you sell your business before this last down turn?




I sold my entire portfolio in 2008
My own business I own.
F/A doesnt actually work on different rules.
Although you seem to think it does.
Ill have a read and report back when better educated.



> I've had a go at explaining this here.
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=9854&p=686441&viewfull=1#post686441


----------



## tech/a

craft said:


> Tech
> 
> I have done my best to explain my FA approach over many posts over the past few months. However people like you who have a mind set that only their way is the right way - never get it and to be blunt you annoy me and I give up.
> 
> I'll leave you to show everybody the light.
> 
> I'm going back under my rock to save myself the agitation.




Not right.
More less risky.
I could say exactly the same about your approach to your trading.
My posts in answer to your posts arent necessarily directed at you---but more comments from my side (Just as you comment from your side) for others to weight up in their consideration.
Whether you or anyone else finds my posts helpful is entirely the readers.
Im not here to convince anyone.
Just present---as you have---what works with least stress and maximum profit for me.


----------



## McLovin

tech/a said:


> Hell I sure as hell do.
> So will you.
> Id like to know how you profit if both dont align?




Do you really not get it or are you being deliberately obtuse? I suspect the latter. You're buying an earnings stream. You're "my way or the highway" attitude is excruiatingly boring not to mention you look rather foolish in your assertion that FA doesn't work. I have no interest in getting into a p!ssing competition on a public forum, or anywhere really, so I will only go as far as to say that I make enough money doing this to support myself. Some of us can get through a day without reminding everyone else how great we think we are and how much money we make, not to mention the preaching and self-aggrandizement.

I'll let you in on a little secret, most of what passes on ASF as FA is not really FA. It's just speculation. I'm sure the same is true of TA. 

Apologies to Vader for ranting in his thread. I try and steer clear of this sort of TA v FA rubbish, and this will be my only comment on it.


----------



## craft

tech/a said:


> Not right.
> More less risky.
> I could say exactly the same about your approach to your trading.
> My posts in answer to your posts arent necessarily directed at you---but more comments from my side (Just as you comment from your side) for others to weight up in their consideration.
> Whether you or anyone else finds my posts helpful is entirely the readers.
> Im not here to convince anyone.
> Just present---as you have---what works with least stress and maximum profit for me.




Tech

I have always emphasised the risk in FA.

I have always acknowledged the risk control potentially available in TA and prompted people to consider it.

Whether you realise it or not – your posts are so combative and un-acknowledging of other approaches that they really put me off.

Undoubtedly there is a fine line between confidence and arrogance. You have taught me one thing. It’s time to stop posting before I step across it, if I haven’t already.

Hopefully what I leave behind will be of some use to somebody.


----------



## tech/a

McLovin said:


> Do you really not get it or are you being deliberately obtuse? I suspect the latter. You're buying an earnings stream. You're "my way or the highway" attitude is excruiatingly boring not to mention you look rather foolish in your assertion that FA doesn't work. I have no interest in getting into a p!ssing competition on a public forum, or anywhere really, so I will only go as far as to say that I make enough money doing this to support myself. Some of us can get through a day without reminding everyone else how great we think we are and how much money we make (under the assumption it's more than everyone else).




Yes I do get it.
I dont wish to trade that way and there may be a few who read this who would prefer not to---right from the beginning---if its not presented then it cant be considered.



> I'll let you in on a little secret, most of what passes on ASF as FA is not really FA. It's just speculation. I'm sure the same is true of TA.




I absolutely and whole heartedly agree on BOTH. 



> Apologies to Vader for ranting in his thread. I try and steer clear of this sort of TA v FA rubbish, and this will be my only comment on it.




Why is it T/A V F/A.
If the case for each is being presented from exponents from either side---why cant we present our views.
If your happy as can be doing it with F/A fine.

I only post in answer to others posts.


----------



## odds-on

Vader,

There are a couple of key investment points to be noted from how your thread has started the path of another ASF FA vs TA debate.

1.	Predictable. Do not underestimate how much this helps an investor make money. 
2.	Humans. They make the market and they tend to disagree with each other! 

Enjoy the game and keep reading.

Cheers

Oddson


----------



## CanOz

I say we leave Vader to his thread....while remembering that FA and TA can both be applied successfully by many traders/investors the world over....

Even more so, perhaps commonly, they both can be applied unsuccessfully with disastrous consequences.

Lets hope that we see something here that represents the former rather than the latter.

Waiting...

CanOz


----------



## kermit345

CanOz said:


> I say we leave Vader to his thread....while remembering that FA and TA can both be applied successfully by many traders/investors the world over....
> 
> Even more so, perhaps commonly, they both can be applied unsuccessfully with disastrous consequences.
> 
> Lets hope that we see something here that represents the former rather than the latter.
> 
> Waiting...
> 
> CanOz




I'm not sure why the debate has to be FA v TA and you've summed it up well here that both can work and both can't and its almost totally up to how the individual applies them.

The funny thing is you read the posts of a lot of FA guys around here that are trying to help, and they never once attack the TA style and readily admit that it works, but that it just isn't for them. Yet you have the TA guys attacking (whether they realise it or not) the FA way of doing things and will not even admit it has the potential to work.

Best of luck Vader, as CanOz has said i think its time we left Vader's (And Robusta's) threads to discussing their actual approach, portfolio and strategies. Vader is here seeking some assistance on his 'journey' not to start a 5 page debate in a matter of days on the merits of TA v FA - there are plenty of threads on here and on the internet in generaly that explain these to the full.


----------



## Trembling Hand

kermit345 said:


> Best of luck Vader, as CanOz has said i think its time we left Vader's (And Robusta's) threads to discussing their actual approach, portfolio and strategies. Vader is here seeking some assistance on his 'journey' not to start a 5 page debate in a matter of days on the merits of TA v FA - there are plenty of threads on here and on the internet in generaly that explain these to the full.




Out of all the post above hope this one from SKC doesn't get lost,




skc said:


> $30k is more than enough capital to learn on the fly. Whatever amount you think you are comfortable losing now, half that, and half again, and that would still hurt twice as much as you think it would now.
> 
> Ditch the LOC. Or at least delay it by 6-12 months. The market will always be here when u get good at it. I don't know your financial circumstances but you wouldn't buy a $100k car with borrowed money just to learn driving, would you?


----------



## herzy

Sorry to to Vader, I'm afraid my (on-topic) question may have been a catalyst for yet another TA / FA debate. Hopefully the answers (especially one above from Craft) were useful to beginners such as me and Vader in answering the question of whether to apply a tech-style stop loss to a value-based trade.


----------



## Boggo

kermit345 said:


> The funny thing is you read the posts of a lot of FA guys around here that are trying to help, and they never once attack the TA style and readily admit that it works, but that it just isn't for them. Yet you have the TA guys attacking (whether they realise it or not) the FA way of doing things and will not even admit it has the potential to work.




I believe that in an uptrending market the use of FA and TA together work very well, even using EW analysis on the ASX 300 seems to have a more consistent and predictable reliability than applying the same to speccies etc.

As someone who prefers TA over FA especially in the current environment what I find hard to watch are statements such as this one of yours on the TGA thread which really is just a hopeful stab in the dark based on what management told you six months ago, it just doesn't have any qualifying substance and the stock going nowhere...
_


kermit345 said:



			Bought some today at $1.54 with a target price between $2.00 and $2.20 following an estimated EPS of $0.195 or above in the upcoming full year results.
I think the stock deserve a P/E of approx 11 hence my target price range. It was about this time last year where TGA achieved this P/E and beyond.
Either way even if TGA hovered at the same P/E it currently trades at, with an EPS of around $0.195 your still looking at a price increase to approx $1.80 which is a healthy gain in itself.
Guess we'll have to wait and see how this one plays out. 

Click to expand...


_



Trembling Hand said:


> Out of all the post above hope this one from SKC doesn't get lost,




Agree entirely.



herzy said:


> Sorry to to Vader, I'm afraid my (on-topic) question may have been a catalyst for yet another TA / FA debate. Hopefully the answers (especially one above from Craft) were useful to beginners such as me and Vader in answering the question of whether to apply a tech-style stop loss to a value-based trade.




I still don't see a debate exists or is necessary, justify why a stock (any stock) that is falling is "a bargain at these prices" is any form of analysis other than hoping, guessing, I bought it and I can't be wrong, or I will be right eventually even if I have to wait for years until the dollar is worth 80 cents.
Being asked to justify why a stock is referred to as "underpriced" is not an attack, don't take it personally. Look at all the attacks on TA comments on the RED thread, some FA's eventually conceded that they were wrong by just giving up rather than discussing some obvious reality.

Have a look at this part of the TGA thread and the response I got when I stated the obvious and you will see what I mean (its even more "underpriced" today  ).
https://www.aussiestockforums.com/forums/showthread.php?t=18617&p=696730&viewfull=1#post696730

To lighten this up a bit here is a humurous example of the difference between FA (potential) and TA (reality).

_A kid asks his father for help on a writing assignment. "Dad, can you tell me the difference between potential and reality?"

His father looks up thoughtfully and says, "I'll demonstrate. Go ask your mother if she would sleep with Robert Redford for a million dollars. Then go ask your sister if she would sleep with Brad Pitt for a million dollars. Come back and tell me what you've learned."

The kid is puzzled, but asks his mother. "Mom, if someone gave you a million dollars, would you sleep with Robert Redford?"

"Don't tell your father, but, yes, I would."

He then goes to his sister's room. "Sis, if someone gave you a million dollars, would you sleep with Brad Pitt?"

She replies, "Omigod! Definitely!"

The kid goes back to his father. "Dad, I think I've figured it out. Potentially, we are sitting on $2 million bucks, but in reality, we're living with two sluts."_


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## Vader

Trembling Hand said:


> Out of all the post above hope this one from SKC doesn't get lost,




I'm sorry TH/SKC, but that is without doubt the worst piece of advice possible... not only would it be higher cost (mingling investment with mortgage would mean money going into that account would reduce the investment balance first reducing the tax claimable amount and therefore costing me more), but it would also be SIGNIFICANTLY higher risk.

If I did just use that 30k and didn't setup the line of credit - what happens if I were to both lose that 30k and also lose my job? If that were to happen then my house would most certainly be at risk. That 30k liquidity is the essential part of this strategy, it's the safety net, it allows for a good six months breathing space if the absolute worst was to happen... I would be completely insane to put that at risk.


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## Ves

Boggo said:


> I still don't see a debate exists or is necessary, justify why a stock (any stock) that is falling is "a bargain at these prices" is any form of analysis other than hoping, guessing, I bought it and I can't be wrong, or I will be right eventually even if I have to wait for years until the dollar is worth 80 cents.



Not always the case.  Go have a look at some "special circumstances" buys like JIN or AGI recently. Some of the F/A guys were buying these up.

In a lot of other cases, the market is short-sighted. Big instos sell out (in periods of stagnation, dividend cuts, changing circumstances, "better" opportunities, window dressing... the list goes on). Most F/A investors seem to be earnings orientated (but only for the next year or two into the future) so quite often you will get announcements that provoke a massive gap down. See Cochlear, which bottomed at $45 and is now $60+.


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## Ves

Vader said:


> I'm sorry TH/SKC, but that is without doubt the worst piece of advice possible... not only would it be higher cost (mingling investment with mortgage would mean money going into that account would reduce the investment balance first reducing the tax claimable amount and therefore costing me more), but it would also be SIGNIFICANTLY higher risk.
> 
> If I did just use that 30k and didn't setup the line of credit - what happens if I were to both lose that 30k and also lose my job? If that were to happen then my house would most certainly be at risk. That 30k liquidity is the essential part of this strategy, it's the safety net, it allows for a good six months breathing space if the absolute worst was to happen... I would be completely insane to put that at risk.



 Save up another six months buffer then. Some times short term sacrifices must be made for longer term gains!


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## skc

Vader said:


> I'm sorry TH/SKC, but that is without doubt the worst piece of advice possible... not only would it be higher cost (mingling investment with mortgage would mean money going into that account would reduce the investment balance first reducing the tax claimable amount and therefore costing me more), but it would also be SIGNIFICANTLY higher risk.
> 
> If I did just use that 30k and didn't setup the line of credit - what happens if I were to both lose that 30k and also lose my job? If that were to happen then my house would most certainly be at risk. That 30k liquidity is the essential part of this strategy, it's the safety net, it allows for a good six months breathing space if the absolute worst was to happen... I would be completely insane to put that at risk.




Let me get this straight... I said risk $30k and it's the WORST piece of advice ever. You said risk $100K and it's a f-king plan?!

When I said "ditch the LOC" I meant do not use the total of $100k. I meant play with only the amount you've managed to save up. 

Losing $30k under your LOC has basically the same financial consequence as losing $30k that is currently sitting in your offset / prepayment account. Your LOC is secured against your house, if you lose that money and your job and can't pay that back, you are just as screwed. The only difference is, if you are using the buffer $30k (as you call it) without the LOC, you will need to go to your bank and refinance and/or make your mortgage interest-only for a period when you are out of work. 

Since you've already got the LOC set up, you've effectively pre refinanced and negotiated the interest-only deal. So by all means draw on the LOC for $30k play money... but not $70k+$30k.

As to interest being tax deductible... you just need to move any money from offset to pay off the mortgage, then redraw it out. The interest portion on the redraw is tax deductible AFAIK provided that you are using it for investment.


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## Trembling Hand

Vader said:


> I'm sorry TH/SKC, but that is without doubt the worst piece of advice possible... not only would it be higher cost (mingling investment with mortgage would mean money going into that account would reduce the investment balance first reducing the tax claimable amount and therefore costing me more), but it would also be SIGNIFICANTLY higher risk.
> 
> If I did just use that 30k and didn't setup the line of credit - what happens if I were to both lose that 30k and also lose my job? If that were to happen then my house would most certainly be at risk. That 30k liquidity is the essential part of this strategy, it's the safety net, it allows for a good six months breathing space if the absolute worst was to happen... I would be completely insane to put that at risk.




Crazy! All you can see is tax deductions and potential gains. To _me _thats shows NO business sense.

Cannot wait till we see some of your FA.


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## tech/a

Trembling Hand said:


> Crazy! All you can see is tax deductions and potential gains. To _me _thats shows NO business sense.
> 
> Cannot wait till we see some of your FA.




All he need do is use a credit card.Just think of the interest deduction!


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## So_Cynical

herzy said:


> surely there is merit in the idea of not staying invested in a share when sp dips significantly (even if the fundamentals are the same)? Assuming you're good enough of course, *couldn't you sell out and then buy back in lower?* Why wait till a purely fundamental change in the company if the share price is tanking anyway?




Yes simple just buy back in at a lower price..and if the price falls again take another 5% loss and buy again, and if the price falls again take another 5% loss and buy back in again, and if the price falls again take another 5% loss and buy back in again, and if the price falls again take another 5% loss and buy back in again. and if the price falls again take another 5% loss and buy back in again.


Your now down 25% (locked in losses) in the one stock and its fallen maybe 50% and your gona buy again? lol this has the makings of a brilliant plan.  generally i wait for the stock to fall 20 or 30% before my first buy and then simply buy more at appropriate time/s on the way down...works 4 times outa 5 for me.

Taking a loss is losing money (locked in, gone, sayonara) now when trying to make money, losing money should be avoided at all costs.


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## Klogg

tech/a said:


> All he need do is use a credit card.Just think of the interest deduction!




LOL - good call tech!

Honestly though, why would you invest money with an untested approach/skill set? You're essentially saying that you can beat an 8% (assumed interest rate) return without any experience - that's fairly strong statement to make. It's not impossible, just difficult.

If the opinions of some of the most credible people on this forum (tech/a, SKC, SC and TH) doesn't convince you, take Buffett's very simple view -  "Leverage is the only way a smart guy can go broke"


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## StumpyPhantom

Vader, it came to me in the dark of night (the big picture, that is).  

STAY OUT OF THE MARKET!

What's the best case scenario for 12 months from now? 

The most optimistic would say 10% higher.  So you perform at your peak and get this 10%, but the 10% or so interest rate on your line of credit would account for most of that, plus another 2-3% dividend if you're lucky.

Best case scenario, you stand still.  Compare.  Put your case in most bank accounts and you're 5% ahead.

The most pessimistic scenario?  There are those that say we will be below the March 2009 lows.  Total crash and burn.

So the risk/reward ratio is just not there on the big picture.  Can you find anyone predicting a 15-20% better market than today?  That's the minimum you will need to make more money than just dumping your money in a high interest bearing account.

If the market takes out a low, then you will find more people saying it will be 15% better in 12 months.  That's the time to dip in.  But if it takes out a low, another low will be waiting, and another low.

The real nerve involved here is not to do with making decisions while in the market, it's sitting on the sidelines and witing for the whole world to say "The end is nigh" before putting your money in the market.

GOOD LUCK!  Tell us how you go.


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## McLovin

tech/a]I dont get it and frankly dont want to.[/QUOTE]

[QUOTE=tech/a said:


> Yes I do get it.





What an enlightening seven days you must have had.


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## tech/a

McLovin said:


> What an enlightening seven days you must have had.




You must be a journo.

I get what you do. It's logical to everyone that trades fundamentally.
I don't get why you or anyone else would trade that way.

Oh and a note to our friend on tax deductions.
Unless your making a profit you won't be able to claim a cent.
Profit first then claims for deductions.
You make a loss you wear it --- all of it.


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## McLovin

tech/a said:


> You must be a journo.
> 
> I get what you do. It's logical to everyone that trades fundamentally.
> I don't get why you or anyone else would trade that way.
> .




I rarely trade. Doing so as a value investor is tough, very tough.


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## herzy

So_Cynical said:


> Yes simple just buy back in at a lower price..and if the price falls again take another 5% loss and buy again, and if the price falls again take another 5% loss and buy back in again, and if the price falls again take another 5% loss and buy back in again, and if the price falls again take another 5% loss and buy back in again. and if the price falls again take another 5% loss and buy back in again.
> 
> 
> Your now down 25% (locked in losses) in the one stock and its fallen maybe 50% and your gona buy again? lol this has the makings of a brilliant plan.  generally i wait for the stock to fall 20 or 30% before my first buy and then simply buy more at appropriate time/s on the way down...works 4 times outa 5 for me.
> 
> Taking a loss is losing money (locked in, gone, sayonara) now when trying to make money, losing money should be avoided at all costs.




That's the logical answer that was failing me  Thanks!


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## tech/a

> Your now down 25% (locked in losses) in the one stock and its fallen maybe 50% and your gona buy again? lol this has the makings of a brilliant plan. * generally i wait for the stock to fall 20 or 30% before my first buy and then simply buy more at appropriate time/s on the way down...works 4 times outa 5 for me.*




So thats a better plan than the one above it.
Youll still buy as its falling but only after its fallen 20-30% from your initial decision to buy it???

So its $10
You wait patiently for it to be $7
Then you buy at "appropriate times" at $6 and $5
So now you have a stock which has dropped 50% and you have 3 positions averaged down to X depending on your position sizing.

Now let me guess.
Brilliantly you buy a small parcel for the first buy then bigger ones as you buy at lower and lower prices!!
A version of a Martingale betting system.


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## CanOz

tech/a said:


> A version of a Martingale betting system.




That's exactly what it is. As well as:

-Limited risk of ruin because he uses position sizing, or divides his capital up.
-Probability of the price increases because of the perceived value from the FA
-If he makes a mistake and buys too high he just buys lower...chances are after 'three drives down', he's hit the bottom and his price realizes a profit on the way back up.
-this is speculation, pure and simple.

It works until it doesn't Can't argue with that.

CanOz


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## motorway

> I believe portfolio managers should weight the buy decision about 80% fundamental and only about 20% technical. But the sell decision should reverse the weights of the two inputs, 80% technical and only 20% fundamental.
> 
> The proven ability of stocks to discount changing fundamentals suggests that stocks will experience a downturn in price before the bad news “comes out”. Very small negative divergences from consensus expectations can often have a devastating effect of the stock price.





http://www.clayallen.com/TALTI.pdf


Motorway


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## cynic

Vader said:


> I'm another newbie with delusions of granduer...
> 
> 
> ...Anyway, that's long enough for my first post I think - will add some more detail over the coming days.




Hi Vader,

The last 6 months or so will (no doubt) have provided a tumultuous introduction to trading the market/s. Would you care to share your experiences? 

Did market trading and behaviour prove to be just like you thought it would be? 

If not, what aspects were different from expected?


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## So_Cynical

tech/a said:


> So thats a better plan than the one above it.
> Youll still buy as its falling but only after its fallen 20-30% from your initial decision to buy it???
> 
> So its $10
> You wait patiently for it to be $7
> Then you buy at "appropriate times" at $6 and $5
> So now you have a stock which has dropped 50% and you have 3 positions averaged down to X depending on your position sizing.
> 
> Now let me guess.
> *Brilliantly you buy a small parcel for the first buy then bigger ones as you buy at lower and lower prices!!
> A version of a Martingale betting system.*




I somehow missed this piece of tech brilliance months ago  funny cos if i did have a start out small and average bigger plan (Martingale) it would of worked brilliantly, of the top of my head i reckon with keeping the same exit points my profits would of maybe doubled with my losses being only a little larger.....tech's a genius.


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## Vader

cynic said:


> Hi Vader,
> 
> The last 6 months or so will (no doubt) have provided a tumultuous introduction to trading the market/s. Would you care to share your experiences?
> 
> Did market trading and behaviour prove to be just like you thought it would be?
> 
> If not, what aspects were different from expected?




I haven't been on the forums that much lately, so missed this thread popping back up, but you're right - it's been about 6 months now, so well past time for a little update.

Cutting right to the chase - as of today I'm down a little under 2% (taking into account all dividends received and all interest charged)... not exactly fantastic, I've certainly made some mistakes, but it's been an interesting period. I've learnt a lot and managed to have a few good wins in amongst it all, so am by no means disillusioned about anything and from all warnings the initial 'learing period' hasn't been too costly (at least not yet).

Have I stuck to what I thought would be my initial plan during this six months? Absolutely not. My approach has changed a couple of times as events unfolded and I've taken notice of what's happened, I acknowledge that I'm still not completely there.

So let's start with the mistakes shall we?

One of the first companies I bought was *CSR*. After lots of reading, I formed a conclusion that they had plenty of cash and were ready to take advantage of the housing market when it eventually starts to track upwards (I felt that the building industry couldn't get much lower, so just about anything is up from here)... I bought in at $1.52 and almost immediately saw it drop into the $1.30's... some panic started to creep in and I sold out after about a month at $1.38. In hind sight... I'd purchased them for a long term reason and sold back after some (further) short term drop - I was spooked by the continuation of the downward trend and wasn't confident enough in my initial appraisal to back myself.

Today, CSR are at $1.89 and while anything can still obviously happen, they've been performing really well over the past couple of months... I'll probably have another look at them in the near future, they still may be worth buying, but I'll need to get past a psychological hurdle of them being my first realised loss.

Another mistake I made was with *CCC*, a small coal company in South Africa that were expanding their operations with a new mine due to start production in September... I bought in at 10c, kept watching the train wreck for far too long and eventually sold out at 6c (they are currently 4.2c). Not only did I hold them too long, but the more experience I got watching their share price educated me that I really shouldn't have bought them in the first place. A dropping share price is one thing, but CCC seem to have a history of continually sliding on what on the face of it seems to be relatively good news and expectation. They keep failing to deliver despite promising much - this also isn't helped by having nearly 500m shares on issue that trade extremely fast... maybe there is money to be made there one day, but it's definitely not a 'beginner friendly' stock and has now got big red lines through it for me never to invest in again.

...this now brings me to *SDM* - it's too early to tell if they are a mistake or not, although the fact that I have ridden them down so far doesn't exactly look good. SDM are a top quality mining contractor IMO - yes, they are under pressure with the issues suffering the mining industry, but they seem to have take a way bigger hit than they should have. Their main saving points IMO is that they've got a management team who have hit a number of home runs in the past several years and they have no net debt and $69m in additional funds to see them through.

I bought them at an average price of $1.375, sold off a third of my holdings at $1.07 as I wasn't comfortable with the weighting they had in my overall portfolio (about 15% of my funds at the time). The share price currently sits at $0.88. From a total portfolio perspective they represent a loss of approx. 6% at their current price, so have had a major bearing on my overall results. I'm not prepared to admit defeat on them yet though - I do believe they are a quality company and will be a good long term investment. The sliding share price is softened a little by the good dividend yield they pay (and their strong cash position should help maintain that too), but I'm going to be faced with a decision soon as to whether I average down again, now they've really dropped off in the last couple of weeks or just sit back and ride it out (I'm pretty sure somewhere early on in this thread I said I definitely wouldn't average down, lol... having a high opinion of the company, offset by no net debt and a good dividend seems to have changed my mind though... whether for better or worse I guess we'll find out in the next 12 months or so)

So what have been the wins then?

Well, the first ever shares I bought were in *CSE*. To cut a long story short, they own 11m shares in SYR who found a lot of graphite and have had a nice run over the last 6 months or so... I didn't get on the early big multi-bagger action, but the CSE share price is obviously tied very closely to SYR who have been bouncing around between $2.30 and $2.90 pretty consistently every couple of months. After watching the cycle through a couple of these bounces, I finally figured out that these are a good candidate for some short-term trading. I've bought and sold them a couple of times now (current round bought at 17.5c and sold off half last week at 20.5c - holding the other half to see what SYR does, hasn't crashed back to $2.30 yet, but hasn't closed above $3 either - which will be a telling factor I reckon... see, getting some technical analysis in there, lol)... end result, up over $3,000 ($1,000 unrealised) on CSE so far... having lots of fun 

Next up is *OKN*. As mentioned on their company thread, I work for these guys, bought in at an average price of $1.10 and was targeting $1.30-$1.50 over the next 12 months. They ended up jumping pretty quickly to high $1.40's and I sold off the majority of my shares at $1.37 before offloading the remaining ones at $1.22 last week on the announcement that the ACT office is struggling with a slowdown of federal spending and earnings are likely to be impacted. I don't think it'll be that long before positive news starts to flow again (probably not before at least February though as the Christmas period is typically really slow), so am planning on buying these back once the price drops back down below $1.10 again (shouldn't be too long, and will represent a good dividend yield there too).

A few others that have done really well...

*GXL *- Purchased at $2.36, sold half at $2.88, have watched them continue to climb to $3.20

*CZZ* - Purchased at $2.03, current price $2.20

*YTC *- (small holding) Purchased at $0.24, sold most at $0.305, bought some back at $0.23, currently at $0.28 (another fun little one)

...and finally, one that I'm hoping will be a star in the making:

*HDG *- Coal explorer in Botswana... sitting on a huge resource on what I think is pretty high quality, near surface coal. Recently completed a measured JORC resource, doing a feasibility study and looking to bring on a partner to help setup a little power station that will help fund future expansion. Currently taking up a fairly high weighting in my portfolio, and I bought in at an average of 13c (currently at 12c), but they just released a research report they commissioned (so take with several large grains of salt, but I agree with most of it - available from their website), that rates them as a speculative buy and gives a 12 month target price of 58c... let's just say if it gets anywhere near that I'll be laughing 

Anyway - so what is the #1 thing I've learned over the last six months?

_Don't rush out and buy because you think you'll get left behind when the price rockets up (usually on the back of some good news coming out)... it's possible that you might, but more likely that you'll get another chance fairly soon anyway... unless it was realy, really good news in which case you're probably already too late to benefit from it anyway._

...I've fallen for that trap a couple of times (CCC was one example, but there have been a couple of other less disasterous ones).

Thanks for reading... I'll probably do another update in another six months (hopefully SDM and HDG are in really nice positions by then, lol), but given the prior speed this thread took off at I doubt I'll stoke the fires much more than that as it was just starting to derail and wasn't helping anyone


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## cynic

Thanks for the update Vader. I'm delightfully surprised by how much you've achieved and how well you've fared thus far.

As for the less than 2%, If it's any consolation to you, I made some "courageous" decisions during my first year of trading. I managed to burn approximately 75% of my trading capital before recognising my misconceptions. Subsequent revisions of my approach enabled me to recover much (but not quite all) of the lost capital during the following years. The rally started to spook me during the latter part of 2004 so I decided that it was time to unwind my share positions and shift my focus to derivatives instead. As it turned out I exited much sooner than necessary only to observe the continuation of a bull market that would almost certainly have rewarded my strategy.(Aahhh the wonders of hindsight!).

I look forward to your updates and hope that whatever learning experiences you may encounter as you continue with your endeavours, that none are as financially and emotionally taxing as my own have been.


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## So_Cynical

Vader said:


> I haven't been on the forums that much lately, so missed this thread popping back up, but you're right - it's been about 6 months now, so well past time for a little update.
> 
> 
> So let's start with the mistakes shall we?
> 
> One of the first companies I bought was *CSR*. After lots of reading, I formed a conclusion that they had plenty of cash and were ready to take advantage of the housing market when it eventually starts to track upwards (I felt that the building industry couldn't get much lower, so just about anything is up from here)... I *bought in at $1.52 *and almost immediately saw it drop into the $1.30's... some panic started to creep in and I *sold out after about a month at $1.38.* In hind sight... I'd purchased them for a long term reason and sold back after some (further) short term drop - I was spooked by the continuation of the downward trend and wasn't confident enough in my initial appraisal to back myself.
> 
> *Today, CSR are at $1.89 *and while anything can still obviously happen, they've been performing really well over the past couple of months.




And that's why i average down at the appropriate intervals...stocks with good financials and sound businesses will carry on, the SP will inevitably go up and down and that has to be planned for...selling for a short term loss when investing for the long term is so so often the wrong decision.


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## Boggo

So_Cynical said:


> And that's why i average down at the appropriate intervals...stocks with good financials and sound businesses will carry on, the SP will inevitably go up and down and that has to be planned for...selling for a short term loss when investing for the long term is so so often the wrong decision.




You are having a lend surely ?

From here...
https://www.aussiestockforums.com/forums/showthread.php?t=13513&p=688246&viewfull=1#post688246


So_Cynical said:


> *I entered HHL late last week @ 3.99* ~ my second entry, this time at a price significantly lower than last time....no big deal as the shares im holding from my first entry are 60% free carried anyway and the yield is still ok even with the reduced dividend.


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## So_Cynical

Boggo said:


> You are having a lend surely ?
> 
> From here...
> https://www.aussiestockforums.com/forums/showthread.php?t=13513&p=688246&viewfull=1#post688246




You should know better Boggo...having a lend no..the post you quoted is from 3rd-March-2012 come back and see me in march 2013 and march 2014 and we will have a discussion about my stock picking and timing ability's. 

---

Why not quote my posts from the BLD thread..how about this post from June 2012 https://www.aussiestockforums.com/forums/showthread.php?t=1918&page=3&p=711748&viewfull=1#post711748

Or this from the BPT thread also from June 2012
https://www.aussiestockforums.com/forums/showthread.php?t=299&page=33&p=709337&viewfull=1#post709337

Or this from the KSC Thread in May 2012
https://www.aussiestockforums.com/f...t=16132&page=2&p=701637&viewfull=1#post701637

Or this from the SND thread on the 12th of May this year
https://www.aussiestockforums.com/forums/showthread.php?t=17700&p=703417&viewfull=1#post703417

All winners.

HHL is one of the 7 stocks that has gone against me this financial year...not one of the 18 that has gone my way.


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## Boggo

So_Cynical said:


> ...stocks with good financials and sound businesses will carry on, *the SP will inevitably go up* and down and that has to be planned for...*selling for a short term loss when investing for the long term is so so often the wrong decision.*






So_Cynical said:


> You should know better Boggo...having a lend no..




I do know better SC, that obviously works for you but I think it is a very broad, generic and a potentially misleading statement to make in a thread with a heading associated with 'beginning'.

If someone was to start out with that approach and their first 'investment' was HHL then they would be in more trouble than the first settlers at the moment.

Protection of capital is the first priority that should be hammered home especially in a thread associated with 'beginning'.

My


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