# Profiting from market trends?



## MattThomson (31 May 2006)

Hey I've just started up in the market a few weeks ago and I've noticed that everyone keeps talking about market trends etc. I'm at uni doing finance and have read that trends are just random and that its information that truly matters. From what I've seen, you have to know the company that you're investing in and what their prospects are. After two weeks of looking I have found two companies that I believe are undervalued, one massively so, and thats through ignoring trends. The massively undervalued one is due to a complicated company structure and people not taking the time to read up and learn just what is going on. I believe in a couple of weeks it will double in price, and has the potential to go further. Just a few tips from a beginner investor   . If anyone has any information on how you can make money from trends, please let me know.


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## RichKid (31 May 2006)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> Hey I've just started up in the market a few weeks ago and I've noticed that everyone keeps talking about market trends etc. I'm at uni doing finance and have read that trends are just random and that its information that truly matters. From what I've seen, you have to know the company that you're investing in and what their prospects are. After two weeks of looking I have found two companies that I believe are undervalued, one massively so, and thats through ignoring trends. The massively undervalued one is due to a complicated company structure and people not taking the time to read up and learn just what is going on. I believe in a couple of weeks it will double in price, and has the potential to go further. Just a few tips from a beginner investor   . If anyone has any information on how you can make money from trends, please let me know.




Hi Matt,
Welcome to ASF!
I assume your question is about price trends and how technical analysts view it. The basic tenet is that all the information about a stock is reflected in the price chart. My advice for anyone wanting to know more is to search and browse ASF for discussions about randomness, fundamentals vs TA, charting etc. Maybe read your textbooks at uni and speak to your lecturer too. Also read Schwager's Market Wizards or Radge's Everyday Traders for examples of real people who make real money using real trends. It works imho.

Also please read the forum code of conduct and posting guidelines asap. If you are confident about your 'massively' undervalued co's you may wish to post what you have in the appropriate thread for each stock for others to discuss.


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## wayneL (31 May 2006)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> Hey I've just started up in the market a few weeks ago and I've noticed that everyone keeps talking about market trends etc. I'm at uni doing finance and have read that trends are just random and that its information that truly matters. From what I've seen, you have to know the company that you're investing in and what their prospects are. After two weeks of looking I have found two companies that I believe are undervalued, one massively so, and thats through ignoring trends. The massively undervalued one is due to a complicated company structure and people not taking the time to read up and learn just what is going on. I believe in a couple of weeks it will double in price, and has the potential to go further. Just a few tips from a beginner investor   . If anyone has any information on how you can make money from trends, please let me know.




Hi matt,

Never believe anything you read and only half of what you see.

I would not call price action random. It is however, chaotic (in the mathematical, dynamical system sense).

It means carry a jacket in winter, the tendency (trend) is towards cold weather... and it might rain.

 Cheers


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## David123 (31 May 2006)

*Re: Trends & Information*

Welcome! lol Warren buffet ? hmm maybe...big calls ? beginner 


trend is ur friend they say ?


cheers


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## MattThomson (31 May 2006)

*Re: Trends & Information*

I was mostly confused by how some people are just using trends and trends only to help them select which shares to buy. (I'll post the new about those shares in the right threads when I buy some in a couple of days, just setting up comsec etc now. Don't want the price to jump too early  )


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## It's Snake Pliskin (1 June 2006)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> Hey I've just started up in the market a few weeks ago and I've noticed that everyone keeps talking about market trends etc. I'm at uni doing finance and have read that trends are just random and that its information that truly matters. From what I've seen, you have to know the company that you're investing in and what their prospects are. After two weeks of looking I have found two companies that I believe are undervalued, one massively so, and thats through ignoring trends. The massively undervalued one is due to a complicated company structure and people not taking the time to read up and learn just what is going on. I believe in a couple of weeks it will double in price, and has the potential to go further. Just a few tips from a beginner investor   . If anyone has any information on how you can make money from trends, please let me know.




Matt,

Trends are momentum.

Undervaluation is opinion.

What is value in an ever changing environment, based on outdated data?


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## MichaelD (1 June 2006)

*Re: Trends & Information*

Picking winners and trading profitably are two separate and only loosely connected pieces of the puzzle.

Q. Why are there 101 cures for the common cold?
A. Because none of them work.

Q. Why are there 101 ways to pick a stock to trade?
A. Because none of them work.


What works?
A system with a positive expectancy and correct money and risk management, most appropriately but unpalatably called bet sizing.

(and the psychological make-up to cope with the answer)


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## It's Snake Pliskin (1 June 2006)

*Re: Trends & Information*



			
				MichaelD said:
			
		

> What works?
> A system with a positive expectancy and correct money and risk management, most appropriately but unpalatably called bet sizing.
> 
> (and the psychological make-up to cope with the answer)




Positive expectancy is well known and tends to be blurted out too often with disregard to what matters to achieve that expectancy. 



> Q. Why are there 101 ways to pick a stock to trade?
> A. Because none of them work.




What are the parameters for the picking to be classed as having worked?

There are too many variables to discredit one or the other 100. 

Picking is only part of the issue, as is management and psychology. Oh, and then there is the selling issue. When?


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## It's Snake Pliskin (1 June 2006)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> I was mostly confused by how some people are just using trends and trends only to help them select which shares to buy.




Bull market gold medallists!


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## tech/a (1 June 2006)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> I was mostly confused by how some people are just using trends and trends only to help them select which shares to buy. (I'll post the new about those shares in the right threads when I buy some in a couple of days, just setting up comsec etc now. Don't want the price to jump too early  )




Well if your on a stock and it doesnt "Trend" in the direction your trading then you'll not profit.

Regardless of how you select a stock I'll guarentee that if you make a profit from it it will have trended.
Secret is staying in the trend for as long as you can.

I hope you do post your trades as you'll find it a great learning experience.


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## ducati916 (1 June 2006)

*Re: Trends & Information*

*Matt* 



> I'm at uni doing finance and have read that trends are just random




A trend, is a direct prediction of the future, and as such it must be either right, or wrong, 50/50.



> and that its information that truly matters. From what I've seen, you have to know the company that you're investing in and what their prospects are.




There is information overload. The key is to identify the important information, and to interpret, or analyze that information in a quantitative & qualitative manner, that provides an accurate appraisal of the value.



> After two weeks of looking I have found two companies that I believe are undervalued, one massively so, and thats through ignoring trends.




As I assume you are looking in the ASX, this will be interesting.



> The massively undervalued one is due to a complicated company structure and people not taking the time to read up and learn just what is going on. I believe in a couple of weeks it will double in price, and has the potential to go further.




Complicated company structure.
We have debt, equity, & hybrids.
We have holding companies.
We have minority, unconsolidated holdings within parents.
We have Partnerships (the tax situation can become complicated)

To double in *price* or return 100% in a couple of weeks.
While this is possible, it would suggest a speculative capital structure, generally utilizing a lot of debt to leverage the returns to equity, or, a stock so *oversold* that it is due a *technical* bounce combined with a true *undervaluation*.

This would however suggest a *counter-trend* position.



> I was mostly confused by how some people are just using trends and trends only to help them select which shares to buy. (I'll post the new about those shares in the right threads when I buy some in a couple of days, just setting up comsec etc now. Don't want the price to jump too early




I'd be interested in analyzing them when you eventually disclose them.

*Snake* 



> Trends are momentum.
> 
> Undervaluation is opinion.
> 
> What is value in an ever changing environment, based on outdated data?




Trends are momentum, or sentiment, and can change in a heartbeat, so what is their value?

Undervaluation is most definitely not simply an opinion. It is a fact.
Outdated data, simply displays the gulf that exists between *charties* and *fundies*



> Positive expectancy is well known and tends to be blurted out too often with disregard to what matters to achieve that expectancy.




Agreed.
The mantra is propagated without the vaguest notion of what is, and is not actually being generated.



> Bull market gold medallists!




Indeed.

*tech/a* 



> Regardless of how you select a stock I'll guarentee that if you make a profit from it it will have trended.




While I understand your point, and accept it, there are still the *Options* strategies that do not really require *trending*, Arbitrage, which does not require trending & Bankruptcies.

jog on
d998


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## tech/a (1 June 2006)

*Re: Trends & Information*

Duc 



> A trend, is a direct prediction of the future, and as such it must be either right, or wrong, 50/50.




Where'd you get that from duc! There is nothing predictive about a trend--you dont even know you have one or how long it is until after the fact.




> There is information overload. The key is to identify the important information, and to interpret, or analyze that information in a quantitative & qualitative manner, that provides an accurate appraisal of the value.




Resulting in an opinion,your opinion. As we have seen in your live trading duc percieved value may not be universal.Holding a stock to a 40% loss when purchased at a point of "Undervaluation" has me questioning determination of undervaluation.Accuracy is far from evident from the fundamental analysis I have seen.This in itself is not a problem provided you have a point in saying that "At this point my analysis is not accurate"---your pet hate---STOPS.




> To double in *price* or return 100% in a couple of weeks.
> While this is possible, it would suggest a speculative capital structure, generally utilizing a lot of debt to leverage the returns to equity, or, a stock so *oversold* that it is due a *technical* bounce combined with a true *undervaluation*.
> 
> This would however suggest a *counter-trend* position.




Only news from a speculative stock would do this.Its value would not likely have any bearing.




> I'd be interested in analyzing them when you eventually disclose them.




Dont scare the guy off duc let the market analyse them!!

*Snake* 




> Trends are momentum, or sentiment, and can change in a heartbeat, so what is their value?




All ords has been on a 20 yr trend.Take a look at QBE had that since $7.85 and now $22 + .Timeframe my friend timeframe



> Undervaluation is most definitely not simply an opinion. It is a fact.
> Outdated data, simply displays the gulf that exists between *charties* and *fundies*




It can be as factual as you like but unless enough people see things the same way as you do and continue to see your undervalued stock as still undervalued as it increases 10%,20%,30% or more a TREND wont develope for long enough for you to profit.




> Agreed.
> The mantra is propagated without the vaguest notion of what is, and is not actually being generated.




Expectancy AGAIN---the only usefull expectancy is that derived from a number of completed trades analysed over time.To calculate expectancy of an indivividual trade basis is just plain meaningless v results achieved over your last 50/100 or more trades.Both will be vastly different and more than likely there will not be a positive expectancy if calculated on a trade by trade basis.

Mantra sure but learn how to determine it in a useful way.


*tech/a* 




> While I understand your point, and accept it, there are still the *Options* strategies that do not really require *trending*, Arbitrage, which does not require trending & Bankruptcies.




Thought we were talking with a novice---not Allan Greenspan.


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## ducati916 (1 June 2006)

*Re: Trends & Information*

*tech/a* 



> Where'd you get that from duc! There is nothing predictive about a trend--you dont even know you have one or how long it is until after the fact.




Exactly.
The trend will continue, one possible outcome.
Or, the trend will end, outcome number two.
By *joining* a trend, you are making a prediction that it shall continue, or by shorting it, that it will in point of fact end.

Whereas, with a fundamental analysis, you are *predicting* not that the trend (price) will continue, or fail, only that the valuation in time will return to a higher valuation, or fair valuation.



> Resulting in an opinion,your opinion.




An opinion based on the facts.
Factually, it is undervalued.
Your *opinion* rests on the return, or the exceeding of the undervaluation.



> Holding a stock to a 40% loss when purchased at a point of "Undervaluation" has me questioning determination of undervaluation.




Only because you trust the market valuation. The market is schizoid. 
The ultimate *proof* is not within the gyrations, or volatility, it rests in the *closed* profit/loss statement. The *Chickens* were undervalued, became increasingly undervalued, and are now profitable, as will be the others.



> "At this point my analysis is not accurate"---your pet hate---STOPS.




Stops *guarantee* you losses.
The purpose of my live examples is to demonstrate that volatility can be ignored, or utilized to increase profitability, without the necessity of utilizing stops; viz. without losing ANY money.



> Dont scare the guy off duc let the market analyse them!!




The market fluctuates between *efficiency* & *inefficiency*
Technicals generally place you in the efficient arena, fundamentals within the inefficient arena. Where would you rather be?



> All ords has been on a 20 yr trend.Take a look at QBE had that since $7.85 and now $22 + .Timeframe my friend timeframe




DJIA has been on 100yrs+ trend.
That is because of the underlying fundamentals of equity & economics, nothing what-so-ever to do with *technicals*



> It can be as factual as you like but unless enough people see things the same way as you do and continue to see your undervalued stock as still undervalued as it increases 10%,20%,30% or more a TREND wont develope for long enough for you to profit.




I beg to differ................and I invoke the mighty...*Bullmarket* and his quest for *income*

Assuming that capital growth is not the over-riding concern, then a fundamentally sound business that grows it's revenues, profitability & dividends can be highly lucrative.

Example KO.
Dividends have grown from $0.17/share to $1.24/share or 12.39% compounded BEFORE share splits. There have been two 2:1 share splits, so, if you had 1000 shares in 1989, you would have 4000 shares today, and your compounded growth in dividend income would have been 49.56% compounded,(resulting in a return of initial capital & pure profit) and all the time the share price could have gone nowhere. Generally however, they rise additionally or proportionally to dividend returns.

jog on
d998


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## bullmarket (1 June 2006)

*Re: Trends & Information*

Hi michael



			
				MichaelD said:
			
		

> Picking winners and trading profitably are two separate and only loosely connected pieces of the puzzle.
> 
> Q. Why are there 101 cures for the common cold?
> A. Because none of them work.
> ...




spot on imo   

"*A system with a positive expectancy and correct money and risk management, most appropriately but unpalatably called bet sizing*."  *=* a written and paper traded trading plan which has been tested by paper trading or whatever other means (software etc etc) until the desired returns are achieved consistantly.

*Hi Matt * 

I don't thing trends are random at at all......I see them as the display of the two most powerful emotions that drive share prices up and down - *fear and greed * 

Basically, *greed* drives buyers to bid higher prices to get stock they believe will go even higher but eventually there comes a point where the *fear* that a stock may be overvalued stops buyers from bidding higher prices and prompts sellers to offer lower prices to lock in profits.

So in very simplistic terms, share prices rise when the emotion of greed from buyers (and hence there are more buyers than sellers) is much stronger than the emotion of fear that the buyers will drop away from sellers.....and vikky verky for when share prices are falling.

cheers

bullmarket


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## It's Snake Pliskin (1 June 2006)

*Re: Trends & Information*

Duc,



> A trend, is a direct prediction of the future, and as such it must be either right, or wrong, 50/50.




A trend is momentum of greed or fear. A trend is not a direct prediction of future directions. 50/50? What about ranges? 




> *Snake*
> Trends are momentum, or sentiment, and can change in a heartbeat, so what is their value?



Value is relative.



> Undervaluation is most definitely not simply an opinion. It is a fact.
> Outdated data, simply displays the gulf that exists between *charties* and *fundies*




Undervaluation is relative and opinion. Why do so many give different opinions about a given stock?


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## MichaelD (1 June 2006)

*Re: Trends & Information*



			
				Snake Pliskin said:
			
		

> What are the parameters for the picking to be classed as having worked?



For picking to have worked it needs to improve system performance over random entry, be that improving system expectancy or reducing drawdown. The great majority of stockpicking strategies are demonstrably harmful to both parameters.


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## It's Snake Pliskin (1 June 2006)

*Re: Trends & Information*



			
				MichaelD said:
			
		

> For picking to have worked it needs to improve system performance over random entry, be that improving system expectancy or reducing drawdown. The great majority of stockpicking strategies are demonstrably harmful to both parameters.




Michael,

Yes there is truth to that. Management after the pick is the issue most seem to avoid though.

Personally I think picking is extremely important, however, I realise it is only part of a trade and other variables detemine, as a whole trade, what eventuates.


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## ducati916 (1 June 2006)

*Re: Trends & Information*

*Snake* 



> A trend is momentum of greed or fear. A trend is not a direct prediction of future directions. 50/50? What about ranges?




A trend is momentum, agreed, whether it signifies greed or fear is open to discussion.

As to a direct prediction, it is, you are predicting that it will continue, you go long, or that it will end, you go short. A range, is a sideways trend.
But really it's not that big a deal, if you don't like the definition, just ignore it.



> Value is relative.




Actually it is.
Relative to the share price.
And this makes it a fact.
KO at $10/share is undervalued, KO at $40/share is fairly valued based on analysis of the Income Statements and Balance Sheet.



> Undervaluation is relative and opinion. Why do so many give different opinions about a given stock?




Because there are a number of different ways to *value* a stock.
Second, it depends *who* is providing the valuation, and their motive.

jog on
d998


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## Realist (1 June 2006)

*Re: Trends & Information*



> I believe in a couple of weeks it will double in price, and has the potential to go further.




I'll bet you any amount of money you like that it does not double in a month.

You must of course list which company it is straight after you accept the bet of course!


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## MattThomson (1 June 2006)

*Re: Trends & Information*

OK. Any amount? Let's go $200mil. I'll then borrow $100 mil, get the price to double, take your money, pay back the loan, and be $100mil better off.  lol


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## wayneL (1 June 2006)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> OK. Any amount? Let's go $200mil. I'll then borrow $100 mil, get the price to double, take your money, pay back the loan, and be $100mil better off.  lol




I volunteer to hold the bets... and I won't do a runner to the Bahamas.... I promise!


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## GreatPig (1 June 2006)

*Re: Trends & Information*



			
				wayneL said:
			
		

> I won't do a runner to the Bahamas



More like a stumble - that would need a pretty big suitcase!

And of course you'd have to declare the money to customs when you left... 

GP


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## MattThomson (1 June 2006)

*Re: Trends & Information*

Lol. Neway the two companies are BMN & EVE for those of you that are interested.


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## Realist (1 June 2006)

*Re: Trends & Information*



> OK. Any amount? Let's go $200mil. I'll then borrow $100 mil, get the price to double, take your money, pay back the loan, and be $100mil better off.




 

You got a deal!!

I'll borrow $201 mill to invest in the stock myself.

If it doubles I'll double my money, so I've got enough to pay you back. Forget tax I'm off to the Bahamas.

If it doesn't you'll owe me $200M, and I'll have $201M in stock as well.

I win every way.    


what is the stock - I'm ready to buy!!


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## Realist (1 June 2006)

*Re: Trends & Information*

BMN and EVE are you crazy!!    

Both have market caps of $20M

And have Price to book ratios of over 6

They are extremely overvalued by any measure IMHO.   

If they are still trading in years to come I'd be surprised.


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## wayneL (1 June 2006)

*Re: Trends & Information*

I'm still holding the bets, right? :batman:


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## Realist (1 June 2006)

*Re: Trends & Information*

Yes Wayne, just as soon as we get these $200M margin loans approved I'll email you the money!

 

But in all seriousness my tip, at least one of them wont be trading this time next year.


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## michael_selway (2 June 2006)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> I was mostly confused by how some people are just using trends and trends only to help them select which shares to buy. (I'll post the new about those shares in the right threads when I buy some in a couple of days, just setting up comsec etc now. Don't want the price to jump too early  )




dont tell me its ZFX!?   

thx

MS


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## MattThomson (2 June 2006)

*Re: Trends & Information*

lol. just watch them


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## ducati916 (2 June 2006)

*Re: Trends & Information*

*Matt;* 

I see that both companies are now in the public domain, so they are up for discussion.



> that its information that truly matters. From what I've seen, you have to know the company that you're investing in and what their prospects are. After two weeks of looking I have found two companies that I believe are undervalued, one massively so, and thats through ignoring trends. The massively undervalued one is due to a complicated company structure and people not taking the time to read up and learn just what is going on.




My interest was piqued due to the *fundamental* implication contained in your post. 

*ENE.....Energy Ventures* 
This is a Venture Capital business. Their primary area of expertise, or interest are hydrocarbons (oil) and oil related technology. I notice they are or have an office in Stavanger, Norway, & as my wife is Norwegian just caught my interest.

They have no financials on their home page http://www.energyventures.no/ev/content/view/full/99 and I am assuming this is the correct company.

Without financials, it simply is not possible to calculate a valuation.
Venture Capital is a high risk business, and almost by definition *speculative*
As with all Venture Capital concerns, they provide cash for the start-up business at some point in their business cycle. Within their portfolio they have some Caltex exposure, this was the only holding I recognized at first glance.

The rest I assume are at various points in their cycles. Without having access to the underlying cash-flows of the subsidiaries, or having them consolidated into financials of the Holding company, you are flying simply on faith. 

My biggest concern for the longer term would be that they are *investing* at the high end of oil prices, rather than at the trough. Therefore, as supply comes on line ...............will prices still return an attractive exit strategy for the Venture Capital firm? That is, to float as an IPO, or sell to a private buyer will be much easier in a high oil environment than a lower one.

On the information available, pretty close to zero, there is simply no way of making any kind of informed decision.


*Bannerman Resources* 

This is a start-up miner, floated 2005, no financials, and from the *Prospectus* a self-confessed *high risk* undertaking. (Nickel mining)

Again, without a lot more information, no *investment* decision can be made.
As *tech/a* intimated, news of a strike etc might turbo-charge the share price, but then again, in the current market, it may not. I am assuming there will be news of a *strike* or something similar.

Without the *Cost of Goods* line entry, there is no way to assess the profitability margins, and thus the viability of the business outside of the current pricing environment.

To assess a *Miner* you need as a bare minimum;
Reserves
Cost of production
Price Received
Depletion writedowns

As none of these are currently available, we are back to pure speculation.

Both stocks *may* indeed double, triple, but then again, they might not.
You would seemingly be playing the *news momentum* game.
This game is as old as the hills, and goes something like buy the rumour, sell the news, but can vary. Suffice to say, it is a tough game to play.

jog on
d998


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## Realist (2 June 2006)

*Re: Trends & Information*



> Again, without a lot more information, no *investment* decision can be made.




Well we have enough information to confirm these are not worth "investing" in - simple as that!

But that does not mean you can't speculate with them.

I wont, but Matt may get lucky and double his money, much like he would if he went to the casino, straight up to the Roulette table and bet it all on Red.

The problem is if he loses he is out of pocket.

And if he wins, he thinks "how easy is this, I'm gonna do that again with another stock for even more money"

Either way you'll lose over the longterm IMHO.


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## mit (2 June 2006)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> Hey I've just started up in the market a few weeks ago and I've noticed that everyone keeps talking about market trends etc. I'm at uni doing finance and have read that trends are just random and that its information that truly matters.




Unfortunately, in Uni you will only learn from People who only know theory or if you get somebody from the industry they will be people who earn their money from fees not from buying and investing in shares. I have a friend just completing his Master of Finance and he lost money this year and last year. (Yes lost money during a Bull market). I also have a friend who writes lecture materials for some of these Finance Courses and as far as they are concerned private technical traders who outperform the market consistently just don't exist. For the official "academic" stance on the market read "a random walk down wall street" and spot the errors.

If you are doing Finance to make money in shares forget it. If you are doing Finance to get into the industry well then fine as it is a very well paying industry. 

It's a good thing too. If the big funds started doing technical analysis and proper money management then we would all be in trouble.

MIT


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## Realist (2 June 2006)

*Re: Trends & Information*



> Unfortunately, in Uni you will only learn from People who only know theory




Yup, there are people that can do, and do!

And there are people that can't do, and teach!



> I have a friend just completing his Master of Finance and he lost money this year and last year. (Yes lost money during a Bull market).




Surprise, surprise.    


Out of interest, what did you friend invest on to lose so much money?    

Also please ask your friends when he thinks I should buy and house and when not to?

(I wanna do the complete opposite of what he says of course   )


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## tech/a (2 June 2006)

*Re: Trends & Information*



> It's a good thing too. If the big funds started doing technical analysis and proper money management then we would all be in trouble.




Funds dont have the flexability of retail traders.

They are simply managing masive amounts that can move stocks on entry and exit.
There reaction time is like a boxer on drugs.

Regardless of analysis unless they can find longterm trends to hop into across the board--then performance will be ordinary.
Of late most have been spectacular---compared to other years---but thats due more to market conditions than skill.


Finance industry re advisors------theorists pure and simple--90% of them who exist on trailing commisions regardless of performance.



> And there are people that can't do, and teach!




An often toted adage.
How then or who then teaches?
Ist it then that there are NO can do teachers?



> When to buy a house




The best time was 6 yrs ago and in 6 yrs time the best time will have been 6 yrs ago.
Ever heard anyone say "Im glad I waited 5 yrs to buy my home/IP?"
Always---wish Id have bought back then!!--when ever then was.


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## Realist (2 June 2006)

*Re: Trends & Information*



> 90% of them who exist on trailing commisions regardless of performance.




Exactly!!

They spend time signing up more customers than they do trying to manage their funds!!


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## mit (2 June 2006)

*Re: Trends & Information*



			
				Realist said:
			
		

> Out of interest, what did you friend invest on to lose so much money?




A couple of the Macquarie funds that he thought were underpriced. The major factor was IINet, he bought in at around $3 and has been averaging down ever since.

MIT


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## MattThomson (2 June 2006)

*Re: Trends & Information*

I've just realised tha EVE is &*(&#. Neway , BMN is still good though, the uranium tenements in Namibia will pay off and it'll become a copy of PDN. EVE has got too much money, and the other two projects it's funding really are very spec. GO BMN!


----------



## Realist (2 June 2006)

*Re: Trends & Information*



> A couple of the Macquarie funds that he thought were underpriced.




Hmm, far too many people use the term"underpriced" or "undervalued" without understanding what they mean, or how exactly to value a company.

Matt, himself mentioned some mining stock was very undervalued. Yet it had a market cap of $20M, had never made a profit and has about $3M in NTA.

It is arguably valued at about 7 times more than it is truly worth at first glance.




> The major factor was IINet, he bought in at around $3 and has been averaging down ever since.




Bugger!!

Still, not a wise buy, even now at 85 cents it looks overpriced.


----------



## Realist (2 June 2006)

*Re: Trends & Information*



> I've just realised tha EVE is &*(&#. Neway




 



> EVE has got too much money




I wish I could buy a company that had too much money!!    



> BMN is still good though, the uranium tenements in Namibia will pay off and it'll become a copy of PDN.




down 8% since yesterday Matt...    

If you had bought it yesterday, would your stop loss have meant you already sold it at a loss?


----------



## MattThomson (2 June 2006)

*Re: Trends & Information*

Where's the faith?


----------



## ducati916 (3 June 2006)

*Re: Trends & Information*

*Matt* 

Faith, Hope, Charity..............all commendable attributes in life, unfortunately, in the market a short-cut to the paupers grave.

Knowledge (theory) is very important, vital in fact, but knowledge must be tempered with experience, and this takes time, and finally courage of character, without which the previous two cannot be fully realized.

jog on
d998


----------



## Realist (6 June 2006)

*Re: Trends & Information*

On June 1st :

BMN was 1.05
EVE was 0.14

Today 6/6/6 :

BMN is now 0.91
EVE is now 0.135


I hope you did not buy them Matt!!


----------



## MattThomson (6 June 2006)

*Re: Trends & Information*

Just you watch BMN


----------



## Realist (6 June 2006)

*Re: Trends & Information*

I have been....   :bad: 


What is so good about BMN Matt?

What do you know that I don't?  Or what can you see that I can't?


----------



## RichKid (6 June 2006)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> Just you watch BMN




Matt,
Whatever happens I hope you will stick around to analyse your trades/investments, you're bound to learn a lot.


----------



## Realist (7 June 2006)

*Re: Trends & Information*

BMN is up 1 to 0.92
EVE down 1 to 0.125


----------



## MattThomson (7 June 2006)

*Re: Trends & Information*

Give BMN 5 weeks.


----------



## Realist (8 June 2006)

*Re: Trends & Information*



> Give BMN 5 weeks.




Before it goes into voluntary receivership?


----------



## It's Snake Pliskin (8 June 2006)

*Re: Trends & Information*

I get it: it`s all inside info.


----------



## MattThomson (8 June 2006)

*Re: Trends & Information*

lol No, just a careful look at the companies schedule and what information is due to come out and when. Then a careful look at the probabilities of what that information will be and how good or not the news will be. Financials don't matter in spec uranium explorers.


----------



## Realist (14 June 2006)

*Re: Trends & Information*

BMN is now 0.75     



Did you buy any Matt?


----------



## swingstar (14 June 2006)

*Re: Trends & Information*



			
				MichaelD said:
			
		

> What works?
> A system with a positive expectancy and correct money and risk management, most appropriately but unpalatably called bet sizing.
> 
> (and the psychological make-up to cope with the answer)




That's all I do. I cut my losses at 0.5-1% of my capital and let my profits run. 

When my stops are hit, most of the time I don't even look at the chart. I have an SMS sent to me and I simply close the trade. Using discretion has rarely worked in my favour. 

As some trader said, I think I saw it quoted around here... "Every big loss was once a small loss".


----------



## swingstar (14 June 2006)

*Re: Trends & Information*



			
				mit said:
			
		

> Unfortunately, in Uni you will only learn from People who only know theory or if you get somebody from the industry they will be people who earn their money from fees not from buying and investing in shares. I have a friend just completing his Master of Finance and he lost money this year and last year. (Yes lost money during a Bull market). I also have a friend who writes lecture materials for some of these Finance Courses and as far as they are concerned private technical traders who outperform the market consistently just don't exist. For the official "academic" stance on the market read "a random walk down wall street" and spot the errors.
> 
> If you are doing Finance to make money in shares forget it. If you are doing Finance to get into the industry well then fine as it is a very well paying industry.
> 
> ...




I've been studying comp sci which no doubt was a ****ing waste of time. I've been thinking of changing to finance, but not after that synopsis. 

Maybe economics? At least it's broader. If I wasn't so far out of school I would maybe try maths.


----------



## It's Snake Pliskin (14 June 2006)

*Re: Trends & Information*



			
				swingstar said:
			
		

> I've been studying comp sci which no doubt was a ****ing waste of time. I've been thinking of changing to finance, but not after that synopsis.
> 
> Maybe economics? At least it's broader. If I wasn't so far out of school I would maybe try maths.





Swingstar,

Choose something of value when the financial system collapses. Become a doctor or a dentist maybe. Real Estate is not worth it. I@ve been there and it is just nasty people thinking they are important because they borrow what they don`t have and then think they can command what they want to, devoid of any investing strategy or education. I am bitter about that industry. I have a lot to reveal.

Snake


----------



## swingstar (15 June 2006)

*Re: Trends & Information*

Thanks Snake. If I do anymore study, it'll only be so I can apply it to my trading. Economics and maths are areas that don't rely on a capitalist society, whereas finance does. I'd only be continuing study for personal interest, not for a career/job.


----------



## It's Snake Pliskin (18 June 2006)

*Re: Trends & Information*



			
				ducati916 said:
			
		

> Because there are a number of different ways to *value* a stock.
> Second, it depends *who* is providing the valuation, and their motive.
> 
> jog on
> d998




Value is opinion then.


----------



## NettAssets (18 June 2006)

*Re: Trends & Information*



			
				Snake Pliskin said:
			
		

> Value is opinion then.




Of course value is an opinion!

Look at what some people pay for additions to outlandish and "valueless" collectables.


----------



## MattThomson (15 January 2007)

*Re: Trends & Information*

EVE is now 0.225, not bad if you had picked it up at around 0.10. BMN however has done very well and is now at 2.10 up from 0.35. And yes, I bought and hold BMN but did not get any EVE. My first experience with shares has been very nice indeed lol.


----------



## stevo (15 January 2007)

*Re: Trends & Information*



			
				MattThomson said:
			
		

> EVE is now 0.225, not bad if you had picked it up at around 0.10. BMN however has done very well and is now at 2.10 up from 0.35. And yes, I bought and hold BMN but did not get any EVE. My first experience with shares has been very nice indeed lol.



No offence Matt but on May 31st 2006 you stated;


> I believe in a couple of weeks it will double in price, and has the potential to go further.



The 64% drop that BMN went through on week ending 25/08/2006 must have been interesting if you only have one trade on. The stock didn't double as predicted. *I don't suppose that you are going to ramp this one again?*  

If so maybe back the claims up with some fundamental analysis. Mind you both stocks have quite nice looking charts with some good uptrends well underway  

I suppose you also realise that setting the FA's against the TA's is a great way to get some very heated discussions going on this thread, usually with very little gained.


----------



## coyotte (16 January 2007)

*Re: Trends & Information*

Few handy Trend Following tools:

ADX,  Trend Line , and GMMAs


Note the long term GMMA has not yet compressed and turned down and the short term GMMA has not penertrated the L/T GMMA -- trend still in tact .

ADX gave ample warning 

Bollinger Band upper penertration was a very early warning 


Trend Line in tact 


Simple  Trend Trading Tools :


----------



## It's Snake Pliskin (16 January 2007)

*Re: Trends & Information*



			
				coyotte said:
			
		

> Few handy Trend Following tools:
> 
> ADX,  Trend Line , and GMMAs
> 
> ...




Hi Coyotte,

Do you treat any penetration of a bollinger band as a sign of change be it upper or lower?


----------



## coyotte (16 January 2007)

*Re: Trends & Information*

Hi Snake

In Trend Trading I treat Bollinger Bands  as a early warning when a stock appears to be starting to top -- tighten STOPS -- watch for a diverging ADX plus line .

I treat a diverging ADX combined with long upper Candle tails in a  Trend Trade  as a EXIT SIGNAL for the time being with a possible entry latter  .



In Break Out Trading I watch for a breach of the lower band - - followed by a move back within the band --- any CLOSE now above the Count Back line is a Entry Signal .


BBs set at 20 x .2 simple


Cheers


----------



## It's Snake Pliskin (16 January 2007)

*Re: Trends & Information*

Coyotte,

I understand your rationale thanks.
Snake


----------



## Wysiwyg (28 November 2014)

Value Collector said:


> it's mathematically impossible for the majority of people to make money this way.
> 
> Because, if the majority of people took that strategy, who would be there to buy when the stock when the market is flooded with sell orders because a trend reversal trigger was met, an early group who got their sell orders in quick enough might exit in time, but the rest behind them would just be adding to an avalanche of sell orders and an evaporating list of buy orders and a falling price.
> 
> ...



I believe the company fundamentals is what people are buying into on a trend and to a lesser extent the "future prospects" of a company. The trends are formed and collapsed on these premises to a greater or lesser degree. Chart wise it is evident in price action and reactive at various places too.

Day traders and short term holders buying in and selling higher contributes to the trend just like the buy low sell lower approach hastens the decline.


----------



## Julia (28 November 2014)

VSntchr said:


> The problem is, what is the definition of the trend reversing?
> If you have the trigger too tight then you will be stopped out on any slight volatility, too loose and you give back too much of the gains which the momentum provided you with.
> 
> Then there is the question of when to get back in if you got stopped out on a slight dip?
> ...



Completely sensible considerations, VS.  You're quite right.  When I first began with the strategy I had the stops too tight and got whipsawed about.   Many years of practice now, and probably a better comprehension of the wider macro situation (viz especially leading up to the GFC) have brought increased profitability.


----------



## Julia (28 November 2014)

On the general principle of the strategy, I'm in the market to make money, not to sit around waiting for that market to recognise the brilliant fundamentals of some company on which I've placed my own calculation of value.  
Wysiwyg's post goes to this succinctly.

 I'd rather be out or invested elsewhere than watch my capital investment diminish every day.
We'll all do what we're comfortable doing.  And eventually what a few decades of experience teaches us is the most profitable for us.


----------



## Value Collector (28 November 2014)

Julia said:


> On the general principle of the strategy, I'm in the market to make money, not to sit around waiting for that market to recognise the brilliant fundamentals of some company on which I've placed my own calculation of value.
> .




We are all in the market to make money, However If I find a business that is severely undervalued because of the value it's generating and accumulating and it will probably see a gain of a couple of 100%, at some stage over the next couple of years, why would I want to wait for a trend before I buy.

Holding a stock and waiting 2 years to earn 200% is nothing, and if the company is paying say 6% - 9% franked dividends anyway, I gain nothing by having my funds earning 3% taxable interest in a bank while I wait for the trend to start.

Also to me it's about the over all rate of return on my portfolio, if I hold a portfolio of say 10 stocks I have selected on value, the will probably all go up at different rates at different times, so the 2 year wait on one stock is offset by only having to wait 6months on another, and the large returns across my entire portfolio offsets the share that went no where, but just earned some dividends. 

Looking over the chart of all the companies I have made large gains on in recent years, a trend following approach would have led me to buy at higher price than I did, then sell on a dip only to buy back in at a similar or higher price and then sell on another dip before buying back in at a similar or higher price.

I prefer to watch the performance of companies rather than price action.

I am not saying just blindly hold any investment, I would watch the quarterly company earnings announcements and basically keep track of the company making sure it's still performing, but the short term fluctuations of it's market price wouldn't bother me.   

But each to their own.


----------



## burglar (28 November 2014)

Value Collector said:


> ... But each to their own.




I've once been on a seven bagger ... your approach does not float my boat!


----------



## Value Collector (28 November 2014)

burglar said:


> I've once been on a seven bagger!




Same,


----------



## burglar (28 November 2014)

Value Collector said:


> Same,




I tried value investing with NAB 
Made 12% Capital Gain after brokerage within six weeks.

Bored silly, I gave it away, went back to my penny-dreads!

Different Strokes, ... I don't mean to denigrate your method.


----------



## Value Collector (29 November 2014)

burglar said:


> I tried value investing with NAB
> Made 12% Capital Gain after brokerage within six weeks.
> 
> Bored silly, I gave it away, went back to my penny-dreads!
> ...




Value investing doesn't mean you have to avoid penny stocks.


----------



## Julia (29 November 2014)

Value Collector said:


> Looking over the chart of all the companies I have made large gains on in recent years, a trend following approach would have led me to buy at higher price than I did, then sell on a dip only to buy back in at a similar or higher price and then sell on another dip before buying back in at a similar or higher price.



If that were the case, then your time frame would need adjusting.  It's the sort of concern Value Snatcher referred to in that using a too short period chart will see you moving in and out too soon.  Comparisons with longer period charts give a different perspective.  To jump out because of short term volatility makes no sense.



> I prefer to watch the performance of companies rather than price action.



As do quite a few people.   
There is plenty of room in the market for a variety of approaches, various of which suit different people for different reasons.  



> But each to their own.



Exactly.


----------



## luutzu (29 November 2014)

The Coca-Cola Company prices over 4 decades.

If you follow trends, when would be the right time to jump back in once you've flipped it and take your profit?

You would probably missed those years in the 70s when it's the best time to buy it; then buy at a higher price when strong trend is up, then sell out and share your profits with the taxman, then watch as it goes up and up... 

And this is when you actually make money trading great businesses. Imagine those .COM or whatever else that's all sizzle and no meat.

Anyway, not saying you can't make money trading the trend... but the time it takes to follow the market - daily - and the tax and opportunities (and being the last guy out or in)... I don't think it's worth it.


----------



## burglar (29 November 2014)

luutzu said:


> ... then watch as it goes up and up ...




Why would you watch and watch for years while it goes up and up.
Jump on while it has momentum!
Jump off when it shows weakness!

It's not Theoretical Mathematics !!!!!

:


----------



## pixel (30 November 2014)

burglar said:


> Why would you watch and watch for years while it goes up and up.
> Jump on while it has momentum!
> Jump off when it shows weakness!
> 
> ...




: It's not even rocket science!
I think this whole debate about trends and size of profits is conducted on so many different levels that people at different age groups - hence different time frames - are arguing well past each other. Yet it's really as simple as 1-2-3:
1. Pick your time frame.
2. Pick your strategy.
3. Follow the trend in your time frame and enter/exit as strategy directs.

Personal Example:
My time frame is weeks/ months because I'm at a stage in life where I consider it unreasonable to wait ten years for the profits to pay my bills. It would've been nice, to follow luutzu's example of Coca-Cola, to have bought in 1970 at the beginning of the trend. At that time, I was building a career with the likes of IBM, developing technologies that now, 40 years later, make it possible for us to have this discussion. From that angle, it's a red herring to talk about what might have been if...

My strategy right now is focused on average daily return on capital at risk.
Based on that, I look for stocks that promise a trend reversal, then I start risking small amounts traded over small swings, until a HL-HH sequence confirms a positive trend on my original daily-weekly c.o.t.
Check out a few of "Pxel's picks" and you'll probably get my drift.

The "beauty" about this approach is: It works on any time frame. I can scan the Market with the same algorithm over a 34 week, even 34 month, horizon as easily as I can apply 34 days. At times like the current, I may find fewer "Picks" at any run, and the rewards may take longer to materialise. But the results will be comparable.


----------



## Julia (30 November 2014)

pixel said:


> : It's not even rocket science!
> I think this whole debate about trends and size of profits is conducted on so many different levels that people at different age groups - hence different time frames



and different levels of experience



> - are arguing well past each other. Yet it's really as simple as 1-2-3:
> 1. Pick your time frame.
> 2. Pick your strategy.
> 3. Follow the trend in your time frame and enter/exit as strategy directs.



Sure, and it can be simplified further by

Let your profits run
Cut your losses short
Protect your capital



> Personal Example:
> My time frame is weeks/ months because I'm at a stage in life where I consider it unreasonable to wait ten years for the profits to pay my bills. It would've been nice, to follow luutzu's example of Coca-Cola, to have bought in 1970 at the beginning of the trend. At that time, I was building a career with the likes of IBM, developing technologies that now, 40 years later, make it possible for us to have this discussion. From that angle, it's a red herring to talk about what might have been if...



There would also have likely been a need during those younger years to pay off a mortgage, invest in additional education, raise children etc.
Then there would have been several periods during that time frame when your funds would have done better in a different asset class, eg property.
Or, as in the recent GFC, to preserve profits by moving to cash until it was over, instead of watching your invested capital halve.

Just as no one method of investing has a monopoly on success, neither does devotion to a single asset class over a long period.

Another relevant point is that many who espouse their particular holy grail of investing have the luxury of being full time employed.   It's a different story when one is in retirement, generating a living from capital with no government or other assistance.
As long as I can easily live on dividends, franking and interest, I'm happy to donate the capital gains to the RSPCA.   Money for its own sake is less meaningful imo than what it allows you to do after providing life's essentials.



> My strategy right now is focused on average daily return on capital at risk.
> Based on that, I look for stocks that promise a trend reversal, then I start risking small amounts traded over small swings, until a HL-HH sequence confirms a positive trend on my original daily-weekly c.o.t.
> Check out a few of "Pxel's picks" and you'll probably get my drift.



Probably not a lot of emotion involved in that methodical process.


----------



## tech/a (30 November 2014)

luutzu said:


> The Coca-Cola Company prices over 4 decades.
> 
> If you follow trends, when would be the right time to jump back in once you've flipped it and take your profit?
> 
> ...




What a shocker of a chart what a shocker of a theory and what a shocker of a comment.(Bold) 

Firstly lets put the chart in linear and have a *REAL* look at it.




Value investing is simply an *INTERPRETATION* by who ever is determining *PERCEIVED* value of a stock at any given time. 
Right now with WOW on another thread that interpretation is argued by many on the thread---whos right?
Us techies however wouldn't be sitting around waiting to find out!






> You would probably missed those years in the 70s when it's the best time to buy it; then buy at a higher price when strong trend is up, then sell out and share your profits with the taxman, then watch as it goes up and up...




This is a crazy statement.
You have to pay taxes regardless of when you liquidate.
Your theory without an exit strategy is simply buy and hold ---oh on a Value stock of course.
Its a great theory and has been proven to be less than the holy grail.Its got more holes than Swiss cheese.



> And this is when you actually make money trading great businesses. Imagine those .COM or whatever else that's all sizzle and no meat.




I remember the .com era.
You could make 10s of 1000s on companies in a few months who had NO VALUE.
Value investors missed ALL those opportunities.

This (UXC) Was Davenet.
Now thats a trend and thats REAL OPPORTUNITY

*

*

Call it emotion call it stupidity I don't care what you label it
I call it bread and butter.I see it on charts every where in every time frame.




This is the DAX and at a point of pending "Opportunity"
Short right now but ---Ill keep watching those charts!




> Anyway, not saying you can't make money trading the trend... but the time it takes to follow the market - daily - and the tax and opportunities (and being the last guy out or in)... I don't think it's worth it.




Yeh really??

Waste 25 yrs waiting and hoping(See Coca Cola Chart---the linear one) or search out opportunities that FLY in a few months (See Davnet UXC chart)..
I only need one to change my life and I've and a few other here-- been fortunate enough to find more than a few!
You just have to get very good at it!


----------



## luutzu (2 December 2014)

tech/a said:


> What a shocker of a chart what a shocker of a theory and what a shocker of a comment.(Bold)
> 
> Firstly lets put the chart in linear and have a *REAL* look at it.
> 
> ...





The Coca-Cola Company stock splits.

If a person bought in at $40 at listing and just go to sleep, that stock is now worth some 9000 times in less than 100 years.

So an investment of $10k is now worth some $90, 000, 000.




---------

I understand where you, Pixel, Burglar and other who trade stocks, either with the trend, TA or whatever technique it is you use. I know the reasoning and logic behind it, and if a person can do it successfully, what's the difference between value or trend... I agree with that.

Like Pixel said, there's the timeframe factor... True that not everyone has the spare capital to just pluck it down and wait months or years to maybe get a return (if you do get it then), why wait when you can get it now or in a few days time.

However, there's some important mistakes and misunderstanding in the above two assumptions. 

*First*, while it's true that if you could buy stock X at price P then flock it off when it reaches P2 - you'd make money and who cares what the company does or what some genius reckon it's worth. That's true but you're assuming that you can get in at P and will set out at P2. But what if you're too late to the party? What if too soon after you bought, the prices are just -Ps. You would get out and buy at a lower price and wait until it goes to your previous P or higher?

What if, like that UXC example where you bought in after April 2000 at say $70, or then again after another peak at $30? You would have lost most of your money. Yea you would make buckets if you got in early and the trend goes your way and you got out early or just right... but how many of us could do that given that future prices cannot be known?

Or in the Coke example, what if you've made 100% or triple your money and decided to get out? Sounds reasonable... Then Coke just keep going up and up... you would jump in if that's the case right? But then you would have already paid taxes on realised profits, would have lost the profit gap since you left and now join. 
This is assuming that your psychology and ego allow you to buy in at a higher price than when you just sold out recently. But like most people, chances are you might see something to expect Coke to go lower than when you sold and wait for it then.

When you trade the trend, what you are doing, at its core, is being involved in a ponzi scheme. That regardless of the value of the fake jewelleries or the tulips or the stamps, any stock (whether it earns a profit or burn hundreds of millions)... who cares as long as you could buy low and sell higher, you make money. Others (these others could very well be you) would see this "easy" profit and jump in hoping to buy high but sell higher... then when it unravels... on what basis do you use to predict when the end is nigh? The basis for value here is simply more supplies of buyers at the bottom of the pyramid... and while experienced traders or those with access to detailed data might have an idea and get out early... the market is very fluid and supplies of buyers can just dry up within a day or two, or dry up enough to do real damage to your holdings real quick.

When you trade the content inside a closed box but not knowing what is in that box, where do you anchor your value around? If the price of that box goes up 50 times, how do you know that that is too low or too high? If it drops 500% from its height, how do you know it won't go lower and go broke? A box that contain one solid piece of pink diamond is vastly different from one containing a lump of coal, or contains nothing.

*Second,* although value investment usually mean waiting a while to see your profit return, to wait for a turnaround... while we all associate value investing with long-term investing, thus giving an impression that invest on a value basis, one buy into a business and hope it grows over time. That a value investor buy now, not make any money now but wait until a year or two or five for the business to make money. This is wrong.

Value investing is buying a business at a price that already makes you money the moment you bought it.

It is buying a $1 note for 60 or 50 cents because most others figured it's only worth 50cents or much less.

Value investing is not buying 50 cents for 50 cents then hope that over time, if management is clever and if luck is on our side, that 50 cents is turned into $1 and then you sell out.

So if you know what you are doing, which you need to whether you trade the trend or value a business, if you know value investing and find the right opportunity, you have already made your money the very moment you buy into it - just the market does not agree with you... But it is the business and its profit that matter since opinions can change, hard cash is what it is.

So while it could take years for the market to recognise and re-evaluate your stock, you as the owner of the business have been making money ever since you bought in... and the market might reflect the earning streams as it has been or value at the new and higher earning streams over the time you bought in.


----------



## McLovin (2 December 2014)

tech/a said:


> View attachment 60526




Did you actually do this trade or is it just as theoretical as saying buying Coke in 1949?


----------



## tech/a (2 December 2014)

McLovin said:


> Did you actually do this trade or is it just as theoretical as saying buying Coke in 1949?




Bits of it.
I trade early sessions when I'm at the screen.
That's a daily chart 
I trade 1/3/9 min.

Generally pick up a grand to 3 a session or B/E where I often let it run and it comes back on me.


----------



## tech/a (2 December 2014)

luutzu said:


> The Coca-Cola Company stock splits.
> 
> If a person bought in at $40 at listing and just go to sleep, that stock is now worth some 9000 times in less than 100 years.
> 
> ...




Yes the same with Westfields and many others. Then there HIH and these in the USA.
http://www.thestreet.com/gallery/tsc-bankruptcy2-decade/0/photo-closed.html

As an example.

The only minor problem is finding one and staying on it for 50-100 years.
---------



> I understand where you, Pixel, Burglar and other who trade stocks, either with the trend, TA or whatever technique it is you use. I know the reasoning and logic behind it, and if a person can do it successfully, what's the difference between value or trend... I agree with that.




Massive difference.
You cant make profit without trend in your direction. Most Value investors wait/hope/prey for a trend.
We find them and simply ride them till they stop.



> Like Pixel said, there's the timeframe factor... True that not everyone has the spare capital to just pluck it down and wait months or years to maybe get a return (if you do get it then), why wait when you can get it now or in a few days time.




Yes but who's going to put $10k in 10 stocks in the hope that in 50 yrs time they can retire comfortably?
Its very likely not one will supply that!

However, there's some important mistakes and misunderstanding in the above two assumptions. 



> *First*, while it's true that if you could buy stock X at price P then flock it off when it reaches P2 - you'd make money and who cares what the company does or what some genius reckon it's worth. That's true but you're assuming that you can get in at P and will set out at P2. But what if you're too late to the party? What if too soon after you bought, the prices are just -Ps. You would get out and buy at a lower price and wait until it goes to your previous P or higher?




Youll be stopped out and live to invest in another "P"
I personally would never wait for a stock to fall more to buy any or more.
Id be looking for and trading something with momentum in my direction.
No way would I be watching a stock moving down thinking this is getting cheap cant wait to buy this!
If I found one which showed great momentum then yes Id consider it.




> What if, like that UXC example where you bought in after April 2000 at say $70, or then again after another peak at $30? You would have lost most of your money. Yea you would make buckets if you got in early and the trend goes your way and you got out early or just right... but how many of us could do that given that future prices cannot be known?




Well some of us. You never let a trade fall into a massive loss. Personally I move stops to B/E as quickly as I can. Sure I get stopped out heaps but I don't have a lot in realized losses and way more in realized profits.
Youd be suprised how good you can become.



> Or in the Coke example, what if you've made 100% or triple your money and decided to get out? Sounds reasonable... Then Coke just keep going up and up... you would jump in if that's the case right? But then you would have already paid taxes on realised profits, would have lost the profit gap since you left and now join.
> This is assuming that your psychology and ego allow you to buy in at a higher price than when you just sold out recently. But like most people, chances are you might see something to expect Coke to go lower than when you sold and wait for it then.




Id rather have the profit and pay the tax. I'm never going to make a decision to buy or sell based on a tax consideration.



> When you trade the trend, what you are doing, at its core, is being involved in a ponzi scheme. That regardless of the value of the fake jewelleries or the tulips or the stamps, any stock (whether it earns a profit or burn hundreds of millions)... who cares as long as you could buy low and sell higher, you make money.




Your argument here I suppose is value investors aren't involved in your Ponzi idea because they aren't selling?
But arent they also just riding the trend? As A value investor your doing exactly the same thing---buying lower to sell higher. The only difference is the label you give it.
"Value investing"
If we are trading technically buying low selling high aren't we finding "Value"?
We are "Technical Value Investing" like you we perceive value. Like you we maybe wrong short term or right long term.



> Others (these others could very well be you) would see this "easy" profit and jump in hoping to buy high but sell higher... then when it unravels... on what basis do you use to predict when the end is nigh?




There are many that indicate an end or a pause.



> The basis for value here is simply more supplies of buyers at the bottom of the pyramid... and while experienced traders or those with access to detailed data might have an idea and get out early... the market is very fluid and supplies of buyers can just dry up within a day or two, or dry up enough to do real damage to your holdings real quick.




Yes but your saying a value investor is immune to this---How?
I as a technical value investor may hold through this OR decide to sell.
I may even buy more. If your just holding your perceived low and value price may become a high price as a stock falls to oblivion while the value investor is screaming---how can this be its way under valued!!!



> When you trade the content inside a closed box but not knowing what is in that box, where do you anchor your value around? If the price of that box goes up 50 times, how do you know that that is too low or too high?




I can tell by the actions of the participants in the daily auction of price---they are determining value right now today or this week or this month.



> If it drops 500% from its height, how do you know it won't go lower and go broke? A box that contain one solid piece of pink diamond is vastly different from one containing a lump of coal, or contains nothing.




Again---I can tell by the actions of the participants in the daily auction of price---they are determining value right now.---today or this week or this month



> *Second,* although value investment usually mean waiting a while to see your profit return, to wait for a turnaround... while we all associate value investing with long-term investing, thus giving an impression that invest on a value basis, one buy into a business and hope it grows over time. That a value investor buy now, not make any money now but wait until a year or two or five for the business to make money. This is wrong.




I read with eager anticipation!



> Value investing is buying a business at a price that already makes you money the moment you bought it.
> 
> It is buying a $1 note for 60 or 50 cents because most others figured it's only worth 50cents or much less.
> 
> Value investing is not buying 50 cents for 50 cents then hope that over time, *if management is clever and if luck is on our side,* that 50 cents is turned into $1 and then you sell out.




A few ifs here.
You may perceive that your 50c stock is worth $1 but until it IS $1 its only worth what the participants in the daily auction say it is! you cant tell me that every value investment you make is going to double just as i cant tell you every technical value purchase is also going to double.



> So if you know what you are doing, which you need to whether you trade the trend or value a business, if you know value investing and find the right opportunity, you have already made your money the very moment you buy into it - just the market does not agree with you... But it is the business and its profit that matter since opinions can change, hard cash is what it is.




No you've not made anything UNTIL price has risen to where you think it should be. Your valuing of 50c that should be a dollar doesn't mean jack to tomorrows auction.
*QUESTION* If you've been able to find this at great value---why hasn't the other 100000 analysts come to the same conclusion?
Why do so many vary? some think value is cheap others average others still about right?
If its clear to you why not all the Economic grads!



> So while it could take years for the market to recognise and re-evaluate your stock, you as the owner of the business have been making money ever since you bought in... and the market might reflect the earning streams as it has been or value at the new and higher earning streams over the time you bought in.




And many are never re evaluated UP many are re evaluated down!
Dividends don't make up the loss in capital value and at times dividends decrease and stop.
Often those in love with their valuations go the same ways as their failing business.

Lots of theory hear I'm pretty sure your not over 40 so haven't been involved in business or trading for 40 yrs.
Some of us are and some of us have been.
That's why we trade like we trade.
We know the difference through practical experience.


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## Habakkuk (2 December 2014)

The technical analyst is frequently wrong, finds out pretty soon and deals with it.

The fundamental analyst is NEVER wrong - everybody else is. Because he knows better than the market.
And eventually the market will agree with the fundamental analyst.

That's how it works ...


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## tech/a (2 December 2014)

Habakkuk said:


> The technical analyst is frequently wrong, finds out pretty soon and deals with it.
> 
> The fundamental analyst is NEVER wrong - everybody else is. Because he knows better than the market.
> And eventually the market will agree with the fundamental analyst.
> ...




Aint that the truth!


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## McLovin (2 December 2014)

tech/a said:


> Bits of it.
> I trade early sessions when I'm at the screen.
> That's a daily chart
> I trade 1/3/9 min.
> ...




Maybe you should've said that instead of putting up a chart with how much one could hypothetically make. Yours and luutzu's examples seem to both fall into the same blue yonder category.

Back on topic, what sort of unlevered returns do punters get from trend following through the cycle?


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## luutzu (3 December 2014)

tech/a said:


> Yes the same with Westfields and many others. Then there HIH and these in the USA.
> http://www.thestreet.com/gallery/tsc-bankruptcy2-decade/0/photo-closed.html
> 
> As an example.
> ...




Value investing does not mean buy and hold, no matter what. 
Value investing, like marriage, mean entering HOPING to stay forever but things may deteriorate or not worked out as we though; when that happen, we exit.

We simply review performance every six months or a year or two, depending on the nature of the business and the projects or business life cycle. If we see economic or market condition changed drastically than we had anticipated or the business is used to; if management is not performing etc.; that's when we exit. We don't hang around.




tech/a said:


> Massive difference.
> You cant make profit without trend in your direction. Most Value investors wait/hope/prey for a trend.
> We find them and simply ride them till they stop.
> 
> ...




In my opinion, this is a big misconception about value or fundamental investing. One that a lot of books, experts and fund managers help spread - that is, they define value investing as equal to long-term investing. Like looking after your nest egg, a seedling growing into a tree etc.

Like I said, while value investing often mean long term holding, mean being patient. But that does not mean buying a seedling and pray and wait for it to grow. It means buying a business and treat it like a business. In business, some projects could be delayed; some product line could fail; some new plant or new venture will burn cash years before they could give new life to a new income stream... Value investing mean you are aware of these and then decide whether you're OK with it or get out.

Why do I need to sell a business to make money? That's one way to make money, but not the only way.

The definition of a business is one that makes you money, and keep on making you (its owner/s) money. If the rate of return is good; if its prospects is further icing on the cake and I do not see any other opportunity, why would I want to sell it?

Say I bought a property and its net rental income is $1000 per week. As long as I get $1,000 a week (and be able to adjust it with inflation etc.)... If I am happy with that return based on my purchase price and annual maintenance/expenses... I don't need daily quotations from real estate brokers to see if I make money or not.

If a guy come to me and offer, every minute if he'd like, to buy that property for $200K, or $500K... and I know it earns $52K real/adjusted net income a year... I wouldn't sell it and still make good enough return on my investment.




tech/a said:


> Youll be stopped out and live to invest in another "P"
> I personally would never wait for a stock to fall more to buy any or more.
> Id be looking for and trading something with momentum in my direction.
> No way would I be watching a stock moving down thinking this is getting cheap cant wait to buy this!
> ...




I work on the assumption that others are just as smart as me if not smarter. So when I buy something, I want to know what it's worth. That way, when I want to sell it on to others, I know when or when not to sell.

I prefer not to buy something I have little idea what its real worth is just to then pass it to another guy demanding a higher price. The buyer do not need to buy my stock, and I cannot force them to... so if they don't buy, I at least know the earnings is still acceptable and won't lose sleep over it.

As Value Collector said, to each his own. But I really think that given the potential of what a good business can achieve in our time, it might be a real great lost to simply try and make profit from trading what is essentially paper stocks. I mean, if you trade stock, you're buying low and selling higher... that's all find and good but you're only profiting from what your buyer is paying only, and that's it.

But if you buy into a good business, for the same price, you suddenly have hundreds of millions or billions of dollars worth of resources, some of the best minds working to improve your company (and maybe the world's standard of living) - all over the country and the world. Why would you want to trade the potential gain from that sort of resources for a few bucks if you can help it?





tech/a said:


> Id rather have the profit and pay the tax. I'm never going to make a decision to buy or sell based on a tax consideration.




If I own the corporation outright, aren't I, its sole owner, already be paying taxes on its earnings? If I own a couple of shares, aren't I paying my portion of that earning in taxes?




tech/a said:


> Your argument here I suppose is value investors aren't involved in your Ponzi idea because they aren't selling?
> But arent they also just riding the trend? As A value investor your doing exactly the same thing---buying lower to sell higher. The only difference is the label you give it.
> "Value investing"
> If we are trading technically buying low selling high aren't we finding "Value"?
> We are "Technical Value Investing" like you we perceive value. Like you we maybe wrong short term or right long term.




I can't speak for value investor, they probably laugh at my ideas anyway... 
But me as a value investor I know that I seek to buy and sell at fair value. If the buyer or seller want to sell or buy at value above and beyond what I considered fair, who am I to not make extra profit? 

What is fair value?

If a stock is worth $100 in my opinion... fair value have to be below that. Why? Why would I want to go through the trouble and expense to exchange my $100 for another $100? It has to be below what I think it is worth to give me a margin of safety as well as profit for the transaction. 

After that initial transaction, my return is what the business return on its equity. 

If I make improvements, if luck was on my side, then that's extra profit on top for risk and innovations I take as owners of a business. If condition deteriorate etc... that's part of the risk I was hoping to avoid but couldn't so I suffer losses.

So when a value investor buy at a low price then later sell at a higher price; while it appear like he's simply trading and buy low sell high as any trader does... the difference is in the value behind buying low and the new value added since then that now demand a fair higher selling price. Both prices may very well be fair value at their transactions. 

A trader have little or no idea, and does not care to know, about this value. Value to him is the difference between his costs and his income. He could as easily buy a lump of coal or a lump of useless rock if there's a good chance of a higher bid in the near future.





tech/a said:


> There are many that indicate an end or a pause.
> 
> Yes but your saying a value investor is immune to this---How?
> I as a technical value investor may hold through this OR decide to sell.
> ...




Depends on definition of value. If I buy and make $1 profit, that's value; If I sell and not suffer losses, that's valuable. 




tech/a said:


> I read with eager anticipation!
> 
> A few ifs here.
> You may perceive that your 50c stock is worth $1 but until it IS $1 its only worth what the participants in the daily auction say it is! you cant tell me that every value investment you make is going to double just as i cant tell you every technical value purchase is also going to double.




The few IFs refers to that's NOT what value investing is.




tech/a said:


> No you've not made anything UNTIL price has risen to where you think it should be. Your valuing of 50c that should be a dollar doesn't mean jack to tomorrows auction.
> *QUESTION* If you've been able to find this at great value---why hasn't the other 100000 analysts come to the same conclusion?
> Why do so many vary? some think value is cheap others average others still about right?
> If its clear to you why not all the Economic grads!




Ask economic grads, how do I know. Actually I do know.

Before that... if you can spot patterns in share prices, what make you think others cannot? What stops others from jumping the gun before that pattern even appear? What if they know that before such pattern, there's this other patterns... and others read before that and before that... so that eventually a new pattern is formulated and the cycle repeats.




tech/a said:


> *QUESTION* If you've been able to find this at great value---why hasn't the other 100000 analysts come to the same conclusion?
> Why do so many vary? some think value is cheap others average others still about right?
> If its clear to you why not all the Economic grads!




Why? Because they're not as smart as me. I'm quite exceptionally clever to be honest 

But mainly because they weren't taught right and basically follow market and share price trend (TA) without realising it. You know, thinking that risk is related to return; then define risk as deviation from a fancy aggregate of "representative" stocks index Share price movement. That's trend following and silly thinking masked in fancy maths and backed by billions and trillions of dollars and a couple of Nobel prizes.

That and varied required rate of return. Some are perfectly happy with getting return just above or equal that risk-free return one gets from a bank account - why I don't know, they seem to want to play fair. So if they/we all agree on earnings but varied by our required rate of return (say some require 6, others 10%)... you got yourself a wide range of value... mix that up with varied earnings/return estimates and it seem nobody knows anything.

Then there the really smart one who look at economic and geopolitical factors; look at industry trend and make assumptions and protect earnings into a distant future and priced it based on all these factors aligning...

Then there's people like me who just talk 





tech/a said:


> And many are never re evaluated UP many are re evaluated down!
> Dividends don't make up the loss in capital value and at times dividends decrease and stop.
> Often those in love with their valuations go the same ways as their failing business.
> 
> ...




I have traded before (not TA, but have invested/traded stocks - did pretty well I reckon but had very small capital then to be impressed); have also, still is, running my own business with my siblings doing good work with big boys, and we're doing not too badly. So I do have some experience running my own show as well as getting some ideas of how some large corporation works.

Theory leads to action though 

I'm not having a go at you guys or TA... to be honest, I think TA is much more intelligent than these "modern" investment theories and portfolio management rubbish. At least with TA, you guys don't pretend to muck around with stuff that doesn't matter to you - you are trading the market and the market only cares about share price and that's your focus. With the other approach, they're doing the same but want to appear smarter and so look at things that are quite useless and harmful.

OK, I think I've upset just about everyone. At least it's good entertainment though.


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## luutzu (3 December 2014)

McLovin said:


> Maybe you should've said that instead of putting up a chart with how much one could hypothetically make. Yours and luutzu's examples seem to both fall into the same blue yonder category.
> 
> Back on topic, what sort of unlevered returns do punters get from trend following through the cycle?




How is it theoretical?

If you bought in 1996, 16 years later it's 4,500 times more? I think that's what it is based on that chart.

Anyway, there will be businesses now and in the future that may present the kind of opportunities coke or a walmart did (maybe still does)... so it's not theoretical. It doesn't come by everyday and we may not buy in at bottom or stay til the end... but it's out there.


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## Wysiwyg (3 December 2014)

Just thinking back to 1919 when average American wage was $25/week. Buying one share in a fizzy drink company at near two weeks wage for one share would not have been thought a smart investment. Especially after the trauma of World War One. Stock data can look fantastic in hindsight but the real game is here and now. Could one Coke share make you a billionaire in a hundred years? With all the drink competition and nutritional data and awareness about sugary substances, no, but get those developing   countries hooked on the sugar and fizz and the company could do well again.


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## McLovin (3 December 2014)

luutzu said:


> How is it theoretical?
> 
> If you bought in 1996, 16 years later it's 4,500 times more? I think that's what it is based on that chart.




Some times it pays to think if something sounds so far fetched it probably is. How realistic do you think it is that the world's largest beverage company had a return of 450,000% over the 16 years to 2012?


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## McLovin (3 December 2014)

Wysiwyg said:


> Just thinking back to 1919 when average American wage was $25/week. Buying one share in a fizzy drink company at near two weeks wage for one share would not have been thought a smart investment. Stock data can look fantastic in hindsight but the real game is here and now. Could one Coke share make you a billionaire in a hundred years? With all the drink competition and nutritional data and awareness about sugary substances, no, but get those developing   countries hooked on the sugar and fizz and the company could do well again.




Exactly. Hindsight is 20/20. Putting up a chart of an absolute outlier and saying "look how easy it is" adds zero. If you picked KO you got lucky.


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## luutzu (3 December 2014)

McLovin said:


> Some times it pays to think if something sounds so far fetched it probably is. How realistic do you think it is that the world's largest beverage company had a return of 450,000% over the 16 years to 2012?




yea was half asleep man.


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## luutzu (3 December 2014)

Wysiwyg said:


> Just thinking back to 1919 when average American wage was $25/week. Buying one share in a fizzy drink company at near two weeks wage for one share would not have been thought a smart investment. Especially after the trauma of World War One. Stock data can look fantastic in hindsight but the real game is here and now. Could one Coke share make you a billionaire in a hundred years? With all the drink competition and nutritional data and awareness about sugary substances, no, but get those developing   countries hooked on the sugar and fizz and the company could do well again.




I'm not saying I or anyone could pick and stayed with a Coke; though there could be another one like it, I'm not saying I could pick it and just stay with either.

I agree with you that buying Coke in 1919 and holding onto it is unrealistic (even if we can go back in time)... but thing is you can buy it over any decade since listing and make a fairly decent return. And this even though during that time Coke had made a bunch of mistakes - like New Coke, or venturing into strange businesses... it even own some entertainment/TV/Film production company at some point; and gone through World wars, Cold War, crashes and recessions; diet fads and what not.

Anyway, what I am trying to say is that while trend trading could make a lot of people a lot of money, and for some people they could do it consistently... I know I can't do it, not consistently. I'm not made for it so I opted for the easy way where I think I could have a good chance of doing things I understand, doing it consistently, and that is looking for businesses that are well established and seem to have been and are likely to keep doing well... and get in when it stumble a bit or the market could be wrong in reckoning its days are numbered... and put my capital in a large established organisation run by people who are brilliant and shown to be very capable and let them decide how best to move and adapt. I could lose money there too but at least I would know why and maybe learn from it.

I recently scanned through WalMart's annual reports and from the 70s, it had a few dots on a map of America... about ten years later those dots were scattered all over the Eastern then soon the entire US... and now that map coloured in a few major regions/countries in the world. I'm sure that even Sam Walton couldn't have predicted that.


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## McLovin (3 December 2014)

luutzu said:


> yea was half asleep man.




Of course.


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## luutzu (3 December 2014)

McLovin said:


> Of course.




Better than my "blame the wife" excuse 

Yea that's a really good price and I'd love to buy it like I said, but have to talk to the wife. You know how it is.


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