# Be honest



## mime (21 October 2005)

Ok.

Be honest guys. Who's been burnt by the recent "correction"?

Around maybe 20% has been wiped off my portfolio. I'm still in the green but it'll take a while to rise back up to it's peaks (if it ever does)

What about you guys?


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## brisvegas (21 October 2005)

absolutely no burn whatsoever


............ pete


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## Smurf1976 (21 October 2005)

Most of my money isn't in shares to start with and I had already sold most of the shares that I held before the slump.

Bit of a burn with some gold stocks that I kept but not too bad overall.


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## mit (21 October 2005)

4.5% down from my equity peak. I purposely looked for a system with low drawdown rather than just maximizing profit. I have been stopped out of about half of my portfolio. 

mime, What kind of system are you running? 

MIT


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## The Once-ler (21 October 2005)

Of my share portfolio, I would be down about 11%.

I don't use stops, I don't trade, I invest for the long term. I mostly sell stocks once they've been held for 12 months or more. I've been heavily into resources and energy for about 18 months, and would be up about 100% [that was at the top, so now up 90%] from when I started seriously investing in shares about 4 years ago.

This is just a healthy correction. 

Cheers.


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## tech/a (21 October 2005)

Drawdown 14%.


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## Profitseeker (22 October 2005)

Down 7%


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## Scratch (22 October 2005)

Sold on 18/10 and stayed out except DOM (down .02 - bought at .47)

Scratch
____________________

Disclainmer:

Who me??!!  Don't you have to know something first??!!


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## Kauri (22 October 2005)

Being a short term pattern/support-resistance trader the correction has not affected me too much so far... a few less trades, usual mix of losers to winners.. tight stops ensuring an overall acceptable result. Am less likely to hold a winning trade overnight in the current climate though. 
   I find there are as many if not more opportunities, both long and short, as usual, the only thing that has changed is the traders/investors mindset.


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## Julia (22 October 2005)

About 4%

Julia


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## wayneL (22 October 2005)

brisvegas said:
			
		

> absolutely no burn whatsoever
> 
> 
> ............ pete




Yes, it could be reasonably expected that anyone who takes swings and includes short selling, could indeed be well up during this "correction".

As a swing trader, you miss the tenbaggers, but the you're still scooping profit in times such as this.

Cheers


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## brerwallabi (23 October 2005)

I took a fair bit of money out last October and still the market went up and up hence I traded very conservatively with capital used, this year I was not as conservative as I had previously been, so this month GGN,DRA,SMY anf FCL cost me because of tight stops. It certainly hurts when you cop a few losses in such a short time. Usually I trade stocks that I have got to know reasonably well the secret for me is and was when to reenter, it isno different now. I will continue with my group of almost 40 favourites (I do not hold all 40 at the same time but usually hold between 6 - 8 at any one time apart from a couple of weeks ago when 8 went to 3 in two days. At one stage I was down 12.7 % on capital used although for this tax year I am still very healthy overall, actually at this stage line ball with last year - interesting for me anyway.


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## RodC (23 October 2005)

Down about 10%

Rod.


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## GreatPig (23 October 2005)

Down about 6% in the investment portfolio, 10% in the trading portfolio.

I'm not sure of the exact definition of "draw-down" though. Can someone state exactly what it means, and thus what figures are used in calculating it?

Cheers,
GP


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## JetDollars (23 October 2005)

Back in Late Mar and April'05 I got burnt badly, but this month correction I bought a lot of put to protect it.

On Friday 21/10/05 I sold out all my puts and expecting this coming week for most of the stock to recover, but the Dow Jones is down on friday, so look like I am going to get burnt next week.

I still had plenty of Nov'05 call options. Only time will tell.

This Financial Year I am already down 4.22% of my total capital.


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## tech/a (23 October 2005)

GreatPig said:
			
		

> Down about 6% in the investment portfolio, 10% in the trading portfolio.
> 
> I'm not sure of the exact definition of "draw-down" though. Can someone state exactly what it means, and thus what figures are used in calculating it?
> 
> ...




If no-one else answers by Monday night I'll answer your question for you.


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## JetDollars (23 October 2005)

tech/a said:
			
		

> If no-one else answers by Monday night I'll answer your question for you.




My understanding of drawdown:
The current stocks you are holding is losing money, but you haven't sold it yet.

Eg. Buy BHP at $20.50 a few weeks ago, now BHP $20.03. So a drawdown of $0.47.


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## markrmau (23 October 2005)

JetDollars said:
			
		

> but the Dow Jones is down on friday, so look like I am going to get burnt next week.




Actually, I wouldn't read too much into the dow. It took a hit partly because a single component (Caterpillar) was down 9.4%. The overall market was actually up by half a bees dick.

OTOH, the afternoon trend was decidedly down.


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## JetDollars (23 October 2005)

markrmau said:
			
		

> Actually, I wouldn't read too much into the dow. It took a hit partly because a single component (Caterpillar) was down 9.4%. The overall market was actually up by half a bees dick.
> 
> OTOH, the afternoon trend was decidedly down.




Mark,
If that's the case then it would be a positive news for me. Let see tomorrow.


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## mit (24 October 2005)

GreatPig said:
			
		

> Down about 6% in the investment portfolio, 10% in the trading portfolio.
> 
> I'm not sure of the exact definition of "draw-down" though. Can someone state exactly what it means, and thus what figures are used in calculating it?
> 
> ...




My percentage drawdown is based from my equity peak which was at the end of September. 

MIT


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## Knobby22 (24 October 2005)

I'm down about 3%. 
Most of my shares have not fallen much and some have risen. 
I see no real collapse in prices. I have been trying to increase my ownership of one company for a month now and it won't drop to my level. (Charter Pacific). My biggest hits have been Oxiana and Woodside but they have done so well, who cares about a  little drop?


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## mime (25 October 2005)

I don't have a trade system or stop loss. I buy small companys and hope they grow into big ones in the long term. 

I'm only trading in stocks bacause I don't have enough money to buy property. (Damn the Labor state govt for their excessive taxes. :swear: ) and it's kinda fun watching them go up. (not down)


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## happytrader (26 October 2005)

Heard this story from a friend of a friend and I tend to think it is true.

There was a futures trader who slept in and missed the market. In doing so they missed trading out of their position which was somewhere around $40k when it was opened. This person got a literal wakeup call from their broker informing them that they would need to come in and make arangements to settle the $800k they now owed. This possibly involved close to everything they owned and some. It could all have ended right there, however, this person was a trader in the full sense of the word.

Yes they made a mistake, and a huge one at that. The stockbroker had first hand knowledge of this persons trading ability and they came to some arrangement with a stake.

This person was able to get up, get their head together and get back in the game and trade their way out of what can only be called a nightmare. They didnt quit, lay down and die.  No real trader ever does. 

I have read many such stories from well known American traders but this one touched my heart because they're Aussie.

Cheers
Happytrader


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## Smurf1976 (26 October 2005)

mime said:
			
		

> I'm only trading in stocks bacause I don't have enough money to buy property. (Damn the Labor state govt for their excessive taxes. :swear: ) and it's kinda fun watching them go up. (not down)



I don't follow the logic that state govt taxes are somehow to blame for the high property prices. If they took the taxes off then the actual property price would likely rise by an equal amount. It's highly unlikely IMO that house buyers would all drop their offers by an amount equal to the reduced tax. Instead, they would most likely continue to spend as much as they can afford when buying a house. The property owners would win whilst government would simply increase the tax on something else to offset the loss of revenue so first home buyers would be worse off than they are now.

Cutting taxes would probably have an inflationary effect just like the First Home Owners Grant does. Give people $7000 and they leverage that via a mortgage and end up worse off than if the government had given them nothing.


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## mime (26 October 2005)

Smurf1976 said:
			
		

> I don't follow the logic that state govt taxes are somehow to blame for the high property prices. If they took the taxes off then the actual property price would likely rise by an equal amount. It's highly unlikely IMO that house buyers would all drop their offers by an amount equal to the reduced tax. Instead, they would most likely continue to spend as much as they can afford when buying a house. The property owners would win whilst government would simply increase the tax on something else to offset the loss of revenue so first home buyers would be worse off than they are now.
> 
> Cutting taxes would probably have an inflationary effect just like the First Home Owners Grant does. Give people $7000 and they leverage that via a mortgage and end up worse off than if the government had given them nothing.




I worked out that if I bought a PPOR for $130K(rare find in Sydney) stamp duty was around $3k. For an investment property the same price it's around $9k. I think now the land tax threshhold has been reintroducted which is a great help. A low income earner (eg student) find it hard enough to come up with the deposit with out coming up with stamp duty.

I think the state was ment to remove stamp duty after the introduction of the GST and it never happened. So we are being taxed twice.

I'm tried of seeing Labor destorying NSW with excessive taxes. I pray they get booted next election before it's too late.


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## RichKid (26 October 2005)

happytrader said:
			
		

> Heard this story from a friend of a friend and I tend to think it is true.
> 
> There was a futures trader who slept in and missed the market. In doing so they missed trading out of their position which was somewhere around $40k when it was opened. This person got a literal wakeup call from their broker informing them that they would need to come in and make arangements to settle the $800k they now owed. This possibly involved close to everything they owned and some. It could all have ended right there, however, this person was a trader in the full sense of the word.
> 
> ...




I like that Happy! The trader's lucky s/he had a reputation to 'trade' with. Looks like the survivors are the smart ones (and tough too I bet).


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## Kauri (26 October 2005)

Well I am kinda glad my broker insisted on margins that if not met meant the contract/contracts were sold before the loss could get out of hand.


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## tech/a (26 October 2005)

MIT

Has touched on the most common of drawdowns known as the peak to valley drawdown.
Simply it is any drawdown from a peak to a valley or low.
This occures often in the life of a portfolio investment (Infact if you record all trading portfolio or otherwise you'll notice peaks and valleys in total open equity ) and if your a systems trader like myself you'll be looking for any peak to valley drawdown to be within your tested results parameters.If you find a maximum drawdown is exceeded in live trading--best to stop trading and see whats happened.


Second type is an initial equity drawdown.The worst type as this is eating into your initial capital.Again if your trading a portfolio you will have a period of initial drawdown as you select and trade your portfolio.
Not all will perform positively from the get go and you may have 10 trades of which 7 fail and you replace trades as they are stopped.
You need to know that your drawdown on initial capital wont exceed your trading capital while you get your portfolio set.

Time to recovery naturally falls in neatly behind these stats.


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## happytrader (26 October 2005)

Yes Richkid I think thats true what you say about a reputation to 'trade' with.
I reckon we all need one of those just to look back on and to remember we really have got what it takes especially when the going gets tough.

Cheers 
Happytrader


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## mit (26 October 2005)

I was thinking about the drawdowns talked about here and I think we are comparing chalk and apples. A person may have a 4% drawdown but may have made 8% for the year to date. Another person with a 20% drawdown may have made 100% for the year to date. Another way of looking at it would be what date have you rolled back to. For instance as of close today My profit is the same as it was on the 16th of September so I have lost just over a month. Which puts it into a better perspective.

MIT


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## happytrader (27 October 2005)

Hi Mit

I am a very short term option trader and this is how I look at it.
Its about spending money! No profit this month, no spending money! Who cares what I made last month or how much profit I've derived and may still be 'hanging' onto over the year. Thats yesterdays news. In fact the closer it gets to the end of the month and if I am down, I'm likely to fight even harder for my spending money and to uphold my personal track record.

Cheers
Happytrader


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## rozella (29 October 2005)

G'day,

I have seen a few Equity Charts on forums lately, so I thought it might be appropriate to plot our margin trading equity curve to see how the corrections "we had to have" affected us.

We commenced with $75,000.00 on 1st July 2004, however we were not recording the weekly fluctuations until week 11, which was at $85,811.19

We hit a high of $117,370.75 (week 25, 17th Dec 04) then dropped off as banks & LPT's etc were quoted exdividend, to reach a low if $110805.60 (week 26, 24th Dec 04), then rising consistantly up until week 38.

You will notice around Easter (week 38, 18th March 05) we started to dip from a high of $122,672.04 to a low of $105,677.11  (week 42, 15th April)......this was the first major correction since September 11th 2001 that I have found that has affected the dividend strategy, & it then took us until week 50 (10th June 05) to claw back our losses, & be back to $122,784.09, reaching a high of $124,980.53 on week 51 (17th June 05).

From this point, NAB, WBC, ANZ, BOQ, SGB, & a host of LPT's were quoted exdividend prior to the end of the FY, so we took another hit to a low of $109,904.56 (week 54) although this was planned as the dividends were locked in to pay in July & August.

Our portfolio then rose consistantly to a new high of $140,505.30 (week 66, 30th Sept 05) before we were hit by our latest correction, which saw us drop to $130,126.54 by week 68.  By having tight stoplosses we were able to limit loss, & be well cashed up to take advantage of lower prices as they emerge.  The last two weeks have risen to $132439.51 (current week 70) 

See Margin Trading 2 & Trading Diary 2 

I hope this is of help to compare with your own trading.  

Equity Chart

Sorry, I don't know how to post the chart's image directly to the post.....can someone tell me how to do it ?  It is in jpg


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## Smurf1976 (29 October 2005)

Just wondering what is considered to be an acceptable peak to valley drawdown for a trading system? I assume that there is an accepted "rule of thumb"?


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## tech/a (29 October 2005)

Smurf.
It does vary.
I have heard that the top Futures boys can have over 100%.
They have the ability to absolutley kill it at both ends.

When developing a trading system it is possible and for me desirable to minimise drawdown.Of the 3 I use all are around 20% Peak to Valley and 6-11% initial Drawdown.

My aim is a smoother equity curve.


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## mit (31 October 2005)

happytrader said:
			
		

> Hi Mit
> 
> I am a very short term option trader and this is how I look at it.
> Its about spending money! No profit this month, no spending money! Who cares what I made last month or how much profit I've derived and may still be 'hanging' onto over the year. Thats yesterdays news. In fact the closer it gets to the end of the month and if I am down, I'm likely to fight even harder for my spending money and to uphold my personal track record.
> ...




Happy Trader,
What do you do with profit in excess months? I'm trying to build up capital so that is why my POV is different. All of the people doing Options on this Forums has me interested. I have borrowed an Options book from the Library and am reading up on it.

MIT


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## happytrader (2 November 2005)

mit said:
			
		

> Happy Trader,
> What do you do with profit in excess months? I'm trying to build up capital so that is why my POV is different. All of the people doing Options on this Forums has me interested. I have borrowed an Options book from the Library and am reading up on it.
> 
> MIT




Disgusting as it may seem I am a spendthrift and have'nt worked regularly for years. But I must add I am no slouch and study very hard and keep up my professional knowledge. Take it from me don't give up your day job. You will need it to maintain your emotional distance, reduce perceived and real financial stress and stay balanced. I use excess to increase and maintain my capital stake so I can trade bigger on my written and bought positions and to top up my buffer so that I can maintain stake size.

Example

If you were to take 3 trades per week with $5000 stake and $3000 buffer 
20% loss 30% profit. I find these outcomes are common on bank stocks and a financial stock. By the way don't take my word for it check it out.

Possible outcomes

3 wins - $4500            Best case scenario
2 wins 1 loss - $2000   Average case scenario
1 win 2 losses --$500  It happens scenario
3 losses --$3000        Worst case scenario

Example

Favourite stock in material sector outcomes from October 3 call trades

1 loss -- 20%
1 win - 20%
1 win -30%

Your analysis and knowledge of the stock you trade is paramount. Don't even go there if you cant get two out of three right, or your losses are so small 3 or 4 losses are manageable.

My archilles heal is not taking the money when it is offered.

These are my thoughts and are not to be viewed as financial advice or recommendations. Financial loss in this area is very real.

Cheers
Happytrader


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