# Is it Possible to pick Bottoms or Tops - consistently?



## tech/a

> Buying the bottom is ALWAYS luck, never though about the skill aspect and thinking about it i don't think skill plays any part, its a calculated decision.






> Who can find the bottom first time with any consistency? Cheap enough for a decent long term return is cheap enough for a decent long term return. Picking the bottom is luck.




Not only do I think it is more than possible but I also believe it is a skill you need to have a proficiency in.
You need to know when your at a hard top or bottom or a soft one.
How to read price action as it nears either so you can take the best advantage of it going forward.

Obviously the connotations of a topic on tops and bottoms isn't without humor but *this is a serious topic!*

My ambassador for the topic!




*Jokes aside*

On both fronts you need to know what to do when you see one *or* one is approaching---Oh God--you just cant get away from it !!!


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## notting

*Re: Is it Possible to pick pick Bottoms or Tops---consistently.*

I'd say you can't consistently.

However there is nugget in that sentence.

You can pick a top and a bottom rarely yet pretty much perfectly.

The art of it is knowing when it is one that is right as apposed to all the ones 'you think' are right.
It is usually out of the blue, unintended and even self surprising but you know it, almost without realizing you know it. Even the way you know it is different most of the time.  
The intuitive mind is unlimited in its capacity to manifest scenarios.
Once you've got a sense for it after about 30 years of experimenting with it!

Then comes the hard part!
Trading it.

As Techa said it's knowing what to do when it happens and preparing for the psychological meltdown you tend to have when entering a big trade 'on it' against all the nuances that have built into you that will immediately start cheering for the opposite direction once your neck is on the line.

What do you do?
Take the position, set a target and walk away.
Don't go back until it has played out.

Easier said than done.


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## wayneL

*Re: Is it Possible to pick pick Bottoms or Tops---consistently.*

It's actually dead easy. In fact the zigzag function in any charting package does it to the day every single time.:


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## galumay

*Re: Is it Possible to pick pick Bottoms or Tops---consistently.*

i guess it depends whether you subscribe to the theory that past events and be used to predict future action. 

Thats a debate thats been raging since markets started and it wont be resolved any time soon!


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## Valued

*Re: Is it Possible to pick pick Bottoms or Tops---consistently.*

It depends what you mean by consistently. By consistently do you mean getting it right more often than not? P

The problem with a market bottom is even if you do pick it, the stock may get stuck in a trading range for months. If the stock is not in a trading range then you won't be able to pick a bottom since you won't know when a trend will end (of course on the short side 0 is the bottom... that's easy to pick).


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## robusta

*Re: Is it Possible to pick pick Bottoms or Tops---consistently.*



Valued said:


> It depends what you mean by consistently. By consistently do you mean getting it right more often than not? P
> 
> The problem with a market bottom is even if you do pick it, the stock may get stuck in a trading range for months. If the stock is not in a trading range then you won't be able to pick a bottom since you won't know when a trend will end (of course on the short side 0 is the bottom... that's easy to pick).




Also throw into the mix how many times you are having a go at it. If you are day trading, in and out with tight stop losses the law of averages say you are going to hit the bottoms or tops eventually. Compare that to someone making one maybe two decisions a month on a limited universe of stocks...


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## pavilion103

I use these areas to increase probability.
There is a higher probability that price will struggle as it approaches these areas.

I use it for trade management - so I wouldn't just let a trade run near a significant level. The more significant the level , the greater caution I take.

I use major S/R as a potential entry point for a position trade. It allows me to estimate a potential RR and get in at a higher RR area.

Exits - I may profit take near these levels because the chance of at least a consolidation or range is greater.


I don't care about in depth debate though.
I only care about profit.


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## tech/a

*Re: Is it Possible to pick pick Bottoms or Tops---consistently.*



wayneL said:


> It's actually dead easy. In fact the zigzag function in any charting package does it to the day every single time.:




Bugga you know how I do it!


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## robusta

*Re: Is it Possible to pick pick Bottoms or Tops---consistently.*

So this zig zag function can be used in real time, forward looking to pick bottoms and tops with consistency? This is exciting news. Forgive my ignorance but how does it work and how do I use it?


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## Caveroute

*Re: Is it Possible to pick pick Bottoms or Tops---consistently.*

Last night between 7pm and midnight on the 150 tick FTSE a cursory glance shows there were ~ 12 potential double bottoms.

All of them failed. 

A pattern is next to meaningless without context, here the context is a strong bear trend, all reversal attempts are expected to fail, until proved otherwise.

I don't know why would anybody would even bother to look for longs here when the shorts are high probability and low risk.


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## tech/a

robusta said:


> So this zig zag function can be used in real time, forward looking to pick bottoms and tops with consistency? This is exciting news. Forgive my ignorance but how does it work and how do I use it?




You don't he's having a lend---now I've spoilt his fun! 



Caveroute said:


> Last night between 7pm and midnight on the 150 tick FTSE a cursory glance shows there were ~ 12 potential double bottoms.
> All of them failed.
> A pattern is next to meaningless without context, here the context is a strong bear trend, all reversal attempts are expected to fail, until proved otherwise.
> 
> I don't know why would anybody would even bother to look for longs here when the shorts are high probability and low risk.




Context totally agree
But I wouldn't say ALL reversal attempts expected to fail
Particularly in context.
Infact in context and leading upto a potential top or bottom 
I'm sure you can successfully predict outcome.

You just need to know what to look for.
What to do when you see it 
How to manage it after the top is broken or rejected.


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## Caveroute

tech/a said:


> You don't he's having a lend---now I've spoilt his fun!
> 
> 
> 
> Context totally agree
> But I wouldn't say ALL reversal attempts expected to fail
> Particularly in context.
> Infact in context and leading upto a potential top or bottom
> I'm sure you can successfully predict outcome.
> 
> You just need to know what to look for.
> What to do when you see it
> How to manage it after the top is broken or rejected.




Well, sort of.

If your in a TR you can take a view.

If your in a trend you can take a view. 

If you in a trend within a TR, you can also take a view. 

Nail the context and as you say 'know what to look for' and things should fall into place. 

What could possibly go wrong after all.


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## MichaelD

Interesting proposition given the current market action.

I'd say all of the following = decent probability of the bottom.

1. Extended period of downtrend with bigger and bigger black bars, leading to...
2. A huge "kangaroo tail" candle on the open. Really unusually big compared to even the worst of the downtrend bars. Possibly representing the last gasp of the "desperate to get out at any cost" crowd. Pretty much the only candlestick pattern I pay any attention to at all.
3. You personally want to stay short, short, short with all your heart.
4. Newbie traders are asking about how to short stocks on forums.
5. The last trading session fell so much and so far that it made headline news instead of being relegated to the business section.
6. All the news is 100% grim with no hope in sight.
7. (Now a defunct indicator). The CommSec trading platform crashes on market open due to the volume.

Such a combination of events would likely see me closing my short positions & then sitting back and waiting to see what happens - heck, my trailing stop would trail down the kangaroo tail and be hit on the way up anyway so they're closing regardless of what I think of the situation.

I'd go short again if price action goes significantly below the bottom of the kangaroo tail.


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## Caveroute

MichaelD said:


> Interesting proposition given the current market action.
> 
> I'd say all of the following = decent probability of the bottom.
> 
> 1. Extended period of downtrend with bigger and bigger black bars, leading to...
> 2. A huge "kangaroo tail" candle on the open. Really unusually big compared to even the worst of the downtrend bars. Possibly representing the last gasp of the "desperate to get out at any cost" crowd. Pretty much the only candlestick pattern I pay any attention to at all.
> 3. You personally want to stay short, short, short with all your heart.
> 4. Newbie traders are asking about how to short stocks on forums.
> 5. The last trading session fell so much and so far that it made headline news instead of being relegated to the business section.
> 6. All the news is 100% grim with no hope in sight.
> 7. (Now a defunct indicator). The CommSec trading platform crashes on market open due to the volume.
> 
> Such a combination of events would likely see me closing my short positions & then sitting back and waiting to see what happens - heck, my trailing stop would trail down the kangaroo tail and be hit on the way up anyway so they're closing regardless of what I think of the situation.
> 
> I'd go short again if price action goes significantly below the bottom of the kangaroo tail.




These are epoch changing events, in 'geologic time',  I thought we were talking day to day ..........

fwiw, the big bars you refer to are aka as climax bars - and form part of the regular day to day assessment.

I've just looked at the 15 min bars from the absolute classic session last friday and guess what - exhaustion preceded the turn - biggest bars in the trend, both up and down.


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## IFocus

Used to work with some one who got the DOW within a 100 points on three occasions during various crashes and always went all in each time, lost touch so don't know how he went in 2007 / 2008.

Need less to say he made a fortune all on gut feel.


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## notting

Every now and then it happens.
I had AGOs measure for a short period.
Picking the bottom -
5th-September-2012 01:10 PM here hit a low at around $1.20
All that happen was that I noticed a mood change in AGO.  I had become a bit obsessed with it and some how against the market backdrop it suddenly behaved differently than it had been and so did the other IO stocks.  I wouldn’t say this was a completely clear cut case however you can see there was nothing technical really showing.  
I traded it.

Picking the AGO top here -
15th-February-2013 11:33 AM  Fell from 1.875 to .685
This is a classic.  
It would be a lie to say I picked it.  Because I had nothing to do with it.  It was an overwhelming instinct, I had a lot of AGO! It felt like I was saving my own life. 
It was that strong.  
Nothing made sense about it. I just involuntarily sold it due to an overwhelming feeling to.  It was the highest point since that previously picked low. 

I didn’t have the balls to go short.

You cannot do it consistently and you can’t try to.  If you’re asking yourself questions like is this the top or the turn or this or that.  It’s not that kind of special instinct.  If you’re using technical or fundamentals it’s not that kind of special instinct.  Though it does lean on the side of fundamentals. You can learn to know the difference between contrived action and something more profound.  You can’t make it happen, it kind of does you rather than 'you do it.'

SLR 3rd-December-2013 05:20 PM
It will double.  
That’s all I got.  No price sense nothing.  Just - it will double. 
It did.
I only bought a small amount because I’ve been gun shy lately.

Others I can remember where they did exactly what some self assuring sense indicated they would after a strong instinct were KAR, QBE, ASL, TRY and NAB during the crash. These I can remember from the last 5 years or so probably some more that I didn't play.
Not many, but enough amidst hundreds of others that I am playing like everyone one else and winning and losing.

But every now and then - something just lines you up.

It’s really hard because if you say to me, OK then, dick head, tell us when you next have the instinct.  
I will immediately start thinking I have to tell the next time.  That changes the chemistry. It’s like you have taken a vow and it is pulling on you.  
You have to be in this neutral space where nothing is going on no predispositions but you never know.
I will try to indicate something if it ever happens that strongly again, as I have done with AGO and SLR fairly recently and bothered to record it in ASF.


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## Caveroute

notting said:


> Every now and then it happens.
> I had AGOs measure for a short period.
> Picking the bottom -
> 5th-September-2012 01:10 PM here hit a low at around $1.20
> All that happen was that I noticed a mood change in AGO.  I had become a bit obsessed with it and some how against the market backdrop it suddenly behaved differently than it had been and so did the other IO stocks.  I wouldn’t say this was a completely clear cut case however you can see there was nothing technical really showing.
> I traded it.
> 
> Picking the AGO top here -
> 15th-February-2013 11:33 AM  Fell from 1.875 to .685
> This is a classic.
> It would be a lie to say I picked it.  Because I had nothing to do with it.  It was an overwhelming instinct, I had a lot of AGO! It felt like I was saving my own life.
> It was that strong.
> Nothing made sense about it. I just involuntarily sold it due to an overwhelming feeling to.  It was the highest point since that previously picked low.
> 
> I didn’t have the balls to go short.
> 
> You cannot do it consistently and you can’t try to.  If you’re asking yourself questions like is this the top or the turn or this or that.  It’s not that kind of special instinct.  If you’re using technical or fundamentals it’s not that kind of special instinct.  Though it does lean on the side of fundamentals. You can learn to know the difference between contrived action and something more profound.  You can’t make it happen, it kind of does you rather than 'you do it.'
> 
> SLR 3rd-December-2013 05:20 PM
> It will double.
> That’s all I got.  No price sense nothing.  Just - it will double.
> It did.
> I only bought a small amount because I’ve been gun shy lately.
> 
> Others I can remember where they did exactly what some self assuring sense indicated they would after a strong instinct were KAR, QBE, ASL, TRY and NAB during the crash. These I can remember from the last 5 years or so probably some more that I didn't play.
> Not many, but enough amidst hundreds of others that I am playing like everyone one else and winning and losing.
> 
> But every now and then - something just lines you up.
> 
> It’s really hard because if you say to me, OK then, dick head, tell us when you next have the instinct.
> I will immediately start thinking I have to tell the next time.  That changes the chemistry. It’s like you have taken a vow and it is pulling on you.
> You have to be in this neutral space where nothing is going on no predispositions but you never know.
> I will try to indicate something if it ever happens that strongly again, as I have done with AGO and SLR fairly recently and bothered to record it in ASF.




Yes, i've heard this sort of thing -but again were talking visionary one off's.

When  Herman Bhul ascended K2 solo, an unclimbed Himalayan peak,  he said voices were telling him where to go and how to get off the mountain. He followed the voices and got down ok.

Stepped off a serac a few years later though, on Changabang (?), he didn't trade again:


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## notting

Caveroute said:


> Yes, i've heard this sort of thing -but again were talking visionary one off's.




Yes!!
But that's the point!
It's learning to identify those and it's possible.
If your looking for 'consistency' or a pattern or a perfect record or whatever that's not the way it works and you will never find it!
There are lots of areas of life that it is incredibly useful and you will usually get dragged through all kinds of s&#@ that your conceptual mind conjures up to make you second guess and trip yourself up.  The market is one of the hardest arenas to use it in because it's so loaded with all of the worst motives and opinions and egos self doubt and on and on. 
The more you try to explain the more lost you get.  
So I will just try to share if it ever happens again.
Yes.  Expecting it to happen is an obscuring predisposition.
So just be a mug or technical probabilist cumulative trend winner and forget about it.
And then that tap on the shoulder in a moment of stillness.
When you have given up or forgotten about it.


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## Caveroute

If your looking for 'consistency' or a pattern or a perfect record or whatever that's not the way it works and you will never find it!

Mate, nothing is perfect.

Everything requires analysis.

All analysis requires a framework.

I work within a price action framework.

In hindsight everything is crystal clear, as long as you take the right view.

The last bit is work in progress .................

Is there an alternative you might recommend ?


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## notting

Sure, Be Buffet or Radge.
Far easier.

I just happen to be very interested in this particular insight as well.


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## So_Cynical

Is it Possible to pick Bottoms or Tops - consistently?

No

Buying the bottom is ALWAYS luck, if there was a way to do it then i imagine people would be doing it and making a motza, or at least selling a training course on how to do it and making a fortune.


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## Valued

So_Cynical said:


> Is it Possible to pick Bottoms or Tops - consistently?
> 
> No
> 
> Buying the bottom is ALWAYS luck, if there was a way to do it then i imagine people would be doing it and making a motza, or at least selling a training course on how to do it and making a fortune.




Just because you think it's luck does not mean it can't be done. With proper analysis the bottom should be able to be picked more often than not. Consistently does not mean always. For example, with consistent profits you would not expect to win on every trade.

Now picking the very bottom down to the cent would be absurd. I think when talking about picking tops and bottoms, we have to be talking about picking them within say 5 - 10% of the top or bottom before a major new bull or bear market. I think it can be done more often than not. I am not saying I can do it right this minute but I think I can apply proper analysis to take an educated view point of where we are bottoming out or topping out. I need more time to figure it out but from what I can see, it can be done. 

The reason I think many people fail at this is they open up a charting package of 400 mechanical indicators and try to combine them into holy grails. They say "Wow the MACD is doing this when the price is doing that, it's a BUY!". Really it just doesn't mean anything. It's just some lines that react to the price action.

I don't believe in Elliot Wave, or at the very least I am indifferent to it (since in many cases a proper application of technical analysis will predict the same wave movements anyway) but people who use Elliot Wave seem to think they can predict tops and bottoms. Those who use Volume Spread Analysis believe they can do the same thing.


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## tech/a

Personally I think it important for *ANY* discipline of trader.
While bottoms seem to be the focus I would argue that seeing a top is more important.
Many could have avoided a lot of Damage in 2008 but didn't.



> I don't believe in Elliot Wave, or at the very least I am indifferent to it (since in many cases a proper application of technical analysis will predict the same wave movements anyway) but people who use Elliot Wave seem to think they can predict tops and bottoms.




https://www.aussiestockforums.com/forums/showthread.php?t=6211&page=2


You may be interested in reading post #28 then having a look at the outcome.
I didnt have a lot of support at the time of the post.
But It was well *before* history!


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## ROE

So_Cynical said:


> Is it Possible to pick Bottoms or Tops - consistently?
> 
> No
> 
> Buying the bottom is ALWAYS luck, if there was a way to do it then i imagine people would be doing it and making a motza, or at least selling a training course on how to do it and making a fortune.




I agree all down to luck and probability, no system, no charts, nothing can predict this outcome... 
Better to have a system where you can buy at the price you comfortable with and protect your capital.
this way at least you know next year you have more capital than the year before 

most people too focus on winning and capital gain and lose sight of protecting capital.
protect your capital should be just as important or more so.

You have a better chance given proper research but it still boil down to luck and probability.
because if it is a science where lot of people can do this, you can be really rich..


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## Valued

tech/a said:


> Personally I think it important for *ANY* discipline of trader.
> While bottoms seem to be the focus I would argue that seeing a top is more important.
> Many could have avoided a lot of Damage in 2008 but didn't.
> 
> 
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=6211&page=2
> 
> 
> You may be interested in reading post #28 then having a look at the outcome.
> I didnt have a lot of support at the time of the post.
> But It was well *before* history!




Could someone else look at the same chart differently with Elliot Wave though and come to a different conclusion?

Did Elliot Wave practitioners claim that it's warning of a disaster or is it claiming the market is going down anyway even if the GFC did not happen? I think the market moves in waves, I am just not so sure it moves in Elliot Waves. If this were the case, do Elliot Wave practitioners get it wrong since they made a mistake in analysis or because the method is not 100% accurate?


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## MichaelD

Caveroute said:


> These are epoch changing events, in 'geologic time',  I thought we were talking day to day ..........




All IMO. Cleverer traders/analysts may disagree. I don't mind being a dumb but profitable trader.

Day-to-day: not predictable. Offers up a low risk entry opportunity by virtue of the close stop possible, but the results are more down to the close stop and letting the winner run than to the possibility of correct prediction. 50% correct is plenty good enough to make a fine profit.


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## So_Cynical

Valued said:


> Just because you think it's luck does not mean it can't be done.




I don't think it cant be done consistently, i know it cant be done consistently.

Can it be done at all is a different question with a different answer, i have done it myself 3 or 4 times so yes i know it can be done and i know it was pure luck...buy a falling stock and if it stops falling your lucky not skilled or in possession of the magic formula etc.


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## Valued

So_Cynical said:


> I don't think it cant be done consistently, i know it cant be done consistently.
> 
> Can it be done at all is a different question with a different answer, i have done it myself 3 or 4 times so yes i know it can be done and i know it was pure luck...buy a falling stock and if it stops falling your lucky not skilled or in possession of the magic formula etc.




I think the problem you might be having is definitions. I don't think Tech/A means picking stocks as they are falling in anticipation of it bottoming out. I think he means picking bottoms once it has bottomed out. If it's still in a downtrend and falling, we can't have a market bottom. Entering a stock as it is falling is therefore just luck if it happens to bottom out. There has to be a pause in the downtrend through a trading range or some sort of consolidation. It is then you pick the market bottom or make up your mind that the downtrend will continue. Of course, then the point I was making was that even if you get this right, it might be stuck in a trading range months or even years.


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## barney

tech/a said:


> Not only do I think it is more than possible but I also believe it is a skill you need to have a proficiency in.
> You need to know when your at a hard top or bottom or a soft one.
> How to read price action as it nears either so you can take the best advantage of it going forward.
> 
> *this is a serious topic!*




Agree 100% with the above  .... I posted an answer a couple of days ago but deleted the post when I noticed you had put this thread in the medium/long term investing thread.  

Firstly, my disclaimer ...... *I am the worlds worst trader*, so take my opinion with a grain of salt (If anyone wants to know why I am the worlds worst trader just PM me and I'll tell you how to lose money lol)

Anyway, your question Tech is more of an observation from someone who has been in the game for a while (in my opinion) .......  

Whenever anyone takes a position, long or short in a Stock, an Index, or a Forex trade, they are taking that position with the view that *IN THEIR TIME FRAME   * , they are picking the top or bottom of the current move ...... (Exceptions to that opinion is if the trader is taking a "part position"  ie. Scaling into a position as a longer term plan)

If you are not scaling into a position, then taking a trade (*if you are not convinced it is a top or bottom  *... in the time frame you are trading ..... is a* LARGE *mistake!

Without going into boring details, picking tops or bottoms *(in whatever time frame a trader is trading in), *is possibly the most important "ability" that a trader needs to possess .......... in my very *VERY* humble opinion

My assessment of trading after many years of ups and downs  ......   Money may be the root of all evil ...... but *TIME/TIME FRAME* is the route to all Money  ...  Learn the relationship of* time *to whatever market you choose to trade, and the whole concept of trading will become much clearer ......

Bear in mind I may be delusional  lol


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## odds-on

So_Cynical said:


> Is it Possible to pick Bottoms or Tops - consistently?
> 
> No
> 
> Buying the bottom is ALWAYS luck, if there was a way to do it then i imagine people would be doing it and making a motza, or at least selling a training course on how to do it and making a fortune.




Have you thought about applying the Coppock Curve to large cap stocks? 

Cheers


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## Valued

odds-on said:


> Have you thought about applying the Coppock Curve to large cap stocks?
> 
> Cheers




From wikipedia:

"He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.[2]"

Sounds like the same people who think the markets are like gravity. This is a faulty analogy and a logical fallacy. You can't base buying and selling signals on the assumption that markets mourn like people. Further it assumes that the Bishop, likely unqualified, was actually correct. 

I think it's important to understand just how faith based Americans are. They take faith based principles and run with them. People then start believing in things without understanding the underlying assumptions. Trading based on what a Bishop says is the time people mourn isn't really a watertight strategy. It's just another oscillator based on a longer time frame on the advice of a Bishop.


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## odds-on

Valued said:


> From wikipedia:
> 
> "He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.[2]"
> 
> Sounds like the same people who think the markets are like gravity. This is a faulty analogy and a logical fallacy. You can't base buying and selling signals on the assumption that markets mourn like people. Further it assumes that the Bishop, likely unqualified, was actually correct.
> 
> I think it's important to understand just how faith based Americans are. They take faith based principles and run with them. People then start believing in things without understanding the underlying assumptions. Trading based on what a Bishop says is the time people mourn isn't really a watertight strategy. It's just another oscillator based on a longer time frame on the advice of a Bishop.




Markets are made up of humans. The time frame of around 12 months seems about right. Out of boredom, one day I applied the Coppock Curve to interest rate data, when applied with the Coppock Curve for the market, you would end up with a reasonable buy indicator.


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## Valued

odds-on said:


> Markets are made up of humans. The time frame of around 12 months seems about right. Out of boredom, one day I applied the Coppock Curve to interest rate data, when applied with the Coppock Curve for the market, you would end up with a reasonable buy indicator.




They are sort of made up of humans and sort of not. Let's ignore the fact that people still arn't going to mourn the fall of a market like they would a dead relative, the market is made up of retail traders and professional operators. The latter are  hedge funds, prop firms, banks, superannuation funds and other very large professional operators. These professional operators cause the large majority of market activity. They do not mourn a fall in the markets. Further, many entities now use system based trading and high frequency trading. These are run by emotionless computers. The computers are doing the trading. If a professional operator does not want the market to go down, they buy all floating supply of the stock and then the market is unable to move down since there is no more stock left to sell.


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## So_Cynical

Valued said:


> I think the problem you might be having is definitions. I don't think Tech/A means picking stocks as they are falling in anticipation of it bottoming out. I think he means picking bottoms once it has bottomed out. *If it's still in a downtrend and falling, we can't have a market bottom*.




Perhaps we should define bottom, in my experience most bottoms are V shaped and there was little if any consolidation...every time i have bought a bottom i have bought a falling stock, if its going up its not a bottom.


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## Valued

So_Cynical said:


> Perhaps we should define bottom, in my experience most bottoms are V shaped and there was little if any consolidation...every time i have bought a bottom i have bought a falling stock, if its going up its not a bottom.




Well I think you might be misinterpreting what a bottom is. A bottom must occur at the end of a downtrend. You must look to the left and see the downtrend. If it isn't there, it's not a bottom. After a downtrend a stock would almost never form a V shape. There would be a period of panic and mass selling followed by a trading range of buying. The trading range that gets created after the downtrend is the bottom in a lot of cases, but in weaker markets it could be followed by more selling. It will fluctuate and go up and down within the range but that's the bottom. To be honest, identifying bottoms isn't the hardest part, the hardest part is determining when the market will move up from that bottom. You could buy in a trading range after a downtrend but the stock might not make any real progress for a year. Professionals may withdraw their support for the stock and it will go down anyway. Almost no one can tell when this is or is not the case (not to say it can't be done, just almost no one knows how), which is why it's generally seen as risky to trade trading ranges. This is why most people who directionally trade individual stocks don't swing trade the trading ranges. It can be done, but often there are easier trades to use your trading capital on. 

If you were day trading I would understand your bottoms are actually more like V shapes since they happen so fast. That being said, on an intra day scale there still will be consolidation, it's just going to be short consolidation. You long term invest though so you should see the downtrend and the resultant trading range which signifies a potential bottom. Whether it's really a bottom will depend on many factors though which is what makes identifying bottoms so hard. I think buying falling markets is a mistake. If it's falling there is no way it can be a bottom!


----------



## So_Cynical

Valued said:


> Well I think you might be misinterpreting what a bottom is. A bottom must occur at the end of a downtrend. You must look to the left and see the downtrend. If it isn't there, it's not a bottom. After a downtrend a stock would almost never form a V shape. There would be a period of panic and mass selling followed by a trading range of buying.




I'm reasonably certain i know what a bottom is, V bottoms are very common, here's a chart i posted in the BPT thread 2 years ago, first bottom is a V and the next 2 are more broad mouthed but still V's...edited in blue to show the V's
~


----------



## Valued

So_Cynical said:


> I'm reasonably certain i know what a bottom is, V bottoms are very common, here's a chart i posted in the BPT thread 2 years ago, first bottom is a V and the next 2 are more broad mouthed but still V's...edited in blue to show the V's
> ~




I opened the chart in Amibroker to take a look at the chart so I could go further back to see what happened. That's consolidation for about two months! It's a V shape, sure, but it's not as if the stock came down and then went immediately back up. 

I would say that picking the bottom on that stock at that particular time using the daily chart would be hard. It's ranging within a trend channel. It's pretty difficult to know if the downtrend is paused or if it's going to keep ranging. A clue though is that the stock was unable to make a new lower low but I say that with hind sight. Interestingly, that stock entered a large trading range and has remained there ever since. It's in no particular trend for the last two years.

The idea isn't to pick the bottoms and tops of all markets in all time frames 100% of the time. If in doubt, it's best not to trade the stock.


----------



## CanOz

So_Cynical said:


> I'm reasonably certain i know what a bottom is, V bottoms are very common, here's a chart i posted in the BPT thread 2 years ago, first bottom is a V and the next 2 are more broad mouthed but still V's...edited in blue to show the V's
> ~




Actually v bottoms are not that common and the chart you've shown is in the process of bottoming. Most bottoms and tops are complex and not as simple as a v bottom/top. There is almost always another test of the high or low...


----------



## nulla nulla

So_Cynical said:


> I'm reasonably certain i know what a bottom is, V bottoms are very common, here's a chart i posted in the BPT thread 2 years ago, first bottom is a V and the next 2 are more broad mouthed but still V's...edited in blue to show the V's
> ~






Valued said:


> I opened the chart in Amibroker to take a look at the chart so I could go further back to see what happened. That's consolidation for about two months! It's a V shape, sure, but it's not as if the stock came down and then went immediately back up.
> 
> I would say that picking the bottom on that stock at that particular time using the daily chart would be hard. It's ranging within a trend channel. It's pretty difficult to know if the downtrend is paused or if it's going to keep ranging. A clue though is that the stock was unable to make a new lower low but I say that with hind sight. Interestingly, that stock entered a large trading range and has remained there ever since. It's in no particular trend for the last two years.
> 
> The idea isn't to pick the bottoms and tops of all markets in all time frames 100% of the time. If in doubt, it's best not to trade the stock.






CanOz said:


> Actually v bottoms are not that common and the chart you've shown is in the process of bottoming. Most bottoms and tops are complex and not as simple as a v bottom/top. There is almost always another test of the high or low...




With respect So_Cynical is correct, in my opinion. 

The difference in perspective between your interpretation/applications appears to be your approaches to trading and investing. A long term investor would probably not enter the trade until the chart showed definite upward movement, possibly after a double bottom or higher low. 
A trader with a shorter term perspective would be looking for bottoms & tops within a trading range, whether it was interday, a few days/weeks or a couple of months. This trader would have done their research on the share and have an understanding as to what drives that share up or down and when would likely be a low risk entry point. This trader doesn't have to get the bottom or top perfectly but only needs to get an entry that is low enough to combine with a exit that achieves a positive trade outcome. This trader is also likely to add to the trade if it dips further after the initial entry (scaling?) depending on their level of confidence and determination of risk.


----------



## Valued

nulla nulla said:


> With respect So_Cynical is correct, in my opinion.
> 
> The difference in perspective between your interpretation/applications appears to be your approaches to trading and investing. A long term investor would probably not enter the trade until the chart showed definite upward movement, possibly after a double bottom or higher low.
> A trader with a shorter term perspective would be looking for bottoms & tops within a trading range, whether it was interday, a few days/weeks or a couple of months. This trader would have done their research on the share and have an understanding as to what drives that share up or down and when would likely be a low risk entry point. This trader doesn't have to get the bottom or top perfectly but only needs to get an entry that is low enough to combine with a exit that achieves a positive trade outcome. This trader is also likely to add to the trade if it dips further after the initial entry (scaling?) depending on their level of confidence and determination of risk.




I don't think this is the case. I think most traders tend to breakout trade, swing trade established trends or at least the first pullback on a new trend, or trend trade. I don't think many are swing trading the trading ranges. In my opinion the bottom is a trading range almost always in big stocks (small volatile stocks like speculative mining companies play by different rules). It's not picking the absolute bottom, it's picking the trading range that is the bottom. It's a "range" not a particular price. That's a longer term perspective. You add the stock to your watchlist and come back to it later.

Getting a risk/reward ratio more than 1:2 is hard in an ordinary consolidation after a downtrend. There will normally be certain indicators of a preliminary bottom (I don't want to talk about what, it may sound like advice), a test of the preliminary bottom and then after that the bottom is established. The further the trading range progresses, the more dangerous it becomes. It often will start to perform the triangle pattern (which is a symptom of supply and demand, the pattern is just some way people like to define it - but it often leads them to error in my opinion). If you do it at the start though you're buying on the preliminary bottom to take advantage of the inevitable rally that will follow. That rally will come crashing down to test that bottom and then most people get in trouble... they enter on the test without knowing if it carved out a bottom or not. They enter, then perhaps the stock comes up a little, and goes back down even below the preliminary bottom... then some people as you say buy more then they end up having more capital tied into a trading range that may or may not actually be the bottom. I don't think averaging down is a good reason since it often means you made a mistake if you had to do it.

I think most traders average up, not down. You can only average up in an established trend though. I know of no way you can pyramid in a trading range (unless it was a huge trading range spanning years, so much so that one leg of it is really a new bull trend and the leg down is a new bear trend).


----------



## nulla nulla

Valued said:


> I don't think this is the case. I think most traders tend to breakout trade, swing trade established trends or at least the first pullback on a new trend, or trend trade. I don't think many are swing trading the trading ranges. In my opinion the bottom is a trading range almost always in big stocks (small volatile stocks like speculative mining companies play by different rules). It's not picking the absolute bottom, it's picking the trading range that is the bottom. It's a "range" not a particular price. That's a longer term perspective. You add the stock to your watchlist and come back to it later.
> 
> Getting a risk/reward ratio more than 1:2 is hard in an ordinary consolidation after a downtrend. There will normally be certain indicators of a preliminary bottom (I don't want to talk about what, it may sound like advice), a test of the preliminary bottom and then after that the bottom is established. The further the trading range progresses, the more dangerous it becomes. It often will start to perform the triangle pattern (which is a symptom of supply and demand, the pattern is just some way people like to define it - but it often leads them to error in my opinion). If you do it at the start though you're buying on the preliminary bottom to take advantage of the inevitable rally that will follow. That rally will come crashing down to test that bottom and then most people get in trouble... they enter on the test without knowing if it carved out a bottom or not. They enter, then perhaps the stock comes up a little, and goes back down even below the preliminary bottom... then some people as you say buy more then they end up having more capital tied into a trading range that may or may not actually be the bottom. I don't think averaging down is a good reason since it often means you made a mistake if you had to do it.
> 
> I think most traders average up, not down. You can only average up in an established trend though. I know of no way you can pyramid in a trading range (unless it was a huge trading range spanning years, so much so that one leg of it is really a new bull trend and the leg down is a new bear trend).




With respect your response only reinforces the differences in perspective. Also I can't see any reference to risk reward 1:2 in the replies referred to in my post. I am not aware of any requirement that traders only take trades where the risk/return ratios are 1:2. The short term trader is trading the "range" that is made up of short terms *tops* and *bottoms*. Traders big and small often take trades that they consider to be low risk, getting small returns on their capital, on the basis that the cumulative profit on their trades makes it worthwhile.


----------



## CanOz

Regarding v bottoms and tops, they are much less common than double bottoms and tops, that's what I meant...

Here is an explanation for those wanting to know what we were referring too...

http://http://www.chartsecret.com/content/how-trade-v-bottom


----------



## craft

I can’t.

Perfecting picking tops and bottoms and the instant gratification from getting it right attracts so many that it leaves other approaches uncrowded and far easier to compete in.


----------



## So_Cynical

Valued said:


> It's not picking the absolute bottom, it's picking the trading range that is the bottom. It's a "range" not a particular price. That's a longer term perspective. You add the stock to your watchlist and come back to it later.




At last i have found something we can half agree on (pretty sure that its not going to happen much) fact is that im more interested in the bottom end of the range than the bottom, its like a high percentage of success level, but the upper end of that range is always a particular price, usually a proven price point like the June/July 2012 example below.

Buying bottom within 1 or 2% can be a consequence of attempting to buy the very bottom, as has happened to me several times (see below) picking intermediate bottoms can also be helpful to a portfolio builder such as myself...the tops don't matter as much if you are going to hold onto some shares for yield and cap growth.

----

5 year chart for BPT below with my buying (green) and selling (red) and a clear long term up trend, last couple of years that up trend has flattened but a long term up trend none the less. Back to the point of this thread...bottom/top picking cannot be done with any consistency, i have done it and posted it in EOD real time on this forum and it was luck. 
~


----------



## Valued

nulla nulla said:


> With respect your response only reinforces the differences in perspective. Also I can't see any reference to risk reward 1:2 in the replies referred to in my post. I am not aware of any requirement that traders only take trades where the risk/return ratios are 1:2. The short term trader is trading the "range" that is made up of short terms *tops* and *bottoms*. Traders big and small often take trades that they consider to be low risk, getting small returns on their capital, on the basis that the cumulative profit on their trades makes it worthwhile.




You didn't refer to 1:2. However, you need to have around a 1:2 risk ratio at least OR a very high win ratio. Either will turn a profit. 1:2 ratio means a win rate of 33% or more to break even but when you factor in commission, funding costs and costs of trading such as data fees, software, books and subscription services etc, you need a higher win rate than 33% to even have it worth your time. Since most people have win rates around 45% - 55%, 1:2 is an ideal ratio. If you're Jesse Livermore in his bucket shop days, who it's been said had a 70% win rate, you could take less than this since your win rate is high enough to offset it. 

Are there people taking less than 1:2 ratios? Are they profitable? Perhaps high frequency trading computers will do it, but they have edges people don't and their win rate must be sufficiently high to compensate.


----------



## Julia

So_Cynical said:


> 5 year chart for BPT below with my buying (green) and selling (red) and a clear long term up trend,



Can you explain why you've sold when the stock has been in a strong uptrend?  I'm interested to know the basis of this strategy.

Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work?   Anyone up for doing this?


----------



## tech/a

Julia said:


> Can you explain why you've sold when the stock has been in a strong uptrend?  I'm interested to know the basis of this strategy.
> 
> Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work?   Anyone up for doing this?




Sure.

But firstly I think I got the top pretty spot on.
Weeks ago.

https://www.aussiestockforums.com/forums/showthread.php?t=17461&page=81
Post #1615
        #1619


----------



## qldfrog

Julia said:


> Can you explain why you've sold when the stock has been in a strong uptrend?  I'm interested to know the basis of this strategy.
> 
> Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work?   Anyone up for doing this?




based on my p/e view and general feeling of the economy I would say reaching levels around 4800 or so maybe down to 4400 in let's say april before it becomes a buyer market again, valuation as they are now make no sense
If we reach these levels, i will be interested in any analysis etc to determine when to get back in.


----------



## tech/a

> Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work? Anyone up for doing this?




Julia to me its not about picking a top or bottom a month or so out-----BUT
Recognizing when price action is indicating strongly that a top or bottom is 
forming.
(1) To possibly take profit or
(2) Open a new position with minimal risk.


----------



## CanOz

tech/a said:


> Sure.
> 
> But firstly I think I got the top pretty spot on.
> Weeks ago.
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=17461&page=81
> Post #1615
> #1619





I hope this isn't a top....

Are you saying its top Tech?


----------



## beachlife

tech/a said:


> Sure.
> 
> But firstly I think I got the top pretty spot on.
> Weeks ago.
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=17461&page=81
> Post #1615
> #1619




LOL - firstly you covered yourself by using words such as possible and likely, but also you made the call just days before a bottom that was the start of a rally that took out the Nov high on both the FTSE and DOW.  The DOW even went on to make a new record high.  Great call.

Any posts from Jan calling those highs?  Any trades where you traded them?


----------



## tech/a

beachlife said:


> LOL - firstly you covered yourself by using words such as possible and likely, but also you made the call just days before a bottom that was the start of a rally that took out the Nov high on both the FTSE and DOW.  The DOW even went on to make a new record high.  Great call.
> 
> Any posts from Jan calling those highs?  Any trades where you traded them?
> 
> View attachment 56667




*Ahhh selective quoting.*



> While it is likely that we have a smallish bull move I think it more likely we will have more of the same with a longer term bearish bias.
> technically there is little to look forward to on the long side.




So If I selectively quote from the same post its *SPOT ON.*

See when I start a thread like this I personally think I have something to offer.
I wait--see---and when I see something of this quality my reaction is
*



			Why the hell bother!!!
		
Click to expand...


*
Nothing added to help others just tall poppy syndrome.
Like a Poodle barking at a German Shepherd.
Nothing to add but noise.

CAN

Highly likely.


----------



## So_Cynical

Julia said:


> Can you explain why you've sold when the stock has been in a strong uptrend?  I'm interested to know the basis of this strategy.




See quote below.



So_Cynical said:


> the tops don't matter as much if you are going to hold onto some shares for yield and cap growth.




I still hold a few shares in all 3 parcels, i call the portfolio "buy and build" the idea is to recycle capital as quickly as possible but to always leave a little in, approximately equal to the open profit before exit...by repeatedly doing this i build a long term, cheap position in a stock and get a great % return on original investment.

Do i wish i had held on to all the shares...hell yes, but then i wont have capital to recycle.

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



Julia said:


> Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work?   Anyone up for doing this?




Not yet for me...besides i don't have any cash other than 5K in my IB account, have my eye on a couple of stocks but will hold off a bit, so often im in way to early and that has played out as an opportunity cost of significance.


----------



## Julia

So_Cynical said:


> I still hold a few shares in all 3 parcels, i call the portfolio "buy and build" the idea is to recycle capital as quickly as possible but to always leave a little in, approximately equal to the open profit before exit...by repeatedly doing this i build a long term, cheap position in a stock and get a great % return on original investment.
> 
> Do i wish i had held on to all the shares...hell yes, but then i wont have capital to recycle.



Thanks for explaining.  Obviously I respect your decision but find it difficult to understand why you'd pull money out of a strongly rising SP just to adhere to a principle of 'recycling capital'.

Unless, of course, you intend to place the withdrawn profits into something with an even stronger uptrend.
Again, no wish to expect you to divulge detailed info but was that the case in this instance?


----------



## Julia

Julia said:


> Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work?   Anyone up for doing this?






qldfrog said:


> based on my p/e view and general feeling of the economy I would say reaching levels around 4800 or so maybe down to 4400 in let's say april before it becomes a buyer market again, valuation as they are now make no sense
> If we reach these levels, i will be interested in any analysis etc to determine when to get back in.



Thanks, qldfrog.



tech/a said:


> Julia to me its not about picking a top or bottom a month or so out-----BUT
> Recognizing when price action is indicating strongly that a top or bottom is
> forming.
> (1) To possibly take profit or



Not looking for calls for top.



> (2) Open a new position with minimal risk.



Not sure whether that's a 'yes' or 'no' in terms of my original question of was anyone up for calling a bottom in this present correction.
If you could clarify whether you're happy to tell us when you are up for opening a new long position "with minimal risk", that would be much appreciated.  I have no expectation of predictions, but rather your call when you believe an optimum time for entry is reached.

Again, as always, no expectation of anything from anyone.  Just interested to know how people reach the conclusions they do and for an expansion of comments earlier in this thread.


----------



## Valued

If you pick a top on a monthly chart it's kind of irrelevant if the market than rallies on a weekly chart. You have to pick tops and bottoms and compare within the same time frame.


----------



## beachlife

tech/a said:


> Nothing added to help others just tall poppy syndrome.





If anyone else had of called a top weeks after it appeared on the chart, you would be the first to call hindsight.

Then if time went on to prove they got the call wrong, you would be all over it.

A general statement that the market may be bearish would have been met with it being irrelevant to picking tops and bottoms and a no brainer with QE easing in the back ground.

And of course a statement by anyone else claiming the ability to 
_Recognize when price action is indicating strongly that a top or bottom is 
forming.
 (1) To possibly take profit or
 (2) Open a new position with minimal risk_
would have been met with demands for real time screen shots and broker statements.

Tall poppy - no - just expecting you to adhere to the high standards that you set for everyone else.

Help for others - highlighting that anyone claiming to be able to pick tops and bottoms are full of crap in the hope that a newbie isnt temped to try it.

Anyway I'm watching the competition thread with interest to see just how a tall a poppy you are.  Havent seen any 'weeks wages in a few hours' yet.


----------



## burglar

So_Cynical said:


> ... I still hold a few shares in all 3 parcels, i call the portfolio "buy and build" ...




When first I saw the chart I thought "WT?"

But then it dawned on me that you do the "low cost averaging" strategy.
By the way this is a strategy any newb can Google and learn from.


----------



## Wysiwyg

It is true that a top or bottom is not known in any time frame until after it has happened. In my experience, picking tops or bottoms consistently is not possible. The first sentence gives a clue. Going with the trend and trading less frequently allows less exposure to risk, less brokerage fees and less lifestyle disruption.

As far as picking trend reversals (bottom), short covering rallies are worth a look like this one "developing" (loose terminology) on the DOW now. The bears _should_ be well fed and the bulls mighty peeved after the recent selling spree. Does this happen consistently? The market makers would not like that because everyone would know when to enter. Remembering the market exists because 90% of traders fail to profit *consistently*.


----------



## DrapSnagon

I had the pleasure of spending a couple of hours watching Jimmy Carr last week in his first Australia tour, for the pittance of $73 including booking fee. Google him. He is a very funny man who makes his living from exquisitely delivered profanity and describing body fluids.

His best joke of the night was his cleanest:-

_*"I have a special way of working out whether your house is haunted or not.

It isn't.

Grow up"​*_
This thread needs to learn from that.

Almost randomly, I culled these sentiments from it so far:-


every now & then
i've heard this sort of thing
you will never find it
all down to luck and probability


Does that fill you with confidence?

Several of you have skirted around the important bits of the argument, and the rest ought to take notice imho. Trade Management is everything. Nobody will ever pick tops and bottoms consistently. Ever. The best that the very best trader will ever do is figure out when an extreme is approaching, and either get in or out close to that number. Stocks, indices, commodities, exchange rates, whatever. Doesn't matter. That truth remains just as true.

The people who make a career from this game (not just a few bucks or a few fortunes along the way) are those who rigidly control their risks and have thought beyond the binary win/lose equation. They dribble money at a winning trade until it stops being profitable, and bleed money from a losing one until it again becomes attractive to others. They never ever bet the farm on a single play unless they're Nathan Tinkler or an idiot or both.

I saw a Substantial Shareholder notice from Blackrock [or maybe Kinetic?] recently that graphically described their approach to this issue. If somebody is interested, I'll dredge up my notes and tell you who the target was. 

If you want to deal in certainties, you won't be reading this at all, because you'll be on a beach in the Seychelles having fun, enjoying your monthly cheques from some term deposit or equivalent. If you ARE reading this, you're involved in risk management whether you like it or not. You need to understand it. Either that or you're just sick of Keno and there are lots of us who would be pleased to relieve you of your remaining savings.

Snap


----------



## wayneL

MichaelD has "Not fooled by randomness" in his profile.

I believe it, and I believe there are others in this thread equally not fooled by randomness. But I wonder what Taleb might make of the others.

Confirmation bias anyone?


----------



## wayneL

BTW, there seems to be varying perceptions of what a top/bottom is; and the timescale.

Let's define.


----------



## tech/a

> Do i wish i had held on to all the shares...hell yes, but then i wont have capital to recycle





Take capital from a winning trade which has gained momentum and look for another trade that may---gather momentum??



> It is true that a top or bottom is not known in any time frame until after it has happened. In my experience, picking tops or bottoms consistently is not possible. The first sentence gives a clue




You'll see a top/bottom in *ALL LOWER* timeframes.
I agree picking tops and bottoms well before they appear is not consistently possible.
BUT recognising that a top--current top is---(or Bottom) Is firming and likely to remain in place for enough time to trade it---and if there is a good deal of confluence over a number of charts (Not timeframes) then major turning points can be identified---perhaps not to the tick but enough to place you in a position of minimal risk to purchase or minimal risk of loss of profit.



> And of course a statement by anyone else claiming the ability to
> Recognize when price action is indicating strongly that a top or bottom is
> forming.
> (1) To possibly take profit or
> (2) Open a new position with minimal risk
> would have been met with demands for real time screen shots and broker statements.




Its a generic thread not a thread where I'm puffing up how great I am!!
I've asked a question and the response is a resounding NO

*Great---I'm at right angles to the crowd. Fabulous!*

I've given you a screenshot and got this poodle barking like mad.
Why the hell would I spend 3 hrs. of time I don't have right now feeding the poodle with more fodder.




> *If you ARE reading this, you're involved in risk management whether you like it or not. You need to understand it*.




But then again you don't *NEED* to do or agree or investigate anything.
Just be fooled by randomness!!


----------



## craft

wayneL said:


> Confirmation bias anyone?




Confirmation Bias on steroids I would say.

If you really want to know if tops and bottoms can be called consistently, just go and have a look at how some of the legends in their own lunch boxes have posted in the XAO technical analysis or ASX is tanking threads on numerous previous highs and lows. 




beachlife said:


> Help for others - highlighting that anyone claiming to be able to pick tops and bottoms are full of crap in the hope that a newbie isnt temped to try it.








DrapSnagon said:


> I had the pleasure of spending a couple of hours watching Jimmy Carr last week in his first Australia tour, for the pittance of $73 including booking fee. Google him. He is a very funny man who makes his living from exquisitely delivered profanity and describing body fluids.
> 
> His best joke of the night was his cleanest:-
> 
> _*"I have a special way of working out whether your house is haunted or not.
> 
> It isn't.
> 
> Grow up"​*_
> This thread needs to learn from that.
> 
> Almost randomly, I culled these sentiments from it so far:-
> 
> 
> every now & then
> i've heard this sort of thing
> you will never find it
> all down to luck and probability
> 
> 
> Does that fill you with confidence?
> 
> Several of you have skirted around the important bits of the argument, and the rest ought to take notice imho. Trade Management is everything. Nobody will ever pick tops and bottoms consistently. Ever. The best that the very best trader will ever do is figure out when an extreme is approaching, and either get in or out close to that number. Stocks, indices, commodities, exchange rates, whatever. Doesn't matter. That truth remains just as true.
> 
> The people who make a career from this game (not just a few bucks or a few fortunes along the way) are those who rigidly control their risks and have thought beyond the binary win/lose equation. They dribble money at a winning trade until it stops being profitable, and bleed money from a losing one until it again becomes attractive to others. They never ever bet the farm on a single play unless they're Nathan Tinkler or an idiot or both.
> 
> I saw a Substantial Shareholder notice from Blackrock [or maybe Kinetic?] recently that graphically described their approach to this issue. If somebody is interested, I'll dredge up my notes and tell you who the target was.
> 
> If you want to deal in certainties, you won't be reading this at all, because you'll be on a beach in the Seychelles having fun, enjoying your monthly cheques from some term deposit or equivalent. If you ARE reading this, you're involved in risk management whether you like it or not. You need to understand it. Either that or you're just sick of Keno and there are lots of us who would be pleased to relieve you of your remaining savings.
> 
> Snap




Snap (ditto).


----------



## skc

DrapSnagon said:


> _*"I have a special way of working out whether your house is haunted or not.
> 
> It isn't.
> 
> Grow up"​*_






DrapSnagon said:


> The people who make a career from this game (not just a few bucks or a few fortunes along the way) are those who rigidly control their risks and have thought beyond the binary win/lose equation. They dribble money at a winning trade until it stops being profitable, and bleed money from a losing one until it again becomes attractive to others. They never ever bet the farm on a single play unless they're Nathan Tinkler or an idiot or both.




Great post! To sum it up...

Is is possible to pick bottoms or tops - consistently?

You can't and you don't need to.


----------



## skyQuake

I know of 1 person that seems to be able to call certain stocks (at least short term) with alarming skill







Mad skillz


----------



## tech/a

skc said:


> Great post! To sum it up...
> 
> Is is possible to pick bottoms or tops - consistently?
> 
> You can't and you *don't need to*.




Ok Lets accept that You don't need to.

You just buy and sell at random?
When you think a valuation is undervalued you buy---at anytime after you discover this.
and you sell when you think the valuation is over valued---at anytime after you discover this

Other than that how do you buy and sell?
In general terms.


----------



## Valued

I thought we were past the age of "It can't be done". It's a bad attitude to have. Technically swing trading is picking tops and bottoms too, just on a different time scale. By entering a swing, are you not picking the bottom of the reaction (or the top in downtrends)? With momentum trading you're saying it's not the top. 

Is it possible to get in a trade prior to a breakout? Is that picking a bottom or top then? What if you enter on a retest of a new support line? Is that picking a bottom?


----------



## Caveroute

tech/a said:


> Ok Lets accept that You don't need to.
> 
> You just buy and sell at random?
> When you think a valuation is undervalued you buy---at anytime after you discover this.
> and you sell when you think the valuation is over valued---at anytime after you discover this
> 
> Other than that how do you buy and sell?
> In general terms.





Determine if in your time frame, we are trending or in  a range.
Have a playbook for each option. 
If a 'play' is triggered, does it meet your risk parameters.
If so enter, exit using other predefined criteria.
If it's trending, you can buy anytime and still make a profit - if your prepared to accept the associated risk.
Likewise if its trending up, but falling, you can add on knowing it will come good, again, if your prepared to accept the associated risk.


Count me out for the last two btw. 

Nothing to do with tops or bottoms as they will never trigger a buy/sell, but clearly they will form part of the analysis, it's the price action post the event that matters as this is where the play unfolds and the signal is generated.


----------



## skc

tech/a said:


> Ok Lets accept that You don't need to.
> 
> You just buy and sell at random?
> When you think a valuation is undervalued you buy---at anytime after you discover this.
> and you sell when you think the valuation is over valued---at anytime after you discover this
> 
> Other than that how do you buy and sell?
> In general terms.




Well there's a few definitions missing in the topic of this thread so it's open to different interpretations... but here's how I defined some of the terms:

*Top and bottom *- within 10% of the range over the time frame of your trading. 

So if I want to hold a stock for 1 day, and in hindsight it travelled from $1 to $1.20 (20c range). Any buying under $1.02 would be a great bottom picked, and any selling above $1.18 would be a great top sold.

*Consistent *- say over 60-70% correct.

As far as I am aware, a lot of the profitable technical chart traders operate on <50% win rate and make their dough on high win/loss ratios. So they don't fit my definition of being consistent.
*
Picked *- having acted (traded or called) on the top/bottom either before or as it happens.

Picked is very different to "called" in hindsight. E.g. Today I am calling a top in XJO (5383 on 2 Jan) for the next 2 months. I haven't picked it... I merely pointed it out. The XJO is already 300 points below that level. So based on the above definition, unless XJO falls another 2700 points in the next two months (making a total range of 3000 points and hence me picking a top within 10% of the range), I did not "pick" a top. 

Based on these definitions - I believe few can claim that they pick tops and bottoms consistently. If anyone is willing to display their top and bottom picking skills based on similar definitions to the above, I'd be very eager to read such thread.

As to how do I buy and sell in lieu of picking top and bottom?
- If I was trading quantitative methods (e.g. means reversing spreads) it's purely based on historical statistics.
- If I was trading news - purely based on my interpretation of the news and my prediction of how market would react to the news.
- If I was trading short term (i.e. minutes) price action - mostly on the DOM and support and resistance levels.
- If I was investing in fundamentals - I will buy when the stock is undervalued enough and the risk / reward is in my favour.



tech/a said:


> Sure.
> 
> But firstly I think I got the top pretty spot on.
> Weeks ago.
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=17461&page=81
> Post #1615
> #1619




If you go to a post and click on the actual post number, you can get the link to that specific post (instead of link to the thread).


----------



## Boggo

Caveroute said:


> Determine if in your time frame, we are trending or in  a range.
> Have a playbook for each option.
> If a 'play' is triggered, does it meet your risk parameters.
> If so enter, exit using other predefined criteria.
> If it's trending, you can buy anytime and still make a profit - if your prepared to accept the associated risk.
> Likewise if its trending up, but falling, you can add on knowing it will come good, again, if your prepared to accept the associated risk.




Not sure what all the kerfuffle is about, its as simple as that above.

It may be the bottom but you may not know that it was the bottom until the trade continues your way.

KISS principle works best.

Chart example below (I do hold in my SMSF)

(click to expand)


----------



## tech/a

https://www.aussiestockforums.com/forums/showthread.php?t=736&p=808543&viewfull=1#post808543


CBA
Theres a drink in that.
$77-72 and now a lower low.


----------



## So_Cynical

burglar said:


> When first I saw the chart I thought "WT?"
> 
> But then it dawned on me that you do the "low cost averaging" strategy.
> By the way this is a strategy any newb can Google and learn from.




Low cost averaging is something that i came up with myself, its a variation on "Dollar cost averaging" where instead of buying every month or whatever regular interval, the investor would try and pick bottom (and usually fail) at intervals where the share price falls significantly enough.

So only buying at significant low points in the share price cycle thereby "low cost averaging" and ending up with many parcels of the same stock bought over years at all or at least most of the low points in the price cycle...i was a newb when i started following this strategy in Feb (perfect timing) 2009.



Julia said:


> Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work?   Anyone up for doing this?




Ok Bought some Graincorp today 7.59, already missed the very bottom  time will tell all.


----------



## beachlife

tech/a said:


> https://www.aussiestockforums.com/forums/showthread.php?t=736&p=808543&viewfull=1#post808543
> 
> 
> CBA
> Theres a drink in that.
> $77-72 and now a lower low.




Yep very helpful.  Too bad you didnt answer the question that followed about how to trade it back then.

Anyway I'm calling a bottom on XJO and CBA based on 50% retracement and my orders are in.  I will be long tomorrow with usual if...maybe...probably...might...USA...China... short term...bullish...overall...sometime...bearish... fingers crossed...long term...confirmation...wave...leg...ratio...not sure...might be wrong

I think that covers it.  So I can claim super trader status if it reverses and dig this post up for months to come, if not I have my excuses in place, still a super trader.  Awesome!


----------



## Boggo

Julia said:


> Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work?   Anyone up for doing this?




An example of my idea of entering after what has likely been a bottom, also note the value of recognising the tops.

In the case below I am waiting for confirmation of just that, another bar is likely to be all that is needed so I am looking at next week for confirmation.

(click to expand)


----------



## burglar

beachlife said:


> ... still a super trader.  Awesome!




Amusing!


----------



## tech/a

*Cant be done!!!*

Note the time stamp.

*Click To Expand.*




Note the Time Stamp.

*Click To Expand*




A drink in that as well.

My intention was to work through what I believe to be important characteristics in identification
but as usual the poodle factor have just continued barking.


----------



## Julia

So_Cynical said:


> Ok Bought some Graincorp today 7.59, already missed the very bottom  time will tell all.



OK, noted, SC.  What I was hoping for, however, is demonstration from those who are assured they can pick bottoms (or very close to it) on the index rather than an individual stock.



beachlife said:


> Anyway I'm calling a bottom on XJO and CBA



  Whacko!  Thank you.   May I count this as a definite call, ignoring all the rationalisation that followed?


----------



## Julia

Boggo said:


> An example of my idea of entering after what has likely been a bottom, also note the value of recognising the tops.
> 
> In the case below I am waiting for confirmation of just that, another bar is likely to be all that is needed so I am looking at next week for confirmation.
> 
> (click to expand)



Good, thanks, Boggo.  Will you update us with the confirmation?

Anyone else prepared to call a bottom, whether now or later?
Or alternatively to offer reasons why we're nowhere near a bottom at this stage?

No one has mentioned the US debt ceiling issue almost upon us again.  From news.com.


> US President Barack Obama is facing a second crisis over the debt ceiling with temporary measures set to expire at the end of...
> 
> US President Barack Obama is facing a second crisis over the debt ceiling with temporary measures set to expire at the end of the week. Source: AFP
> 
> US TREASURY Secretary Jacob Lew has warned that the United States will exhaust its borrowing authority on Friday without action by Congress to lift the debt limit.
> 
> "Time is short. Congress needs to act to extend the nation's borrowing authority, and it needs to act now," Lew said in to prepared remarks on Monday at the Bipartisan Policy Center, a Washington think tank.
> 
> "In just a matter of days, the temporary suspension of the debt limit will end, and the Treasury Department will have to start using extraordinary measures so the government can continue to meet its obligations," he said.
> 
> Lew noted that the automatic reinstatement of the cap on borrowing after February 7 comes at the beginning of tax filing season, when tax refunds cause net cash outflows "that deplete borrowing capacity very quickly."



Add this to the poor manufacturing figures from the US just out.
Hardly a positive outlook, and erratic behaviour from our own government doesn't assist imo.


----------



## beachlife

tech/a said:


> My intention was to work through what I believe to be important characteristics in identification.




Myself and probably a few others are waiting for you to start explaining. 

I too have some charts with good trades.  Here's a couple from last night and tonight.  Nothing clever about the entries, I just followed the MA down after a pause in what was a long run up, and then did it again at the same top - clever huh.  Do they count as picking tops?  I dont think so.  There was nothing guaranteeing a top, just a MA based entry with a logical stop above what now looks like a top.  No big deal.




That one was exited based on the MA.



This one I might let run a bit because of the double top.




Julia said:


> Whacko!  Thank you.   May I count this as a definite call, ignoring all the rationalisation that followed?




Yes. Its a point I have been waiting for, not a call for the sake of this thread.  My order to buy 1000 CBA on stop is in and stops on my open shorts have been tightened.  Whether or not all or some will trigger remains to be seen. 



Julia said:


> Good, thanks, Boggo.  Will you update us with the confirmation?
> 
> No one has mentioned the US debt ceiling issue almost upon us again.




Debt ceiling will be raised again, after some huffing and puffing.


----------



## CanOz

skyQuake said:


> I know of 1 person that seems to be able to call certain stocks (at least short term) with alarming skill
> 
> View attachment 56678
> View attachment 56679
> View attachment 56680
> View attachment 56681
> 
> 
> Mad skillz




Cool...who is it?


----------



## Valued

Any method to pick tops and bottoms consistently won't be on the sole basis of moving averages or Fib levels. If anything, these can only be used to confirm the original analysis. You need a way to identify support/resistance levels. I just don't think MA and fib levels are the best for this. If anything, the Gann square is better than fib levels anyway (but they basically do the same thing). One good way to identify support/resistance levels is taking off all your indicators, getting some candlesticks, zooming out to a weekly time frame and just look with your eyes. People tend to forget they have eyes sometimes.


----------



## craft

tech/a said:


> *Cant be done!!!*
> 
> Note the time stamp.
> 
> *Click To Expand.*
> 
> View attachment 56686
> 
> 
> Note the Time Stamp.
> 
> *Click To Expand*
> 
> View attachment 56687
> 
> 
> A drink in that as well.
> 
> My intention was to work through what I believe to be important characteristics in identification
> but as usual the poodle factor have just continued barking.




To me a prudent person considering an internet post would accept the second time stamp because it corresponds roughly with the post time - though it was not the low.

But a prudent person could also wonder from a series of how many snap shots was the first time stamped chart taken considering it was posted three hours later.


Giving you the benefit of the doubt - you just need to provide a statistical sample size to prove 'consistency'. preferably posted a lot closer to the time stamp. Looking at other threads there is no consistency displayed.


yap yap yap.


----------



## skyQuake

CanOz said:


> Cool...who is it?




Our very own Alvin purple


----------



## skc

tech/a said:


> https://www.aussiestockforums.com/forums/showthread.php?t=736&p=808543&viewfull=1#post808543
> 
> CBA
> Theres a drink in that.
> $77-72 and now a lower low.






tech/a said:


> A drink in that as well.
> 
> My intention was to work through what I believe to be important characteristics in identification
> but as usual the poodle factor have just continued barking.




Tech, the key part of the debate here is surely "consistent". Anyone can come up with examples where they picked the bottom or top one time or another. So what is your definition of consistent? And what do you think is your performance on being consistent over time?

P.S. It's not very nice to call people poodle when people are offering different opinion.



craft said:


> Giving you the benefit of the doubt - you just need to provide a statistical sample size to prove 'consistency'. preferably posted a lot closer to the time stamp. Looking at other threads there is no consistency displayed.
> 
> yap yap yap.




In line with Craft's comment, if you come up with some definitions around the question, would you like to make say 20-30 calls on any market to prove one way or the other? Obivously you will need to make the calls either ahead or in real time to show that you've picked the top/bottom. And you'd need to define the timeframe of your top/bottom (and hopefully the timeframe is <2 weeks so no one is holding their neck out for verification over months).

I know 20-30 calls is probably not statistically significant, but it's probably a lot of effort and your record of sustaining efforts is _not consistent_.

Here's my post showing how I defined *picked, top and bottom and consistently*. Feel free to alter them as required if you do choose to embark on this exercise. I am sure many are eager to see you show that it can be done.
https://www.aussiestockforums.com/f...t=27977&page=3&p=812273&viewfull=1#post812273



skyQuake said:


> Our very own Alvin purple




He's a legend in many ways.


----------



## Valued

It sounds onerous for anyone to prove they can consistently pick tops and bottoms just to prove it to people on a forum though. If Tech could do it, why should he spend a lot of time posting examples on the internet? He isn't going to tell you how to do it, at least not specifically, so it's just going to be pictures of charts. Further, even if he did post 20 - 30 examples, someone could accuse him of making hundreds of trades and cherry picking the ones he got right. The only way to prove he can is to explain how to do it, and even then it wont be back testable.

If Tech uses VSA indicators, he won't be allowed to explain them either. I am not saying VSA is the answer, it's just an example. VSA has too many signals and is an overly complicated way to look at supply and demand in my opinion, but some of the signals may be useful in identifying tops and bottoms(as an indicator, not a specific buy and sell signal). You can do the same without the software, but it might be hard to know what to look for. There are other writers on the subject of volume though, not just Tom Williams' VSA.


----------



## tech/a

skc

Thanks for your considered responses.

Firstly people rush to conclusions (Poodles) that this and threads like them are designed by the Duck to highlight superior trading skills.

I've studied a lot of guys ---Williams Tom and Larry / Todd Kruger / Proctor / Greenblatt / Poser / Radge / Steinberg--on and on.

Technically I think it important to be able to identify Price characteristics that indicate a top or bottom is close.
What does Price/Range/Volume do. At a high/low point---is that consolidation that is appearing showing signs of a continuation or a breakdown? Is price action indicating a blow off with a quick retracement about to happen? (Is this climatic or Impulse)
Is this breakout likely to continue? (Top or bottom fails). Is this "V" bottom a bottom or continuation

There are clear technical tools which give us the opportunity to listen to and observe what the price action/range/volume/tests are telling us. It can give us very good insight and place us in the position of lowest risk--highest reward.----in my experience consistently. These are tools I believe every trader in every timeframe needs to become proficient in. regardless of wether your trading from them or not. If you had these skills 2008 would not have caused pain.--you would have been out of the market.



> And what do you think is your performance on being consistent over time?




I don't know ---but I do know that if I adhere to the principals ---Others have taught me through their experience----My reward to risk is increased dramatically.

*BUT--You have to BE THERE WHEN IT HAPPENS.*

Having this ability and not being at the point of decision renders it useless.

Not so much of a problem for Weekly or Daily traders but for R/T traders--Futs etc in lower timeframes you just have to be there



> but it's probably a lot of effort and your record of sustaining efforts is not consistent.




Two things.
Time---I cant find enough.
Inclination---When the poodles start biting the ankles the enthusiasm to dedicate precious time to feed the poodles fodder--- GOES.

Look I don't mind good debate.

But present DEBATE. Present a CASE to support your view.
Don't just tell me I'm a DUCK HEAD!

Words to the effect------- that your an ignorant puff pigeon looking for self gratification---what---you think your the greatest trader that ever walked the earth---aren't catalysts to further discussion--charts---notations---the motivation just evaporates.

My view is Fine its of no benefit to anyone--no interest-- I'm A Duckhead---so no further input.

Hence the record.


----------



## beachlife

So here's what happened.  It turned out that the top, double top and resistance werent significant at all and coffee took off in the other direction.  How rude of it.  Had I been so set on it being a top that I had 'picked' I would probably have started self talk about market makers and their robots running stops and all that nonesense, and done more damage by shorting on the pullback of the bar that broke them, and probably the next one.  Lucky for me I am happy to just follow the MA and come out the other end in the black.  Of course we might be looking at another top forming, but by the time it confirms, it will be well and truely a hindsight call.




As for super trader status, CBA hasnt triggered, neither have any of my stops.  If price behaves llike it did in mid Dec it could be days before the bottom is confirmed (or dismissed).  Stuck at poodle status I guess.  Did anyone attempt to go long on what would have looked like a confirmed bottom on 20/21 Jan or 28/29 Jan?

My final 2c on picking/trading tops and bottoms, even if Tech/A can prove that he has found a way to do it day in day out, forget it, just do your best to take a chunk from the bit inbetween the tops and bottoms.


----------



## beachlife

tech/a said:


> skc
> 
> Thanks for your considered responses.
> 
> Firstly people rush to conclusions (Poodles) that this and threads like them are designed by the Duck to highlight superior trading skills.
> .




So here is exactly what you asked of me once.

_Again the example is shown in hind site.
 If your so sure this works as perfectly as hind site
 Put up 5 trades.AS IT HAPPENS WITH COMMENTARY_

All I did is ask you to meet the standards you set for me (and others), and you take you bat and ball and storm off like a 3 year old.


----------



## skc

tech/a said:


> I've studied a lot of guys ---Williams Tom and Larry / Todd Kruger / Proctor / Greenblatt / Poser / Radge / Steinberg--on and on.
> 
> Technically I think it important to be able to identify Price characteristics that indicate a top or bottom is close.
> What does Price/Range/Volume do. At a high/low point---is that consolidation that is appearing showing signs of a continuation or a breakdown? Is price action indicating a blow off with a quick retracement about to happen? (Is this climatic or Impulse)
> Is this breakout likely to continue? (Top or bottom fails). Is this "V" bottom a bottom or continuation
> 
> There are clear technical tools which give us the opportunity to listen to and observe what the price action/range/volume/tests are telling us. It can give us very good insight and place us in the position of lowest risk--highest reward.----in my experience consistently.




You are mixing two different concepts. What you are describing here is using whatever method you use to identify favourable reward/risk opportunities to make profit consistently. What you are NOT doing is picking tops and bottoms consistently. 



tech/a said:


> But present DEBATE. Present a CASE to support your view.
> Don't just tell me I'm a DUCK HEAD!




The post by Beachlife seems pretty spot on. You can't nominate one example where you picked a top (evidently you didn't, although you also didn't specific timeframe) as proof to show that you can pick tops and bottoms *consistently*.


----------



## Trembling Hand

I've been having tech issues this morning so been throwing a few for scalps while the team fix it. 

Is this picking tops and bums?


----------



## CanOz

lol....a 30 second chart on the HSI


----------



## tech/a

beachlife said:


> So here is exactly what you asked of me once.
> 
> _Again the example is shown in hind site.
> If your so sure this works as perfectly as hind site
> Put up 5 trades.AS IT HAPPENS WITH COMMENTARY_
> 
> All I did is ask you to meet the standards you set for me (and others), and you take you bat and ball and storm off like a 3 year old.




All your interested in is Proof.
I'm happy to give it.
Doubt you've seen me back down from any challenge.

What you are missing is.



> Technically I think it important to be able to identify Price characteristics that indicate a top or bottom is close.
> What does Price/Range/Volume do. At a high/low point---is that consolidation that is appearing showing signs of a continuation or a breakdown? Is price action indicating a blow off with a quick retracement about to happen? (Is this climatic or Impulse)
> Is this breakout likely to continue? (Top or bottom fails). Is this "V" bottom a bottom or continuation
> 
> There are clear technical tools which give us the opportunity to listen to and observe what the price action/range/volume/tests are telling us. It can give us very good insight and place us in the position of lowest risk--highest reward.----in my experience consistently







> You are mixing two different concepts. What you are describing here is using whatever method you use to identify favourable reward/risk opportunities to make profit consistently. What you are NOT doing is picking tops and bottoms consistently




How can you say that.
I've presented 2 hindsight examples---one real-time---and I'm happy to do more

Will they be the tops of Tops or the Bottoms of bottoms---Short term no---but they will be tradeable for good profit without massive Risk.
As I see longer term ones Ill post them as well but we could be a few Months for you guys to call it definitive and proven.



> The post by Beachlife seems pretty spot on. You can't nominate one example where you picked a top (evidently you didn't, although you also didn't specific timeframe) as proof to show that you can pick tops and bottoms consistently.




Ah I see Top or bottom picking is to be exact.

Wont happen totally agree.

But the accuracy is enough to make a dramatic difference to R/R.
Within  a half a dozen ticks is in my view pretty damned good.
The ability to avoid a short in a consolidation and buy the bottom area of that consolidation before it breaks out to the top---is also a good skill to have and also in the group (My group) of picking tops and bottoms ---and Vice versa (Shorts).

But hey if I'm full of DUCK ****E fine Ill cease once again.


----------



## tech/a

Trembling Hand said:


> I've been having tech issues this morning so been throwing a few for scalps while the team fix it.
> 
> Is this picking tops and bums?
> 
> View attachment 56699




YES


----------



## MichaelD

Here's some interesting charts which unfolded in real time earlier today.

Could this be a top?




How about this?




Surely not this?




Well that was a surprise!

The whole chart. The market is currently deciding whether the second last candle is a reversal or not.





The point I would make here is that top picking would have been spectacularly unsuccessful with this particular move.


----------



## Valued

Michael D that's assuming we would be picking tops based on a single shooting star candle formation. The volume is not on the chart. I don't trade this low of a time frame so don't hold me to this, but I am guessing that the volume on that bar was very heavy? There is no way to tell if that bar shows strength or weakness based on the information on your chart alone. Since I trade EOD I would be spending a lot longer analyzing the left (the hard right edge is a little overrated, sorry Tech).


----------



## Valued

I can't edit the above post since it's been too long.

Ok let's try picking a bottom. Target price is around 1780. Keep in mind I shorted before the large move down, covered at 1746 and have now stopped and reversed. I am going to look stupid if I am not right though

7/2/2014	0:51	Order	US 500 Cash (A$1 Contract)	-		1750.18 (this is entry)	1737	N (this is stop)	 - 	Position opened: xxxxxxxxx

If this is not in profit after this session coming, I was wrong and this was not a bottom. Keep in mind this is a daily bottom pick and it's only intended to be held for a short time, likely to be closed out Friday night.. so two sessions holding time. Risks of this position are that this bottom pick is not in a previous support zone. Old support was around 1710. This has fell short of that, so it's not ideal but at the same time, demand looks to be overcoming supply. A more conservative approach would be to wait for this close and enter after considering the information provided in the current session. However, given that I expect the market to rally quickly to test prior support, I don't want to lose the majority of the up move and then be priced out of entering again.

This is a CFD. IG will send me a statement tomorrow but considering I am calling it before session open, hopefully that's proof enough regardless if I have money on it (but I do have my own money on it). If I am wrong, let's just chalk it up as the 40% of the time I can be expected to lose under SKCs rules lol.


----------



## MichaelD

Valued said:


> The volume is not on the chart.




I don't have the luxury of volume or depth of market as this is a CFD chart. I work solely on price action.


----------



## Valued

MichaelD said:


> I don't have the luxury of volume or depth of market as this is a CFD chart. I work solely on price action.




Yea, since I trade EOD I just get my data from yahoo. I tried to look into getting intraday indices data and it's too much of a pain. It would be useful to go down into hourly charts but you can sort of fumble around online with yahoo's terrible charts to get a general idea. I tried using esignal on demand on their free trial but it only gives you intraday tick data, even on historical sessions even with the extended intraday data add on and the daily volume won't even work. I am going to cancel my free trial.


----------



## DrapSnagon

MichaelD said:


> Here's some interesting charts which unfolded in real time earlier today.
> 
> {Selectively Snipped}
> 
> 
> Could this be a top?
> How about this?
> Surely not this?
> Well that was a surprise!
> 
> The point I would make here is that top picking would have been spectacularly unsuccessful with this particular move.




Guys ....

Please believe me when I say I AM NOT trying to dive in and out of this thread randomly, offering pearls of unsolicited wisdom from on high. Nor am I trying to be patronising. Also, I make no claim to understanding anything about OTC Index CFDs, so forgive me if what I'm about to say makes no sense. I'm assuming your CFD tracks the physical index rather than the SPI - is that true?

BUT ....

(There's always a "but", isn't there?)

If what I'm reading from above is right, there's a very simple way to "pick tops and bottoms" _intraday_ in the context of these posts. it is to open a realtime chart of the XJO and the SPI (or your choice of CFD proxy) side-by-side on your screen, and trade only when the numbers cross (ie:- the premium or discount of the futures to the physical index approaches zero).

The foundation of the SPI is that it should lead the physical index. In the example above, the futures traded almost all session today (now yesterday) at a premium to the physical, which indicated that the physical was likely to continue rising. As it did. 

The people who are capable of moving the ASX will always stake out a derivative position ahead of transacting any significant business in the physical market, and if their client instructions are index-moving, that position will generally be in the SPI rather than individual options, because it's cheaper. So, tracking the SPI (or individual option/futures components of it if you can be bothered and have the resources) will always provide some good guidance to the imminent movement in the physical and thus (I assume) the proxy CFD.

That might sound like a formula for instant and limitless profits and you would be correct to discard it as a theory if I was trying to sell it as that. I'm not. The sad truth is that most of the index movement on the ASX over time is achieved in the gapping between yesterday's close and today's open, so what you do intraday in Oz is largely irrelevant:- hence my earlier post about trading the SPI overnight. Not only that, but it's expensive and again over time, the rewards don't really stack up vs the investment in time and energy, let alone factoring in losses from unexpected intraday moves (eg:- surprise economic data, news, political shenanigans or whatever). The latter doesn't happen often, but when it does it can cripple an open day-trade and erode weeks or months of tiny gains.

Like most, if not all, pearls of theoretical wisdom, the devil is in the detail. In this case, it is _execution_ and actually making some money from the plan as opposed to just being able to claim "being right" at the next dinner party.

FWIW
Snap


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## Valued

There wouldn't be overnight gapping though since the OTC CFD cash indices can be traded overnight. It's open 24 hours. For example, I shorted at 1783 and covered at 1746 pre-market. The market then shot up to 1755 after open. I did not suffer that gapping risk. The prices seem to be based on the futures market since that's how IG must be hedging the positions. It's true that the OTC cash indices track the actual index. The only way they can be at a premium or discount to the last close is based on the futures market (but not the same prices, it's normally a specific distance away). They get marked to market though and track the underlying index directly. 

You idea sounds interesting but I trade EOD. I am liking OTC CFDs for indices though since I can sleep on decisions, I can enter and exit even when the underlying market is closed, often at superior prices due to fluctuations in futures over night, and since my stop is active during market close, I can be safe from overnight gapping if the futures crash. Of course, there is always weekend risk.

I actually don't know if CFD futures or CFD cash is better in a general sense. I need to try and understand a bit more about futures pricing. Right now I am using the futures pricing though as somewhat of a leading indicator to confirm my original analysis. If I am thinking of going long but the futures are tanking, I will hold off and wait until market open. I also go through and look at individual stocks in the index I want to trade and see if they look bullish/bearish. These are all leading indicators of cash index direction.

BTW it could have been the rain dance I did, but S&P 500 is sitting at 1765 now.


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## wayneL

Sorry, I just can't view intraday pivot reversals as tops and bottoms.

FWIW these ARE tradeable. I'm not particularly adept at it, but have watched enough intraday traders (via IRC) do it with consistent success. 

A top or bottom to me is on much higher time scales.


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## kid hustlr

DrapSnagon said:


> BUT ....
> 
> (There's always a "but", isn't there?)
> 
> If what I'm reading from above is right, there's a very simple way to "pick tops and bottoms" _intraday_ in the context of these posts. it is to open a realtime chart of the XJO and the SPI (or your choice of CFD proxy) side-by-side on your screen, and trade only when the numbers cross (ie:- the premium or discount of the futures to the physical index approaches zero).
> 
> The premium or discount can change due to a number of factors - mkt expectations of dividends, short term cash rates, time to contract expiry + a number of other factors. I don't believe 'approaches zero' is the correct terminology.
> 
> The foundation of the SPI is that it should lead the physical index. In the example above, the futures traded almost all session today (now yesterday) at a premium to the physical, which indicated that the physical was likely to continue rising. As it did.
> 
> I'm not sure you can make this statement.
> *
> The people who are capable of moving the ASX will always stake out a derivative position ahead of transacting any significant business in the physical market*, and if their client instructions are index-moving, that position will generally be in the SPI rather than individual options, because it's cheaper. So, tracking the SPI (or individual option/futures components of it if you can be bothered and have the resources) will always provide some good guidance to the imminent movement in the physical and thus (I assume) the proxy CFD.
> 
> Agree with the bolded, If I knew i had a large amount of flow coming to market and wanted to make a quick buck front running it via the futures would be a good way to do it, not sure if it happens 'always'
> 
> That might sound like a formula for instant and limitless profits and you would be correct to discard it as a theory if I was trying to sell it as that. I'm not. The sad truth is that most of the index movement on the ASX over time is achieved in the gapping between yesterday's close and today's open, so what you do intraday in Oz is largely irrelevant:- hence my earlier post about trading the SPI overnight. Not only that, but it's expensive and again over time, the rewards don't really stack up vs the investment in time and energy, let alone factoring in losses from unexpected intraday moves (eg:- surprise economic data, news, political shenanigans or whatever). The latter doesn't happen often, but when it does it can cripple an open day-trade and erode weeks or months of tiny gains.
> 
> Like most, if not all, pearls of theoretical wisdom, the devil is in the detail. In this case, it is _execution_ and actually making some money from the plan as opposed to just being able to claim "being right" at the next dinner party.
> 
> FWIW
> Snap




I think overall I agree/understand your comments and the idea is interesting, but I would be gobsmacked if one can make gains using this approach in this day and age.


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## skc

DrapSnagon said:


> I'm assuming your CFD tracks the physical index rather than the SPI - is that true?




No that is NOT true. The "cash" CFD is a synthatic creation which simply tracks the SPI tick by tick through the day, and makes one-off adjustments to accont for stuff like dividends and interests at 4pm (IIRC).

So unfortunately everything you've said cannot be fulfilled. There's no arb opportunity between the "cash" CFD and SPI.


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## Valued

I did another rain dance before shorting the Nikkei (cash CFD) on open... confirmation bias FTW:

I am sure this top and bottom picking will stop working soon though. I did pretty well shorting the US markets and then going long, taking me back into the black for this year after some losing trades in January. I actually ended up giving a bit of profit back though but it's hard to be right all the time. 

I was also wrong on the EUR/AUD. I was shorting that before it spiked on a massive breakout this morning. That surprised me. At least I have been right on the Nikkei so far. I have an unfilled order to short the DAX. I am shorting the cash CFD since it offered me a slightly better R:R ratio than the futures plus I can do it in AUD so I don't have currency exchange risk or exchange fees (although you have to trust your broker to have a fair market). The currency exchange risk actually hurt a little bit recently... not to mention my lousy forex trade.


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## Wysiwyg

Valued said:


> I am shorting the cash CFD since it offered me a slightly better R:R ratio than the futures plus I can do it in AUD so I don't have currency exchange risk or *exchange fees* (although you have to trust your broker to have a fair market). The currency exchange risk actually hurt a little bit recently... not to mention my lousy forex trade.



Apologies for being off topic a bit.

Hello. A question if you don't mind. It seems you hold longer than a session so I am wondering what impact negative dividends have on your trading? For instance I had 2 ($2 per point) shorts on the CFD DOW30 and for holding one day past the daily changeover time I was deducted $85 ex-dividend. I still have 2 ($2 per point) longs from 5057.5 on the CFD ASX200 and have received only $7 in dividends credit total. The  ex dividend today for ASX200 was 16 cents. Stuff all credits for the ASX200 long hold. Do you (anyone can reply) experience the same? Proof of my integrity below.
View attachment 56797
View attachment 56796

View attachment 56798


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## DrapSnagon

skc said:


> No that is NOT true. The "cash" CFD is a synthatic creation which simply tracks the SPI tick by tick through the day, and makes one-off adjustments to accont for stuff like dividends and interests at 4pm (IIRC).
> 
> So unfortunately everything you've said cannot be fulfilled. There's no arb opportunity between the "cash" CFD and SPI.




Hey there skc,

OK, point taken on the proprietary CFDs:- I know little about them. However, I was thinking specifically about the IQ instrument - the ASX CFD. I believe that tracks the XJO, although the spreads can be awful, the liquidity even worse, and the market maker often goes to sleep during a session and is often slow to wake up after the opening auction. I'm not saying it's tradeable per se, and certainly not suggesting there's any reliable arb opportunity.

I guess the point I was trying to make, in the context of this thread, is that if the very narrow interpretation of "picking tops & bottoms" is really "_timing intra-session swings_", then looking at the premium or discount of the SPI to the actual XJO *and how it changes through the day* can yield some guidance about when a market-wide trend change is imminent. Put another way:- a "top or bottom". Even if it's only transient.

The assumption is that anyone with a SPI feed and futures broker is paying handsomely for the privilege and probably won't be reading this thread. Everyone else will be able to get access to a CFD feed of some sort, probably for free, and it ought to be a reasonable proxy for the SPI. The XJO itself is, of course, readily available in real time.

I'm also not suggesting this is any sort of basis for intra-session scalping. It's really just another tool for somebody who takes a CFD position on the index: finds themselves on the right side of the trade: and is looking for guidance as to when to close it. It's obviously no substitute for a well-constructed trailing stop, but can provide some early warning as to when such a thing might be triggered.

Cheers
Snap


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## Valued

Wysiwyg said:


> Apologies for being off topic a bit.
> 
> Hello. A question if you don't mind. It seems you hold longer than a session so I am wondering what impact negative dividends have on your trading? For instance I had 2 ($2 per point) shorts on the CFD DOW30 and for holding one day past the daily changeover time I was deducted $85 ex-dividend. I still have 2 ($2 per point) longs from 5057.5 on the CFD ASX200 and have received only $7 in dividends credit total. The  ex dividend today for ASX200 was 16 cents. Stuff all credits for the ASX200 long hold. Do you (anyone can reply) experience the same? Proof of my integrity below.
> View attachment 56797
> View attachment 56796
> 
> View attachment 56798




None of the attachments worked for me. 

The DOW 30 is the Dow Jones Industrial Index and as the name suggests only contains 30 stocks. If a large portion of these 30 stocks go ex-dividend on the same day (or even just a few of them) you could be up for a bit. $85 sounds like a lot though for just two mini contracts. The reason you get less on the ASX is that there are more stocks so any particular stock that goes ex-dividend does not have a large impact. When I short the S&P 500 it's pennies due to how large the index is.

What is supposed to happen (but check with your broker) is that they mark the price of the market they create down by an amount equal to the dividend. If you paid $85 in dividends the market should have been marked down $85 to compensate you on your short positions (it might not be the exact same amount, I am not sure). The reverse is true of long positions - you lose the money when you get marked down but gain the dividend. In a very strong stock you would get the dividend and even though it gets marked down because the stock has so much momentum the market rallies right through any reduction.

All in all, don't worry too much about the dividend issue. The only reason it may cause a problem is if somehow you didn't have enough cash in your account to cover the dividends.


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## CanOz

Speaking of tops, Gold's recent power thrust seems to have settled into a bracket for those wanting something to watch...

BTW - when this PB is over, i reckon we could go to 1032


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## Wysiwyg

Valued said:


> All in all, don't worry too much about the dividend issue.



Thank you for the reply. I sought explanation directly with the broker and was told they had to look deeper into it and would contact me. No contact yet but your explanation makes sense to me. Good luck with it all. Ciao


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## Boggo

Julia said:


> Good, thanks, Boggo.  Will you update us with the confirmation?




That has triggered a new signal this week Julia. Seems to be a few sellers around 1.50, like to see it clear ~1.60 for blue skies.

Original post...
https://www.aussiestockforums.com/f...t=27977&page=4&p=812368&viewfull=1#post812368


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## Wysiwyg

Wysiwyg said:


> As far as picking trend reversals (bottom), short covering rallies are worth a look like this one "developing" (loose terminology) on the DOW now. The bears _should_ be well fed and the bulls mighty peeved after the recent selling spree. Does this happen consistently? The market makers would not like that because everyone would know when to enter. Remembering the market exists because 90% of traders fail to profit *consistently*.



Gosh this bottom pick turned out fantastic. Nice of the team to keep plowing on and am looking forward to 6000 points before mid year.
Proof of purchase 05/02/2014.


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## So_Cynical

Julia said:


> (4th-February-2014) Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work?  Anyone up for doing this?







So_Cynical said:


> (4th-February-2014) Ok Bought some Graincorp today 7.59, already missed the very bottom  time will tell all.




43 Days later and i have completed my GNC trade for a profit of 10.93% exiting at $8.48, the 52 week low ($7.50) bottom came a couple of days after i entered so i missed the bottom by a little under 1.2% 

As for showing the forum how this can work - as i have previously stated in this thread, its dumb luck, calculated (calculated is probably to strong a word) dumb luck....i say calculated because i did spend an hour or 2 looking at GNC, mostly comparing the company and conditions now with the company and conditions then, the last time GNC traded at that price.

I came away from that look with the strong conviction that GNC was very cheap so i better buy it straight away and did so, a few things i have noticed over the years that i have been buying bottoms.


 Holding low cost shares lowers your average holding price on re-entry at a higher price.
 Holding low cost shares makes your ROC (dividend yield) look much better than the current yield.
 Double bottoms are a great (low cost) buy indicator.
 As a consequence of trying to buy bottom you end up buying cheap enough that i really doesn't matter.
`


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## Abyss

Does this count?


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## Wysiwyg

Abyss said:


> Does this count?



What? Pick an arrow and win a prize? Gizmo is about as useful as a wing wong for a goose's bridle. :bad:


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## Abyss

Wysiwyg said:


> What? Pick an arrow and win a prize? Gizmo is about as useful as a wing wong for a goose's bridle. :bad:




Well obviously its a little too complex for you, let me help...its the first arrow on the right...


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## Wysiwyg

Abyss said:


> Well obviously its a little too complex for you, let me help...its the first arrow on the right...



You're good.


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## Abyss

Very kind of you, I must admit, I struggled to keep it civil there for a beer or two, but managed to get through.
I must be getting old..........errrrrrrr


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## Porper

Abyss said:


> Does this count?
> 
> View attachment 57404




Using a Stochastic or indicator like your "Gizmo" for buys & sells doesn't work Abyss. They have been proven through backtesting to be unprofitable. You will go broke solely using them that way. At best use them as confirmation signals used in conjunction with other technical analysis tools.


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## Abyss

Porper said:


> Using a Stochastic or indicator like your "Gizmo" for buys & sells doesn't work Abyss. They have been proven through backtesting to be unprofitable. You will go broke solely using them that way. At best use them as confirmation signals used in conjunction with other technical analysis tools.




True, I have backtested it personally, it is used as part of the confirmation process, works better in some situations than others and definitely not to be used on its own. This backtest was just done with same code, although not spectacular, on its own it makes money OOS.


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## Wysiwyg

Defining consistent 

- on every relevant occasion 
- acting or done in the same way over time, especially so as to be fair or accurate.
- agreeing or accordant; compatible; not self-contradictory
- unchanging; steady

In percentage terms I consider above 90% accuracy to "consistently" pick top or bottom in any time frame. The exact top, i.e. the high value, is probably impossible but say within 5% does allow some practical possibility.


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## Wysiwyg

Porper said:


> They have been proven through backtesting to be unprofitable.



That's right. Crosses have been proven in actual trading to be inconsistent.


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## ceasar73

tech...if that is you in the pic...we need to discuss this face to face. If it is your girlfriend..you lucky sob!!
As for the Thread question? for some stocks, like the big banks, it is pretty easy to pick the top. The bottom?? much harder. Sometimes i get the bottom, at times i miss it. supply and demand helps with the bottom. Anyway, as long as I buy below the top of a company that I can determine and value the top, Im usually ok.
regards, ceasar73


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## Wysiwyg

Wysiwyg said:


> As far as picking trend reversals (bottom), short covering rallies are worth a look like this one "developing" (loose terminology) on the DOW now. The bears _should_ be well fed and the bulls mighty peeved after the recent selling spree. Does this happen consistently? The market makers would not like that because everyone would know when to enter. Remembering the market exists because 90% of traders fail to profit *consistently*.
> View attachment 56675



Following on from that bottom prediction back in February, the DOW has gone onto new all time highs and can't be fit on the screen. Still learning to let winning trades run. So much to learn. Perceived fear the weakness.


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## luutzu

Historically, I could pick top and bottoms and sides without fail


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## Ryan C

After reading Fooled by Randomness and Black Swan by Nassim Nicholas Taleb it changed my thinking to believe it's not possible.  See http://en.wikipedia.org/wiki/Black_swan_theory if you're interested.  I'm no expert but it made sense to me.  My two cents worth.


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## sydboy007

while a simple example, it does show how the use of ETFs these days, along with an asset allocation to the different classes, can help to structure sell high and buy low and produce index beating returns.

http://awealthofcommonsense.com/diversification-works-2/

A very basic three fund portfolio that includes U.S. stocks, foreign stocks and the U.S. aggregate bond market is in many ways a good benchmark portfolio because it’s so broadly diversified and can easily be put together at an extremely low cost through index funds or ETFs.

It seems to defy logic but the rebalanced portfolio actually produced a higher return than any of the individual funds. This is because this portfolio would have been selling some bonds to buy stocks in the 2000-02 bear market, selling some stocks to buy bonds in the 2003-07 bull market and once again selling some bonds to buy stocks in the 2008-09 bear market.

The diversified portfolio had higher returns than both stock funds but they came at roughly 60% of the volatility and largest annual losses. While decreased volatility is a welcomed byproduct of rebalancing, diversified portfolios aren’t meant to manage volatility. They’re meant to manage emotions.

And you’ll often be surprised where the returns come from on a year to year basis. Although the Total U.S. Fund had the best overall performance of the three, it was only the best performing fund 25% of the time. International equities actually had the best returns about 45% of the time even though they was the worst performer.


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## Wysiwyg

Abyss said:


> True, I have backtested it personally, it is used as part of the confirmation process, works better in some situations than others and definitely not to be used on its own. This backtest was just done with same code, although not spectacular, on its own it makes money OOS.



Back tests are a guide only and as the disclaimer states, past results are NOT indicative of future results. This isolated test with a drawdown of 27% and a two year wait to achieve new equity highs is bull dung. It reflects the Index.

Waiting for the next "backtest" misperception.


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