# Newbie Lessons - All your questions answered



## Sir Osisofliver (12 February 2009)

Hi All,

I mentioned that I was thinking of doing this in a blog to help out all the newbies who seem to have lots of questions that are constantly repeated. I'll slowly work on this when I have time - At the moment I think I have about ten chapters planned - but I'd appreciate anyone else's input, comments, pedantic spelling corrections, flames - whatever - feel free to contribute, and for the newbies - if something isn't clear PLEASE ask - because I want to make this as newbie friendly as possible.

*
Budgeting - the foundation of financial independence.*

 It's generally been my experience that there seems to be a lot of people who hit their thirties and then start to wonder about this creature called "financial security".  They start to wonder about things like Mortgage and kids and unexpected financial events in their life and really start to think about how do I get financially comfortable when these events happen? A great many people live hand to mouth and live for the moment, rather than planning ahead and end up realizing when it is almost too late that they haven't planned for their future. 

Let me make this point clear. ANYONE can retire very comfortable. It doesn't matter what your income level is, your level of education, whether you went to a private school or any other factors - all it takes to become financially independent is 1) Self Discipline and 2) A small amount of Knowledge.

The average Australian will earn approximately 1.8 million dollars during an average working life.  For every Australian working today *8%* will become "Financially Independent" when they retire. (we'll talk about this definition in a second). Out of 100 people aged 15 today, by the age of 65

38 will be deceased
38 will be living in poverty
16 will still be working
7 will be retired on a livable income
and 1 will be wealthy.

The way that the ABS (Australian Bureau of Statistics) defines "Livable income"? - In retirement your income is 60% or greater of your last year's pay. "Wealthy" is defined as your retirement income is greater than 80% of your last years pay. Yet with just a small amount of information and self discipline - those numbers could be MUCH better.  

So with those scary numbers in front of you lets talk about budgeting, because budgeting really is the foundation upon which you will build your financial security in the future. 

Most people think that they know how to budget. My income is x my expenses are y, if I take y from x and end up with a positive number - I'm good. Unfortunately proper budgeting has a bit more to it than that. You should sit down with a full years worth of expenses in front of you and then classify these expenses as *Vital, Necessary or Lifestyle* expenses. You then take these expenses and work out how much that means from your periodic wage (Eg monthly, fortnightly, weekly). 

Of course your expenses are not nice and neat and broken down into discrete periods that match your pay packet. You'll tend to get periods that are expenses heavy when your car rego, rates notice, insurance bill etc etc all happen at once. These events need to be planned for by allocating funds towards them out of your periodic pay packet. 

It's as simple as creating a control account (which is what you ACTUALLY have as disposable income after you've paid ALL your expenses rather than what your current bank balance happens to be. If there are expenses that you can plan for, (EG you want to spend $500 on Christmas presents for the kids this year) - you allocate this an an expense in your control account, and work towards it slowly over time. 

You'll soon find that when you are aware of all your expenses, your ability to save money will be greatly enhanced. But here is where the self discipline I mentioned previously (and the little bit of knowledge) come in. 

Self discipline - There's money in the bank - damn that 52 inch plasma TV looks good doesn't it? Or how about that day spa package in the Hinterlands eh? Oo can I pimp the car out with a tight car stereo system?

Knowledge - So we need to apply some self discipline and some rules to our disposable income. Ready? here we go...

*Budgeting Golden Rule number 1*
*Pay yourself FIRST* - For every dollar that you receive - you should put 10% aside for future investment. This should be classed as a VITAL expense in your budget. 

Why? Because of the benefits of compounding and the advantages of leverage.  If you know exactly what your expenses are and what your disposable income is (after rule 1), you can (subject to adequate security), through the advantages of leverage support a proportionally higher share portfolio. Every $1 dollar saved can be worth if properly and safely structured $4 each year and every year, year after year after year. 

I'm not going to add the famous example of which you would rather receive. A million dollars today, or $1 doubled every day for a month. For those of you interested you can look it up, it basically shows you the power of leveraging and brings you to the important realization that compounding effects are greater over longer time frames.

*
Budgeting Golden Rule 2)*
If you want it - plan for it - Don't impulse buy and don't go into debt for something that depreciates in value.

Pretty simple rule - amazing how often people don't follow it. Keep rule 1 firmly in your head at all times and realize that every dollar saved is worth far more in the future. 

 

I'm going to stop here and see what comments and questions arise and finish with the following...

A Budget is not and end in itself, rather it is a means to an end and its' purpose is to 

A) allow a prudent access to a small amount of cash flow, and 
B) to provide a leveraged exposure to income producing appreciating assets

Realize that through compounding that the increasing cashflow from the assets will eliminate the need for budget surpluses over time and ADD to your disposable income.

Sir O


*EDIT - 
Dear Newbies,

If you have a question in relation to this thread - please ask me in the thread rather than PM'ing me. I have limited amounts of time each day and if one of you ask's a question, there will undoubtedly be others with the same question.

I don't want you pished at me by copying your private message to me into the thread, so ask me here please.

Sir O*


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## AlwayzLearnin (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Thanks for the info Sir O.

I am looking forward to the next one.




Sir Osisofliver said:


> Hi All,
> I'm not going to add the famous example of which you would rather receive. A million dollars today, or $1 doubled every day for a month.




For those that are interested in the figures: 

1: 2 
2: 4 
3: 8 
4: 16 
5: 32 
6: 64 
7: 128 
8: 256 
9: 512 
10: 1024 
11: 2048 
12: 4096 
13: 8192 
14: 16384 
15: 32768 
16: 65536 
17: 131072 
18: 262144 
19: 524288 
20: 1048576 
21: 2097152 
22: 4194304 
23: 8388608 
24: 16777216 
25: 33554432 
26: 67108864 
27: 134217728 
28: 268435456 
29: 536870912 
30: 1073741824

$1,073,741,824 

*Disapears into dreamland for a bit *


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## nomore4s (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Can I pick a month with 31 days in it?:


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## alwaysLearning (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*



AlwayzLearnin said:


> Thanks for the info Sir O.
> 
> I am looking forward to the next one.
> 
> ...




hmm...interesting. Oh and hey we have the same user name  lol


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## Trembling Hand (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Looks like a good thread. Hopefully will not get hijacked by fools


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## AlterEgo (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*



Sir Osisofliver said:


> Every $1 dollar saved can be worth if properly and safely structured $4 each year and every year, year after year after year.




And how do we go about achieving this incredible 300%PA return on investment?



Sir Osisofliver said:


> realize that every dollar saved is worth far more in the future.




Well that depends on whether the return you are earning on it is significantly higher than the rate of inflation. eg. if the money is in a bank earning 4% when inflation is 5% then it's actually worth LESS in the future.

And don't forget the impact of TAX. The examples of the power of compounding interest that are often repeated everywhere never take tax into consideration. Re-run the calculations with tax and inflation included and you'll soon see how rediculous some of these common compounding interest myths really are.


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## johenmo (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*



AlterEgo said:


> Well that depends on whether the return you are earning on it is significantly higher than the rate of inflation. eg. if the money is in a bank earning 4% when inflation is 5% then it's actually worth LESS in the future.
> 
> And don't forget the impact of TAX. The examples of the power of compounding interest that are often repeated everywhere never take tax into consideration. Re-run the calculations with tax and inflation included and you'll soon see how rediculous some of these common compounding interest myths really are.




Forget the calcs - it's conceptual!!  Like sharetrading, it's a mental thing.  Remember, it's not necessarily what you earn, it's what you *don't* spend.  Forget extremes like earning 500K vs 50K per year.

I feel this topic is the start of money management.  If you can't manage your day to day finances it'll make it harder to manage share finanaces.  

Good points on budgeting.


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## Sir Osisofliver (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*



AlterEgo said:


> And how do we go about achieving this incredible 300%PA return on investment?



 This is budgeting - and baby steps at that. I can't vomit up 20 years of experience and fit it onto a single page and have it make sense. Structure, Investment classes, leverage, provisional cash forecasting, Timing etc etc etc etc etc - will be coming in the future.  Is there anything about BUDGETING that is not clear?



> Well that depends on whether the return you are earning on it is significantly higher than the rate of inflation. eg. if the money is in a bank earning 4% when inflation is 5% then it's actually worth LESS in the future.
> 
> And don't forget the impact of TAX. The examples of the power of compounding interest that are often repeated everywhere never take tax into consideration. Re-run the calculations with tax and inflation included and you'll soon see how rediculous some of these common compounding interest myths really are.





I don't disagree with you at all in what you have said. I was trying to get across the concept of compounding and the use of time in a fairly simplistic manner. This IS for newbies after all, I didn't want to complicate things to early. I do take into consideration tax implications in my models - but they are proprietary and I'm not just going to upload a master model which took several years to finetune.

Do you want more commentary on this issue?

Sir O


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## prawn_86 (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Great idea Sir O. I have made this thread a sticky one, and have a couple ideas for it, which i will discuss with the other mods and admin, the main being removing posts that are off topic, so we can keep a thread as a "one stop shop" for new investors.

Will report back soon


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## Sir Osisofliver (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Thanks for making this sticky Prawn.

I haven't yet seen anyone say.

"You've forgotten the importance of........"

or 

"Should you give more detail on......."

and this is the sort of feedback I'm looking for... Anyone got anything or should I keep trucking along? (Not today - other lessons to come later)

Sir O


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## sinner (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

You forgot to mention to be easy on your transgressions.

Budgeting is hard. It usually means going without, when others aren't.

Your budget will fail *when* (not if) you can't resist the temptation to go past your rules. 
*If* (not when) you can forgive your mistake and continue with the plan after such a mistake rather than letting it all fall apart, you will have succeeded.

Obviously this doesn't mean you can break the budget every time an opportunity to do so comes along, but rather recognise that sometimes such things will occur and important to continue with the plan rather than letting it drop.


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## Julia (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Excellent and much needed idea, Sir O.  Goodonya.  Couldn't agree more about the necessity for basic budgeting.  It forms the foundation for everything else.


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## ice (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Damn, looks like it has to be me, since no-one else wants to mention it. 

Independance is spelled independence.

Sorry for the pedantry but I devalue anything with spelling errors and your blog doesn't deserve that.

ice


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## beerwm (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Hi Sir O

can u provide a link to the ABS data, worrying figures,
looking forward to chapter 2!


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## skc (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Australian are notorious when it comes to saving money.



> Household saving rates of various countries (2003)
> 
> China 25.5%
> Germany 10.7%
> ...




Anyone want to guess the Australian rate?

........ *-3.4%*

_Source here: http://angrybear.blogspot.com/2005/06/international-saving-comparisons.html, http://www.swivel.com/graphs/show/10676201_


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## Sir Osisofliver (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*



sinner said:


> You forgot to mention to be easy on your transgressions.
> 
> Budgeting is hard. It usually means going without, when others aren't.
> 
> ...




Thats a pretty good thing to say Sinner. I like it.  What I've also found is that   when dealing with couples its generally the less um focussed partner who decides they can't do without whatever piece of stuff it is they want.  Not to sound like a control freak but it's important if you are in a couple to get consensus you can both live with (especially important for the lifestyle expenses).
Sir O


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## Sir Osisofliver (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*



ice said:


> Damn, looks like it has to be me, since no-one else wants to mention it.
> 
> Independance is spelled independence.
> 
> ...




Damn it!!

Fixing it now.. Sonova - won't let me edit it now 

All right just call me..

Sir Can't-type-for-schitt from now on and apologies for not picking that up


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## Sir Osisofliver (12 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*



beerwm said:


> Hi Sir O
> 
> can u provide a link to the ABS data, worrying figures,
> looking forward to chapter 2!




Sure - It'll take you a while to find it, but it's buried in amongst the following...

http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/4102.0?opendocument?utm_id=LN


1 Australian Bureau of Statistics 1997, Australian Demographic Trends, cat. no. 3102.0, ABS, Canberra.

2 Clare, R. and Tulpule, A. 1994, Australia's Ageing Society, Background Paper No. 37, Office of Economic Planning Advisory Council, Canberra

3 Rosenman, L. and Warburton J. 1997, ‘Retirement Policy, Retirement Incomes and Women’ in Ageing and Social Policy in Australia, Cambridge University Press, Melbourne.


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## BillyIdol (15 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Not wishing to labour a point (I know I have mentioned this in other posts), but for me personally, I found Ashley Ormond's book "$1 million for life" a really approachable and effective way to budgeting and investing overall for a fairly novice investor who just wants a more passive approach.  David Bach's books were pretty good too for budgeting, but more USA-focused when they talked about superannuation (401k's, ROTHs etc).

Ashley has a website www.investing101.com.au/club.htm where he puts some good articles up, and they're all free.  He's also got a list of books there, some of which I hadn't personally heard of before (e.g. The Madness of Crowds), and I consider myself pretty well read.

He doesn't try and spruik anything nor talk 'get rich quick'.  He approaches a 'budget' in the way that you take $500 (as the basic plan) per month and save up, buying maybe a couple of times a year.  In that way, the investing bit is taken care of for you and all done in ETFs, LICs, REITs, index funds etc.

I personally got the book out from the library, then liked it so much I bought it.  I refer back to it quite regularly, with post-it tags all over the most-read bits.

What was particularly interesting was his 18 November 2008 post - Million Dollar Habits - Pittard Conference to a group of REAs and how they could get wealthy from small beginnings, but you have to start.

Worth reading, and a good insight into the idea that 'a dollar today can be worth more than a dollar in the future', meaning that if you spend a dollar today, you effectively remove it's ability to compound over time and provide more dollars down the track.  I think it was Buffett who coined (no joke intended) that one.

(mods, feel free to move this post if I've missed the point).


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## BillyIdol (15 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*



Sir Osisofliver said:


> What I've also found is that   when dealing with couples its generally the less um focussed partner who decides they can't do without whatever piece of stuff it is they want.  Not to sound like a control freak but it's important if you are in a couple to get consensus you can both live with (especially important for the lifestyle expenses).
> Sir O




Agreed (and with Sinner).  What I have found though, is that a great way to do it is not argue.  That won't work.  You need a bit of smarts....

Invest, and then when you get your dividend statement, fund quarterly, whatever, sit down at the breakfast table and 'WOW, did you see what I got in the mail today ?  $100 from XYZ, and I didn't need to do anything' - then show them.  The other half got interested when I did the same a long time ago and suddenly, that pair of shoes she'd seen yesterday was forgotten about...in favour of 'how do I get a piece of that action too ?'.  It was then "hey, XYZ company paid for dinner tonight, that's cool !"

This should bring them around somewhat to get interested enough to learn, or at least take notice that THEY should be doing it too !  When I took her to the city and showed her that all these other people pay me when they go and buy this, that and the other, she loved the idea.

Watch things rein in, albeit maybe slowly.  Shares are somewhat intangible and so it can take a bit of convincing.


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## slushy32 (15 February 2009)

*Re: Newbie Lessons - Chapter one: Budgeting*

Looking forward to the next installement.


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## Sir Osisofliver (16 February 2009)

*Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*

Not sure if you want a seperate stickied chapter Prawn - I think this might be better if it's all in one place.

*Chapter 2 - How to manage your bank manager... secrets from the inside.*​
This is gonna sound a little like bank bashing - and there is a reason for that. Simply put...when you go and see your bank manager does he have *YOUR* best interest at the front of his mind or *THE BANKS'* best interest?  We know the answer to that one it's the Banks best interest - otherwise your bank manager is out of a job. Yet the bank manager as an employee of the bank will do his or her best to appear to be your best friend and trusted banking professional who saves you money.

So when your bank manager appears all friendly and uses sales techniques against you - just remember - he or she works for the bank - not for you.

Ok so what are the sorts of things that they do to ensure that they work in the banks best interests?

*Bank Secret number 1.*

Ok this is something that EVERY bank will do and by doing this will save you THOUSANDS. When you get a mortgage, they will ask how frequently you want to make payments. If you say monthly... 
they'll say 'No Problems" and continue.

If you say Fortnightly.... they'll say "no problems" and continue.

If you decide to pay fortnightly (AND YOU SHOULD), when you get your mortgage documents, if you are paying attention and haven't gone glassy-eyed from reading all the legalese, you will see that they will amortise your fortnightly payments across the year so that you pay exactly the same as someone paying monthly. *You pay exactly the same over the course of a year.*

Now ask yourself why would they do that? Go ahead - ask your bank manager (and remember that he'll use sales techniques against you) you probably won't get the REAL answer.... Here it is.

There is 52 weeks a year, 26 fortnights a year...but only 12 months. So by choosing to pay fortnightly *(AND NOT AMORTISING THE PAYMENTS)* you are in effect making 13 months of payments in a year. You are making EXTRA payments (even though the difference to you is about the cost of a cup of coffee every fortnight).  

By not amortising the fortnightly payments, over the course of a 30 year mortgage, you will make an additional 19 payments earlier than you would normally have done so, and save yourself...*72 mortgage payments*.

Wait 72??? How is that possible I hear you cry?  Because when you start paying your mortgage - for the first decade or so when you make a payment, the largest portion of that payment is paying off the interest - not the principle. Extra payments reduce both the principle and interest portion of the loan - and hence you pay it off that much faster. Don't believe me? Go ahead ask your bank manager. I haven't found one yet who'll give me a straight answer - but they will all blush when they realize they have been caught out.

*Bank Secret Number 2 - Banks and interest*
*
DEBT VS LIABILITY*
Ok this relates a bit towards Budgeting. Remember when I said that if you want something you plan for it in your budget?  A LOT of people of course don't do that - they use Debt. Debt is VERY different to Liability.  Let me explain.
*
Debt*
Lets say you want to go away on holidays to Fiji and laze by the pool drinking Pina Colada's. You haven't budgeted for it but you really need that holiday and so you use debt to fund it. Debt is paid for from income that you have not yet earned. Remember to take plenty of pictures when you are on holiday - because you will be paying for it for a LONG time if you use debt.
*
Liability*
Lets say you borrow money to buy an income producing asset. Lets say property. At ANY TIME *if you choose* you can sell that piece of property to remove the liability associated with it. This is very different to the holiday in Fiji. You cannot sell your memories and holiday pictures to clear your debt. 

What has this got to do with the bank?
*
Banks prefer you to have debt rather than liability*

What? Why would they do that?  Because *generally* debt based products attract a higher rate of interest than liability based products. Your credit card has a high rate of interest in comparison to your home loan. (The bank will tell you that this is because risk assessment says that your credit card is a higher risk of default than your home loan). So why then when you borrow money from a bank do they structure it in such a way as to make it easy to get a credit card, and hard to alter the terms of your mortgage? 

Two reasons.  1) With a higher rate of interest they get more money and *2) It limits their ability to lend*

You might scratch your head on that last one so here it is in more detail.

Lets say you have a piece of property worth $1M and you want $100,000 to go invest it into the share market.  You rock up to your bank manager and make the request and he says something along the lines of..."Hmmm investing it into the market? I'm not sure, let me see what I can do I'll have to ask head office." (This by the way if you can't recognise it is a sales technique).  Inside the bank manager is jumping up and down, because for loaning $100,000, they now have *as security* a $1M asset. This security then lets the bank lend out about a further $812,000 to other lenders.  You are most valuable to a bank when you have large assets and small liabilities, because they get to _use your assets to make more money on top of the interest that you get charged_. Neat eh?

*Secret number three - When to borrow from the bank.*

I'm probably preaching to the converted here on this forum but *Timing is important*. It's important as well when you decide to borrow (or more correctly to receive *approval* to borrow) because of the way ecomonic cycles work.

Right now (when the share market is crap, the economy facing recession, unemployment up etc etc) trying to borrow money is bloody hard. Yet when should we be buying quality assets? When the bulls are running or the bears savaging?

It is of course better to buy quality assets when the markets are rubbish - but as I said, it's bloody hard to borrow right now. So when should you seek pre-approval on an line of credit against your assets? Answer is when the market is BOOMING. You'll then have the capacity to invest at the bottom of the cycle that those who don't have your foresight do not.

Once again be very careful of your bank manager - They will be happy to lend you money at the top of the cycle, just make sure you are getting a facility that you don't pay interest on unless you draw the funds. You want the capacity to draw, not have the money sitting in the bank account earning less interest than you are paying.

OK - once again I'm going to stop there and seek comments, flames, and requests for more information.

Sir O


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## SM Junkie (16 February 2009)

Sir O, what else do bank managers have up their sleeve? What is their capacity to discount on rates? What is their ability to negotiate or do we accept what is advertised?


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## Sir Osisofliver (16 February 2009)

SM Junkie said:


> Sir O, what else do bank managers have up their sleeve? What is their capacity to discount on rates? What is their ability to negotiate or do we accept what is advertised?




SM Junkie,

It depends on the bank what level of autonomy the bank manager has (if any). In many circumstances where the LVR (Loan to Valuation Ratio) is much higher..(eg $1M property with $800,000 loan) the bank will instruct the Manager (or mortgage broker, reseller etc) to put the numbers through the risk department of the bank.  It's then the job of some paper pusher at head office to determine whether you get the loan. 

Remember however what I said previously. Where there is a relatively low LVR your Bank Manager will use sales techniques to keep that figure as low as possible. Where you have a LOW LVR you are much more attractive as a client (and have greater leverage during a negotiation). However OTHER bank managers do not yet have your business (or the additional security that your asset will bring to the company). Hence they are much keener to get your business.

When negotiating a new loan from the bank (and remember you will do this when the market is booming to take advatage of the money being thrown around) ALWAYS do your research and don't feel bad about shopping around. If you are with ANZ and NAB give you a better rate, TELL ANZ (and they might better it to keep your business), and THEN TELL NAB (and they might counteroffer)...keep going till they start refusing to budge.

Generally my experience has been that by having correct timing between cycles you can go to your bank manager with a 30-40% LVR and achieve lending capacity of 75-80% during boom times. (You don't use all that capacity - but that is another topic for another day).

Sir O


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## josh_in_a_box (18 February 2009)

Great stuff Sir O, looking forward to the next lesson.

J


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## Sir Osisofliver (18 February 2009)

OK All,

which do you want next..

Asset Classes and sundry info
or
Risk management techniques and equity optimisation?

First in best dressed

Sir O


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## Ashsaege (18 February 2009)

Sir Osisofliver said:


> OK All,
> 
> which do you want next..
> 
> ...




Risk Management Techniques and equity optimisation please


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## Sir Osisofliver (18 February 2009)

*Risk Management Techniques and Optimisation.* (Part 1)

I'm going to try and keep this pretty simplistic - This IS a newbie thread after all.

Ok so Bank secret number 2 told you one of the ways in which banks make money from you. By using the security value of your assets and lending against those assets (and keeping a small reserve).

If you look at the example I gave you above where you go to the bank with $1M property for a $100,000 loan. They would then on-lend about $812,000 (even though the maximum capacity for them to on-lend is....$900,000). They reserve the remaining security.

For the bank this is a legislative requirement - They must retain a certain minimum percentage of unused security for safety reasons.

When you approach you own finance and risk management techniques - you should do the same (just not to the same level because the government won't bail you out if you stuff up).

Let’s say you have a significant asset with a low LVR (This could be your PPR or an investment property for example). Currently the bank loves you - they get to use your asset and make lots of money from you by using the currently unused security value of your asset.

You would be MUCH better off if instead of the bank using that security value - you yourself use it. But how do we use it effectively so as not to endanger the viability of the asset?

In the case of a PPR (principle place of residence) there are a couple of important things you need to consider.

1) Taxation - Interest payments on your PPR are not tax deductible. Any debt on your PPR is not good debt.

2) Serviceability - Your PPR doesn't have tenants (generally) that help you make the interest payments on the loan - so the bank will determine whether you can service the loan with your income.

For these reasons it's best to exclude the PPR from optimisation activities that involved large amounts of gearing. Your best use of the PPR is to use it to cross collaterize into an income producing, appreciating asset class. (usually residential property assets are the easiest to achieve this - There are a number of key characteristics that I look for but that's for another time). This will allow you to have a 100% LVR on a new investment property and use your available disposable income for other activities. (Just MAKE SURE that all of the new debt is held via the new Investment Property to ensure maximum tax write-offs). NOTE if you cross collaterize two assets the lending institution has the ability to veto the sale of either asset.

IMPORTANT - if you choose to do the above and the rental income of your investment property is not sufficient to cover the entirety of the loan (IE - negative gearing). YOU ARE RISKING YOUR HOUSE IF YOU ARE NOT CAREFUL.

Just like what the bank does when they have your asset - we should apply the same lessons here and calculate a reserve from our accessible loan. (Generally you want this at call as well so a Line of Credit facility is the best to use). A reserve is an UNUSED PORTION of your approved loan that can be used to prevent mishaps and unexpected events from compromising the viability of the asset. Depending upon what your risk tolerance is depends upon what size reserve is appropriate. I generally find that a 20% reserve is the maximum that I will use. The reserve should be in place until the asset becomes positively geared, then the reserve can be either drastically reduced, or used entirely for other purposes. 

Want to really appreciate why the use of a reserve on your PPR is important? Go read the Storm Financial Thread.   https://www.aussiestockforums.com/forums/showthread.php?t=13176.  The major issue with Storm was using such a LARGE amount of gearing on the principle residence with inadequate protection in place.

In the case of an Investment Property asset – you can be much more aggressive with your gearing activities because the interest payments on loan funds are tax deductible for you. You still need to maintain a reserve for contingencies but it can be much smaller, and is designed to cover the shortfall whilst the property moves from negatively geared to positively geared.  As a general guideline I’ve found it takes about 5 years for a quality property to move from negative to positive gearing. 

OK Time for another secret: 

If your PPR has non tax deductible interest and limitations towards optimisation and gearing; and investment properties do not have these limitations, which is the better first purchase? 

A great many people seem to want to follow some kind of script that involves chaining themselves to a large asset with an inefficient gearing and taxation profile. The better first purchase is an investment property (or two) BEFORE you purchase a PPR.  For a great many people this little secret comes too late – remember to tell your kids when they are old enough to appreciate it. 

Part two IS coming guys – just got busy.

Sir O


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## Sir Osisofliver (19 February 2009)

Hi Guys and Gals,

Ok So the above post will be edited by Joe hopefully sometime today. My meetiing got pushed back so I spent some more time yesterday editing my post (but wasn't aware I was under a 20 minute deadline) and lost the additions I wanted made. The second (and possibly third) parts will be coming along a bit later.

Sir O


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## Sir Osisofliver (19 February 2009)

*Part two - more risk management*

OK Let’s leave property for now and move onto shares – and the sorts of risk management techniques to employ. You have a lump sum of cash to invest. It may be the result of diligently squirreling away funds from your income, it may be the result of optimising your equity in your Investment Properties (or worst case your PPR), or you may have inherited a bundle from your eccentric Aunt. Point is you’re about to hear a bunch of people tell you what they think you should do.

Professional traders will tell you that you can make money in any kind of market – bull or bear. (And they are right), but that level of skill requires education, practice and a great deal of time.  For newbie investors – by all means educate yourself to be able to trade any market but don’t mess around with core investments if you don’t know what you are doing. If you don’t know what you should do – seek advice - but decide yourself.

Now is the time to really analyse who has your best interests at heart. The BEST person to control your money is YOU.  You should NEVER cede control to someone else. You should also ALWAYS get a second opinion. There has been lots of discussion on these boards about the parasitic nature of advisers in the financial services industry. Take advice but don’t cede control.  

Remember which is the best time to invest in the share market? When the bears are savaging - not the bulls running. When does the bottom happen? You’ll need to decide *that *for yourself, because your broker will ALWAYS be able to find something for you to buy.

OK So cast your minds back and it’s August 07. The market has just had one of the best 5 year periods it has EVER had, the share market is booming, Storm Financial directors just paid themselves a $24 million dollar dividend, for a lot of people life is good. NOW is the time to PROTECT or LIQUIDATE your existing share assets. (If you Liquidate be prepared to pay CGT and make the appropriate reserve for tax purposes).  If you’ve read the bit I wrote about banking secrets you now KNOW that right now is when you go to your lending institution for approval on a line of credit facility to the maximum that you can achieve.   Your existing Share portfolio is looking healthy and you are maintaining a 50% margin with your margin lender.

August 07 – December 07 – You should do the following:-

1)	Pay off margin facility (Because interesting things are going to happen to interest rates in the next 12 months)
2)	Either A) Sell the majority of your shares down and move the money into cash products OR B) Protect your portfolio using put options 

I’d normally talk now about options in great detail – but I’ll leave that for another time –Basically you can use options like an insurance policy to preserve your value at the top of the market.

December 07 – June 08

Right now you should be looking at cash products and Bonds – (If we get a bit more advanced we can use gearing strategies to create tax deductible interest payments to offset the unfranked nature of cash payments)

June 08 – NOW

This is where we start examining the market and selecting (not necessarily purchasing) which stocks to buy (or choose an index when you think it is appropriate).


OK let’s say that you think the bottom of the market is upon us right now. (Or more appropriately that the probability of further falls in the market are small in comparison to the previous 12 months). If so you are probably holding either a wad of cash or a large amount of unused approved capacity.  Normally I recommend that unless you are a professional trader, if you wish to trade a portion of your available equity, you do so with a relatively small percentage of your capacity and have the majority in a portfolio that requires minimal effort and is focussed towards the longer term timeframe of the next 5 to 10 years.  

I always prefer direct equity and direct control – See next topic on Asset classes for the reasons behind my preference.

OK so you’ve made your decisions about what shares or indexes to purchase – what is an appropriate level of optimisation?

I don’t go above 50% gearing.  What this means is if you bring $100,000.00 to a margin lender, you use $100,000.00 of their money to invest.  Margin lenders generally allow you to use significantly more than that figure and will tell you the benefits of gearing to 75% - Don’t let them push you into using a higher level of gearing than you should.

BEFORE we gear however we need to project what the cash flows are going to be. Why do we do this? For the same reason we use a budget for our income and expenses (to know what we are safely capable of achieving).  When you construct your ideal portfolio (BEFORE YOU BUY) work out what dividends have been paid in the last year, what level of franking credits were paid and then work out what interest payments will cost you.  When you have this calculated you can then work out what your safety margin will be (I generally use 5-10%). 

So if we use the above example, we will reserve $5,000 to $10,000 of unused cash or additional lending capacity and then gear the remainder.  

If your timing is correct and your choice of stocks is careful – you will be able to positively gear the portfolio.

Important lessons

Leave it alone – If you have chosen your stocks well, and no major events happen that will impact the dividend streams or massively impact the share price, you won’t need to do any selling until the market is at the top again.

Review quarterly – Look at the cash flows, interest levels and capital appreciation levels. If your gearing ratio has fallen more than 10% buy additional securities to bring it back to 50%. 

Next time Aug 07 appears, Rinse and Repeat.

Sir O


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## hissho (19 February 2009)

Hi Sir O
I'd like to ask questions about mortgage offset accounts if you don't mind:

Let's say I bought a property 12 months ago for $500K. Downpayment was 20% which is $100K and I paid another $40K over the past 12 months as mortgage repayments.

I called my bank the other day to make an inquiry and was told that I have access to that $140K($100K+$40K) and i can use it anytime I want.

I'm a bit confused cos I thought most of my repayments are actually paying interests and that should be considered "profit" for the bank. How come I still have access to it? 

On the other hand, I was told that the bank calculates my repayments according to the difference between my loan and my money in that offset account. So I guess if I start using that money, I will have to start making higher amounts of repayments?

Your help would be much appreciated.


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## tasmart (19 February 2009)

Sir Osisofliver said:


> The average Australian will earn approximately 1.8 million dollars during an average working life.  For every Australian working today *8%* will become "Financially Independent" when they retire. (we'll talk about this definition in a second). Out of 100 people aged 15 today, by the age of 65
> 
> 38 will be deceased
> 38 will be living in poverty
> ...




Thanks for these figures which I agree are very scary - but also are very important as they highlight the reality of peoples efforts! 

This reality is that very few people become wealthy! And it is extremely simplistic to imagine that any 'formula' will secure financial independence. Although a focus on budgetting is worthy, in reality the majority of wealthy people got there either through a major amount of hard work, luck or risk or all three. Unfortunately we are all individuals, with different capabilities which we may achieve but are influenced throughout our lives despite our best efforts by luck, chance or fate. 

My own experience is of a lot of hard work to achieve a high income level - but it is only after I devoted significant time to a financial education that I actually focussed and developed that income to move towards financial independence in 'retirement'. I am less than 10 years away from that (despite the current downturn) but enjoy my job so will probably work longer.

My path has suited me, I have had a great time, happy family, lots of travel and significant social and community involvement (including working in developing countries). I feel that I have been successful, especially considering my poor starting point. 

I sometimes regret that I did not commence my 'financial education' earlier - but then I may have 'budgetted' and not have as good a time or been there for the kids when they were younger!

My 2 cents worth.


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## Sir Osisofliver (20 February 2009)

tasmart said:


> Thanks for these figures which I agree are very scary - but also are very important as they highlight the reality of peoples efforts!
> 
> This reality is that very few people become wealthy! And it is extremely simplistic to imagine that any 'formula' will secure financial independence. Although a focus on budgetting is worthy, in reality the majority of wealthy people got there either through a major amount of hard work, luck or risk or all three. Unfortunately we are all individuals, with different capabilities which we may achieve but are influenced throughout our lives despite our best efforts by luck, chance or fate.




Tasmart - define wealthy.

I am using the ABS definition - I'm not talking James Packer, gold toilet seats kinda wealthy. I think that a couple of simple rules would do wonders for those motivated enough to learn so that those stats do better. No formulaes involved - no one right way, just a few pieces of knowledge to guide people into financial security. I'm not pushing an agenda here, I don't want a 7% upfront fee and ongoing trail to leverage your principle place of residence and invest into highly geared index funds aka Emmanuel Cassimatis. Yes everyone is different, I'm merely sharing what works for me and I've seen work numerous times for others and consider that it is nothing special. No great amount of hard work, luck or risk was involved - merely a small amount of hard-won education.

Sir O


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## mattlaw (20 February 2009)

hissho said:


> Hi Sir O
> I'd like to ask questions about mortgage offset accounts if you don't mind:
> 
> Let's say I bought a property 12 months ago for $500K. Downpayment was 20% which is $100K and I paid another $40K over the past 12 months as mortgage repayments.
> ...





Hi hissho,

The money is available for you to withdraw and use and your repayments wont change. BUT you are correct that the bank calculates the interest on the difference between your money and the loan. That is why it is a good idea to have a mortgage offset account so you can reduce your interest bill.

Your repayment amount and the amount of interest you are charged are separate. If your repayments are $3,000/mth they will always be that until the end of the loan unless you refinance. The interest charged is just added onto the loan balance.


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## Sir Osisofliver (20 February 2009)

hissho said:


> Hi Sir O
> I'd like to ask questions about mortgage offset accounts if you don't mind:
> 
> Let's say I bought a property 12 months ago for $500K. Downpayment was 20% which is $100K and I paid another $40K over the past 12 months as mortgage repayments.
> ...





Hissho,

1) I can't provide you with specific advice - it's against the rules of this forum.

Ask yourself the following questions...

What type of lending facility do you have. Have you got a line of credit for example that has that level of flexibility? Standard P&I loans (even with offset accounts) generally don't allow that level of flexibility. 

When you sought approval from the bank what was your approval limit based upon your income and serviceability? If you have a high income that could support a larger loan the bank may be keen for you to have a larger amount of debt. 

Has the value of the property significantly increased in value in the last twelve months?

For what purpose have the bank approved this drawdown? Eg are you planning on investing this into another asset that the bank will have security over via cross commercialization.

More debt=higher repayments (what other way coud it work?)

As far as offset accounts go - I love 'em - but still pay your mortgage fortnightly.

Sir O


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## nomore4s (20 February 2009)

hissho said:


> I called my bank the other day to make an inquiry and was told that I have access to that $140K($100K+$40K) and i can use it anytime I want.
> 
> I'm a bit confused cos I thought most of my repayments are actually paying interests and that should be considered "profit" for the bank. How come I still have access to it?




You still have access to it because the bank wants you to redraw it - because then they get more interest from you.

Your repayments pay down the original loan amount meaning that you pay less interest over the term of the loan. By redrawing the money the outstanding loan amount goes back up and you get charged more interest. That's why banks love it when you redraw on your loan.

Edit: Great thread Sir O, very educational.


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## tasmart (20 February 2009)

Sir Osisofliver said:


> Tasmart - define wealthy.
> 
> I am using the ABS definition - I'm not talking James Packer, gold toilet seats kinda wealthy. I think that a couple of simple rules would do wonders for those motivated enough to learn so that those stats do better. No formulaes involved - no one right way, just a few pieces of knowledge to guide people into financial security. I'm not pushing an agenda here, I don't want a 7% upfront fee and ongoing trail to leverage your principle place of residence and invest into highly geared index funds aka Emmanuel Cassimatis. Yes everyone is different, I'm merely sharing what works for me and I've seen work numerous times for others and consider that it is nothing special. No great amount of hard work, luck or risk was involved - merely a small amount of hard-won education.
> 
> Sir O




Sorry, my post did seem a bit critical - and was before I read some of your later posts.  However I found the stats depressing (especially with the ABS definition of wealth) - because as you point out the information for people to do better is plentiful, but human nature, lack of appropriate financial education and the minefield of 'advisors' are the greater influence.

Also I have found a lot of the discussion in these forums amazingly ill-informed so it is good to read your approach which is more sensible.

Keep up the good work!


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## Sir Osisofliver (20 February 2009)

Ok ready for the next lesson newbies?
*
Asset Classes and Sundry info. Part 1a*

There are three main asset classes. We will deal with them each separately and in some detail, which I will break into three parts.
*
First Asset class - Shares*

Yup on his forum no doubt this is everyone's favourite asset class. After all we all come here every day to look at what people are saying about stocks and to bounce ideas off of each other in ways that make sense. Spending quite a large portion of my adult working life as a Full Service (private client) broker I have to modestly say I know a bit about this asset class.  I'll try not to go too deep and keep it simple for the newbies and if anyone wants to ask questions we can build from there. Those of you who know this stuff feel free to skim until you find something interesting...

A share (stock, security, unit - in many cases these phrases are interchangeable) refers in it's simplest sense to a portion of ownership in a company.  Companies can be either listed (in which case they have to abide by certain rules called ASX Listing rules. http://www.asx.com.au/supervision/rules_guidance/listing_rules.htm) or unlisted - which means they are responsible to only their share and stake holders.

Who do companies list?  The first function of the Australian Stock Exchange is to serve as a *primary market*. The raising of funds through IPO's (Initial Public Offerings) by means of an offer document (prospectus) which is required to detail the business proposition of the company attempting to float. This document will contain business projections, P&L statements, Balance sheets, key employees and board members, independent experts reports and other vital company information. 

Be aware of course the principle of Caveat Emptor "Let the buyer beware" applies. The information is presented to you so you can decide whether it is worthwhile in making an investment. This if you didn't know is BIG business. Look at any prospectus and listed in the "use of funds section" will be a section called listing fees, or offer fees or expenses associated with offering and depending upon the size of the float, can be several million dollars.  These expenses are made up of the following:-

1) Fees paid to the broking house selling the IPO - which will include fees paid to your stockbroker or financial planner, a chunky fee paid to the corporate department (who administer the IPO and are a central sell point), and any spotter or finders fee (if the deal was sourced outside of the corporate department). Now ask yourself this question...Does your broker have your best interests at heart if he is being paid to sell you something?  Oh and the more he can sell to his clients the greater the size of his commission. 

Don't get me wrong - in a bull market there tends to be several IPO's a year that everyone wants...and when everyone wants it the stock is likely to stag well. (Stag - open at a premium to it's issue price - BNB due to the popularity of it's IPO at the time opened at a 60% premium to it's issue price - and within a short period of time was over $15.00 - $300% above issue price).  In that circumstance the broker would be thinking "which clients do I *reward* with a stock I KNOW is going to stag?" It is of course the client that takes every other sh!tty float offered. I've actually heard when sitting in the dealing room an adviser say.. "Look you take some of this float and dump it after a couple of months and I'll look after you with the next good one."

In ten years in the broking industry I can remember offhand about 15 stocks that I personally put money into on IPO (usually there was anywhere from 20 to 40 floats a year offered to clients) - but then I'm a cautious investor - not a rabid punter. 

2) Fees paid to Accountants and Auditors
3) Fees paid to independent experts and assessors

If the listing is successful and all shares offered in the company are purchased, the stock will list on the exchange and be subject to market forces.

Ok I'm going to leave it there (it is Friday night after all and the scotch bottle is calling me) and pick this up later.

Have a nice weekend

Sir O


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## Sir Osisofliver (24 February 2009)

Sorry about the delay guys and girls - I haven't forgotten you - will try and continue with this sometime today (Got extra busy).

Sir O


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## Sir Osisofliver (25 February 2009)

Ok In the continuing saga of what I promise and what I actually do... I probably won't get to this for a week or so.  (Sorry 'bout that - dealing with other advisers mistakes is starting to &^%$ me off).  I have a large report I need to prepare for a client which will take most of my time over the next several days, but then when $20m says jump....

Just FYI.

Sir O


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## Gordon Gekko (25 February 2009)

Hi Sir O,

Thanks for the time and effort involved in educating us newbies, it's really helpful indeed.

A question with regard to margin loans and strategy. 

I have had a bad experience with FA's in the past in fact I would be completely broke if I had not sold out in Aug 07, more luck than management I might add. I was saving's gearing into a geared share fund.

I have bought back in in Aug 08 into Streettracks STW, catching knives all the way down. At the moment I am showing a loss of 19%.

I would like to get a new margin loan with an LVR of 25% and start a regular savings gearing of 50% per month. I.E I will borrow 3k and invest the same to keep the over all gearing at 25%. I will prepay interest at 6.90 for 12 months and claim it in this years tax.

The question I have and I hope you all can help me out is this. Is it wise to do the following, to average down my position or would it be more advantages to take the margin loan and spread it out over say 5 stock to try to catch some "alpha".
Sorry it might not be the correct terminology but I guess what I am trying to do is buy into 5 stocks that are oversold with a timeframe of 5 to 7 years even though I am 34 and have a long time before I need the money.

I not looking for any specific advise more so if some of you had a 100% core position would you continue with that or try to catch the upside on some individual stocks?
My newbie carefully selected stocks for the long term would be:
1. Westpac 
2.Macq group
3.QBE
4.TLS
5.RIO

All the best of luck in 09

G


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## Sir Osisofliver (26 February 2009)

Gordon Gekko said:


> Hi Sir O,
> 
> Thanks for the time and effort involved in educating us newbies, it's really helpful indeed.
> 
> ...



 So what you are saying is that you were gearing on your gearing with no reserves or exit strategy in place? Yeah you were lucky. 







> I have bought back in in Aug 08 into Streettracks STW, catching knives all the way down. At the moment I am showing a loss of 19%.
> 
> I would like to get a new margin loan with an LVR of 25% and start a regular savings gearing of 50% per month. I.E I will borrow 3k and invest the same to keep the over all gearing at 25%. I will prepay interest at 6.90 for 12 months and claim it in this years tax.
> 
> The question I have and I hope you all can help me out is this. Is it wise to do the following, to average down my position or would it be more advantages to take the margin loan and spread it out over say 5 stock to try to catch some "alpha".



 Sorry Gordon - You're asking for specific advice - which is against the rules of this forum. I would however get you to consider the following points: -

1) What yield (Including any franking credits) do you currently get from your Streettracks STW?
2) What yield (including any franking credits) _would you_ currently get from your specific stock selections?
3) What is the dollar value of the interest that you would pay?
4) What is your marginal tax rate?
5) After taking into consideration the above points are you positively or negatively geared?
6) Finally are you a trader, or an active or passive investor?
7) What happens if you lose the money?
8) What level of reserve are you comfortable with?

The above questions are designed to make you question what sort of investor that you are and what sort of risk tolerance that you have. Only then will you be able to answer your own question. 







> Sorry it might not be the correct terminology but I guess what I am trying to do is buy into 5 stocks that are oversold with a timeframe of 5 to 7 years even though I am 34 and have a long time before I need the money.
> 
> I not looking for any specific advise more so if some of you had a 100% core position would you continue with that or try to catch the upside on some individual stocks?
> My newbie carefully selected stocks for the long term would be:
> ...



 Once again me saying to purchase or not purchase the above 5 stocks counts as specific advice which is not allowed by this forum. I encourage you to examine what your underlying assumptions are in relation to the above stocks and ensure that you have considered both fundamental and technical factors and that you _understand_ these factors.







> All the best of luck in 09
> 
> G




Cheers

Sir O


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## Sir Osisofliver (26 February 2009)

Part 1b

OK so the second function of the ASX is to serve as a *secondary* market. A place in which the current shares of the company can be bought and sold. Prices will fluctuate on the market depending upon numerous factors which are material (or holders _think_ are material) to the share price.

How does the market do this?

Years and years ago, the way this was achieved was through what was known as an open-outcry market.  This is still the case in many parts of the world, where physical representatives of both the buyer and the seller gather and trades are conducted when the price of the sellers and buyers match. If you go into many of the Exchange buildings you can still sometimes see the chalk boards where prices were written.

In those days you had a physical share certificate issued to you via the registry.  For a valid transaction to occur the physical share certificate had to be returned to the registry for destruction by the seller with a new share certificate issued to the buyer.

Nowadays it's all much more advanced. The paper system has been replaced with CHESS (Clearing House Electronic Subregister System) and transactions are handled electronically, no physical delivery of stock certificates needs to occur, the buyer and seller are represented by merely an order in a computer system.

SRN - Stands for Security Holder Reference Number and is a unique 10 digit number that starts with an I - (yes I know on your statements it looks like a 1 - trust me - it's an I) to designate an ISSUER Sponsored Security. EG I0001428793. If you have issuer sponsored stock it means your stock is not sponsored by a broker and is held on the ISSUER Sponsored Subregister. For each stock you have - you will have a different SRN.

HIN - Stands for Holder Identification Number and indicates your stock is held by a broker and is held on the CHESS subregister. Your HIN number will be the same across all stocks that you hold with *that *broker. 

When a Transaction occurs CHESS will transmit the data to the registry - who will then issue you with a HOLDING STATEMENT - which merely indicates your holding in a company.

Market Phases
7am to 10am (SYDNEY TIME) the ITS (Integrated Trading System) allows fresh orders to be entered into the system. This is called the *Pre-open* – My experience working for a large broking house is that in a great many circumstances there will volume that is “hidden”. An operator who has been given an instruction to buy a large quantity of shares will do so in a tight range using small lots. (designed of course not to ramp up the price too quickly – or let the sellers know that there is a massive amount of volume on to buy).
At 10 am  (SYDNEY TIME) the market will begin to open in a staggered fashion, with 5 groups opening at the following times 10.00am A-B Stocks;  10.02.15am C-F stocks, 10.04.30am G-M stocks; 10.06.45am N-R stocks; 10.09.00am S-Z stocks.
Opening prices are calculated according to an algorithm – if you really want to get detailed you can find it here.  http://www.asx.com.au/resources/education/basics/open_Close.htm – For simplicities sake – it’s just a volume weighted match price. The match price is usually displayed on most platforms so you don’t even need to do the calculation.
From 10am to 4pm (SYDNEY TIME) the market is in normal trading times where orders can be placed into the market directly into the ITS.
At 4pm (SYDNEY TIME) the market enters PRE-OPEN again for what is called the CSPA (Closing Single Price Auction) The same algorithm is used to calculate the closing prices.
The CSPA occurs at 4.10pm (Sydney Time)
Between 4.10pm and 6.50pm is the Adjustment Phase – during this time brokers can tidy up orders by deleting unwanted orders from the system (EG Day only transactions) , amending any orders etc. New Orders cannot be entered into the ITS and be executed.
If a broker wishes to make a transaction during this time, they must call the broker on the other side of the “transaction”  to attempt to do the transaction. (ASX Market rules still apply).  Trading during the Adjustment phase is known as overnight trading.
At 6.50pm (SYDNEY TIME) Old orders and those too far outside the market are purged from the system.
At 7pm the exchange is closed until 7am the next morning.


Lots more still to come on shares

Sir O


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## mattlaw (26 February 2009)

Thanks for all of this information and education much appreciated


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## Sir Osisofliver (3 March 2009)

Shares III

OK so the standard secondary market in Australia is made up of 2195 different listed entities that are classified according to a GICS rating (Global Industry Classification Standard). New shares are entered through listings (IPO's) and some shares drop off through de-listing. (This doesn't include futures market, derivatives or CFD markets. It also doesn't include small regional exchanges which have their own listings).

GICS is an industry classifications system that has been developed by Standard and Poors and Morgan Stanley Capital International (MSCI).  It is these entities that are responsible for the publication of indicies data., Such as the ASX 200, All Accumulation Index etc etc.  More information on Australian Indicies can be found here.
http://www2.standardandpoors.com/po...es_ei_au/2,3,2,8,0,0,0,0,0,0,0,0,0,0,0,0.html

There is a lot of useful information to be found at the Standard and Poors website about what goes into an index.  The index used by industry professionals is the ASX200 rather than the All Ords. As the name suggests the ASX 200 is made up of the 200 Largest Stocks by market cap on  our exchange. (Market Cap is simply the number of shares on issue times price of those shares) There are 10 main sectors of the market according to GICS classification.  

Energy
Materials
Industrials
Consumer Discretionary
Consumer Staples
Health Care
Financials
Information Technology
Telecommunication Services
Utilities

(You also tend to see Financials broken into Fins-x-Reit and A-Reit which is that sector of the market minus Real Estate Investment Trusts, and REIT's on their own).

Certain global characteristics are going to influence sectors of the market differently. There are a great many influences over our market, which can rapidly influence prices on our exchange. This is why so much attention is given to major economies that have the capacity to influence the world economic conditions.

There is so much data out there that even if you gave up sleeping altogether, you wouldn't have enough time to read everything. So it becomes a matter of experience to _know_ what is important and to understand what these influences are and how they work to influence our market.  Use whatever you feel comfortable with. Personally I look at the following: -

Bond Yields
Interest Rates (Local and International)
International Reserves
Commodity Prices
ASX200 Index 

To give me a general sense of how our market is tracking at any particular point in time.

Ok I've got lot's more to say about shares (LOTS more trust me) - but It's time to move onto property or I'm never getting this finished.

Cheers
Sir O


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## bossman (13 March 2009)

Sir O,

My thanks also for this thread have been checking it daily looking forward to the next lesson but alas, no knowledge has been imparted for 10 days - hope you are well and able to continue our education in the not distant future.

BM


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## Sir Osisofliver (13 March 2009)

I haven't forgotten you guys, I've just been a bit busy - gotta do things that pay the bills (and my wifes credit card) every now and then.

So *Property Asset Class* (Not my area of Specialisation so if any of you property moguls feels like pitching in - feel free)

Property can be broken down into the following areas.

Listed (Because the share market wants as much of your dollars as possible so you have Listed Property Trusts on the market to give you exposure should you wish to not purchase property directly)

Unlisted (because...actually I'm not sure why you'd look into unlisted property trusts. It seems to be the area where dodgy brothers always set up unsecured mezzanine finance arrangements and milk people of their hard earned dollars, and niave investors get fooled because they think they are investing in bricks and mortar. Maybe I'm biased.)

Residential (my preferred area) - I like this area because with a few simple rules you can generally choose nice assets that return well over time and have simple optimisation strategies behind them.

Commercial (also an area I've dabbled in) - needs specialized knowledge so don't touch it directly unless you know what you are doing.

Property like shares is a cyclical asset. There are periods of time where a property investment will outperform a share investment. When the share market begins to retrace there is a significant portion of investors who flee towards the safety of bricks and mortar. (Increased demand on a limited supply)

Property unlike shares (in Australia at least) doesn't have the same retracement levels that the share market does, except at the high end of the market. IE If you are buying that 3 million dollar penthouse apartment and the market turns on you, expect to get savaged if you try and sell it. It is much more likely that instead of large price retracement in the market, there is a period of price stagnation. There are a couple of simple reasons for this.

Price and liquidity - individual property lots have higher single unit dollar values than shares. As such generally they are much less liquid but also more price stable.

Population growth - has absolutely no direct correlation to the share market. With property there is a direct correlation between population increase and average property prices. 

Population density - right now interest rates are low and dropping, in plenty of places we are seeing that it is cheaper to buy than rent because of this monetary policy of the Reserve Bank. A little while ago, high interest rates and rental rates, encourage populations to move to more affordable areas (generally further away from the main city) which can create localized areas of cyclical property demand.

So as you get this fleeing towards the property market (and the price increases), the Govmint, see that sector of the economy as overheating, (They know from past experience that allowing things to get too hot and heavy makes the inevitable downwards correction that much worse). The recession we had to have anyone?  To combat this overheating they generally increase interest rates (Or in the latest cycle - leave them at their already reasonably high levels) to attempt to slow the economic activity a bit.

So we end up with the situation that Shares looks rubbish (Unless you are a short seller that is), Property looks too expensive (because of high interest rates) and people start to hoard their cash (fixed interest hits it's stride).

Some general rules I use for property..

Always be aware of opportunity in the real estate market. Unlike Shares which has more noticeable cycles, the Property market is a WEAK EFFICIENCY market. It's possible to know something that in shares would be considered insider trading in the share market (such as the proposed construction of a new road or development corridor). Also the depths of recession when interest rates are very low and forced sales are occuring may represent an excellent time to secure property assets at very cheap prices. (Be careful to use your reserves I spoke about in risk management and optimisation to make sure you are protected in this environment).

A Real Estate agent can always find something for you to buy, just like a share broker can always find something for you to buy. It's a rare agent or broker that will tell you to hold off because of the way that commission and their employment works. Realize that most "advisers" have a vested interest in their chosen asset class so especially when you are purchasing a large priced asset - *DO YOUR OWN RESEARCH*.

I've found the most consistent residential  investment properties are those that are average. Average in terms of block size, number of rooms, features etc. Average means that it will be the most suitable house for the average family. Average may not be sexy - but it's consistent over the long term. (Shoot me I find consistency sexy).

As I said property is not my speciality so any property magnates out there who want to expand on this feel free - I'll be moving on to fixed interest now.

Sir O


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## Go Nuke (16 March 2009)

Can someone answer this for me please?

Because of all the buying and selling I did last year, I have become a "trader"

To be honest I cant remember how it affects my tax ..ie my losses reduce my taxable income from wages etc..anyway...

what i want to know is, as a "trader" do I still qualify to only pay 50% tax if I hold a stock for longer than 12months?

I THINK, i basically have to seperate my "trades" from my "investments" when I do my tax.

Any help to understand this would be great.

Thx for your time.

ps, if this question is inappropriate for this thread I apologise and will post it elsewhere.
thx


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## Sir Osisofliver (18 March 2009)

Go Nuke said:


> Can someone answer this for me please?
> 
> Because of all the buying and selling I did last year, I have become a "trader"
> 
> ...




Go Nuke - The internet is your friend

http://www.ato.gov.au/corporate/content.asp?doc=/content/76071.htm

and

http://www.ato.gov.au/individuals/content.asp?doc=/content/36682.htm


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## Sir Osisofliver (18 March 2009)

*Fixed Interest*

I'm covering off against the major stuff here - but remember that the rule that the higher the return the higher the risk applies to fixed interest just as much as any other asset class.

*Bonds* are a debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed*interest rate. Bonds are used by companies, and governments to finance a variety of projects and activities. 
The indebted entity (issuer) issuesa bond that states the interest rate (coupon) that will be paid and when the loaned funds (bond principal) are to be returned (maturity date). Interest on bonds is commonly paid every six months (semi-annually). Two most important features of a bond - credit quality and duration - are the principal determinants of a bond's interest rate.  Credit rating In Australia is carried out by Fitch, Moody’s Investor Services and Standard & Poors.

*Bank Bills *(Or Treasury Bills) are short-term debt obligation backed by the corporate or government issuer, generally with a maturity of less than one year. Bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bill provides the return to the holder. 

*Debentures*  are a type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital.  Debentures have no collateral. Buyers generally purchase debentures based on the belief that the issuer is unlikely to default on the repayment. 

*Term Deposit* is a deposit held at a financial institution with a fixed term. These are generally short-term with maturities ranging anywhere from a month to a few years. When a term deposit is purchased, the lender (the customer) understands that the money can only be withdrawn after the term has ended or by giving a predetermined number of days notice. Term deposits are considered an extremely safe investment and are therefore very appealing to conservative, low-risk investors. By having the money tied up you'll generally get a higher rate with a term deposit compared with a at-call deposit. 


Fixed Interest Strategy.

So cast your mind back a year or so ago... In March 2008 (After the market had *ALREADY HAD SIGNIFICANT FALLS*), the RBA increased the cash rate to 7.25 percent, the highest it had been since *1994*. *Why are they doing this?*

Money is moving away from the share market, and a lot of that money is moving into Property (as I explained last lesson) and in an effort to cool the economy, interest rates are increased. It was *obvious* however that the rate would need to drop to begin stimulating the economy once again.

I'm going to steal a phrase from Tech/A here...

Many see an opportunity
Few know how to take advantage of it
Fewer still actually do something.

So when we have the above situation, with high interest rates and an extremely high probability that those interest rates would begin falling, how do we take advantage of it?

Lets say we have $100,000, that our coupon rate on the bond is 6% and we can borrow for 7.5%, and over the course of a year the interest rate drops to 3.25%, we sell the bond just after 12 months.

Scenario 1
We purchase $100,000 of $100 face value bond paying a yield of 6%
We receive $6,000 in coupon payments over the course of the year.
As the RBA interest rate drops to 3.25% the value of our bond increases (Because it is paying a higher coupon rate than the current rate) so the value of the bond increases to...about $185... we have a capital gain in value of our investment of $85,000.00 and an income of $6,000.

Scenario 2

We purchase $500,000 of $100 face value bond paying a yield of 6%, using $100,000 of our own money and borrowing $400,000 at an interest rate of 7.5% (in this example it's fixed - you want however to use a variable rate)
We receive $30,000 in coupon payments over the course of a year, and pay interest payments of $30,000.
As the RBA interest rate drops to 3.25%, the value of the bond increases to $185... meaning the value of our investment has increased to $925,000. We sell the bond at this point, pay back the borrowings of $400,000 leaving us with a $525,000 capital gain and nil income stream.

Cheers

Sir O


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## skc (18 March 2009)

Sir Osisofliver said:


> Fixed Interest Strategy.
> 
> So cast your mind back a year or so ago... In March 2008 (After the market had *ALREADY HAD SIGNIFICANT FALLS*), the RBA increased the cash rate to 7.25 percent, the highest it had been since *1994*. *Why are they doing this?*
> 
> ...




Just want to add a little bit to the simplified examples above...

- Depending on the maturity terms of the bond, the movement in the capital value of the bond will not nearly as linear as the change in interest rate. The shorter the bond duration, the closer it is to linear. But a 10-year bond will not double in value just because the interest rate is halved.

- There is always the risk that interest rate would rise as well. Back in Jan 2008, people were more worried about inflation, and the next interest rate move was going to be up. Your bond would be fixed at the lower interest rate, and you will either have to sell at a capital loss, or hold until maturity.


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## Sir Osisofliver (18 March 2009)

skc said:


> Just want to add a little bit to the simplified examples above...




Yay someone else is contributing.  Yes they are very simple examples, just to show the principles.



> - There is always the risk that interest rate would rise as well. Back in Jan 2008, people were more worried about inflation, and the next interest rate move was going to be up. Your bond would be fixed at the lower interest rate, and you will either have to sell at a capital loss, or hold until maturity.




Yeah but in January the full impact of the negative effect on our market had not been felt...by March there was a definate sense of how bad this was and the need for the RBA to drop rates (*at some point in the future*).  This is why I normally look at a 3 or 5 year bond when using leveraging, to give myself time for the cash rate to unwind.

Here's where to look for cash rate data.
http://www.rba.gov.au/statistics/cashrate_target.html

Cheers 
Sir O


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## kincella (18 March 2009)

Sir O, that was an excellent observation about property....
the only thing  I would add at this time is....if you have successfully held resi properties, and are experienced, and happy with the returns, and would prefer a little challenge in your life.....
then spend the time doing research on a small commercial property, again its all about location, not the strip shops.....not sure there is much out there for 1 mill or less....
its a great learning curve...and better returns for both income and capital...if you get it right
I did my research, then pin pointed the exact location for my first commercial property venture....I had to wait 5 years for one to come onto the market, 
there have been challenges,,, mainly a problem tenant....but otherwise the returns have enabled me to semi retire much earlier than I ever anticipated


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## Sir Osisofliver (18 March 2009)

kincella said:


> Sir O, that was an excellent observation about property....
> the only thing  I would add at this time is....if you have successfully held resi properties, and are experienced, and happy with the returns, and would prefer a little challenge in your life.....
> then spend the time doing research on a small commercial property, again its all about location, not the strip shops.....not sure there is much out there for 1 mill or less....





Actually Kincella, as I said I've dabbled in Commercial property  - Since it is an area in which I have limited understanding (but understand enough to make a judgement call), I take advice from an old friend who is a commercial property agent. The way that he does business is that he has a group of friends/investors (which includes himself) that set him up with a slush fund of about $100k. He'll look over a bunch of commercial property and vacant land suitable for commercial sites, and if he thinks there is value there will contract an option over the site/building using the slush funds. We then all get together and decide on the viability of the project and if he gets the go ahead will seek out key tenants on the property before purchase. Once key tenant is in place, we exercise the option (and front up the moolah) to purchase the property/make any improvements or building necessary on the project, fill in the remaining blanks with other tenants at higher rates and raise the yield profile of the project and then sell it at a premium.

Done this a few times now and the returns have been fairly impressive. (300%-1000%)  Using a group to purchase means you don't take all the risk and can spread the expense out...gotta *trust* the group though 

Sir O


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## kincella (18 March 2009)

Sir O...trusting the group is the thing...been there done that....in my case found it was more trouble than its worth....I am more interested in say a single retail shop in a good location..eg Chapel st, or the busiest centre in the centre of town....do it on my own....under my control, use all the professional help I need...
done one...and it will be locked away , passed onto the kids....meantime hoping to teach them the tricks...so they benefit from my experience and can use the experience themselves...
on the lookout for another shop...
here is an example of what not to look for....Toorak Rd shopping...
it is strip shop location.....apart from safeway, the banks, the restaurants (one good...the rest mediocre) and the PO...I do not shop there...noticed 3 shops past the PO all vacant...suddenly...
I class those shops as the 'fringe dwellers', expensive items, and targeted to the tourists...or the very few old ladies that keep faith...
not surprised to see them go belly up....most of the shops there have a very limited customer...and when that type of customer goes...so too does the business
chapel st is very different...not a strip, all types of shops there for all types of customers....cheap and expensive..lots of clothing and restaurants...
but probably in trouble if gen Y and gen x stop spending there...I am hoping to snap a bargain there


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## Sir Osisofliver (18 March 2009)

kincella said:


> Sir O...trusting the group is the thing...been there done that....in my case found it was more trouble than its worth....I am more interested in say a single retail shop in a good location..




Well so far I have to say I haven't any problems. The RE guy has good wanker detection skills and the group have all been dealing with him for a decade. They are a nice bunch of guys (and one lady). I just got a look in because I recommended him into some very nice returning stocks. (In one instance his orginal $9,000 investment is worth close to $400 k). He likes me  So he's put this group of high net worth individuals together and we get access to the best deals he does.

A lot of what he's been doing is regional stuff where populations have increased, but infrastructure isn't there yet, he'll go source land in nice locations and sit on the options for a while until he gets what he's after.  After observing what he does I have to say it looks like higher probability of success than metro developments, but he does make it look easy...suppose that is the mark of a craftsman really, making it _look_ easy.

Sir O


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## kincella (18 March 2009)

I pride myself on my 'wanker detection skills'

that probably should be no. 1 on the list for newbies....no matter what you do in life...learn to recognise the 'wankers' out there....

parents taught me the saying....you dont suffer fools gladly


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## Sir Osisofliver (19 March 2009)

OK Newbies...time for another lesson.

what's it going to be..

*Economic Cycles and How to recognise them* or

*Fundamental and Technical Analysis techniques*? (Newbie Version) (I'm thinking that once I get to the end of this I might start a Not so newbie but still learnin' thread - so don't expect any great depth to this topic)

once again First In wins

Sir O


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## superkrusty (19 March 2009)

Please Sir, Can I have some more...

Fundamental and Technical Analysis techniques

Thanks Sir O for your time and effort.


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## Sir Osisofliver (19 March 2009)

OK *Basics of Fundamental and Technical Analysis* it is.

What are we trying to do with fundamental and/or technical analysis? The simple answer to that question is to heighten our probability of a beneficial outcome. We search for "alpha" - an outperformance over the market. That is why we pay fund managers five figure salaries with multi-million dollar bonus  schemes after all - to find a performance level that we ourselves cannot achieve. Otherwise we would simply replicate the market (much as some index funds do).  In that case we don't (or shouldn't) pay the fund manager massive salaries because he's just a monkey pressing the buttons to make sure the index and the fund are the same. My ten year old could do it. 

So we are trying to get a return better than the market. That by this analysis we can somehow achieve a performance greater that simply whacking our money in an index fund and forgetting about it. By doing so both fundamental and technical analysis *go against one of the basic tenets of financial and portfolio management*...*The Efficient Market Hypothesis.
*
EMH - is an investment theory that states it is* impossible* to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, this means that stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments. For a full explanation of EMH go to http://www.investorhome.com/emh.htm

Some quotes about Technical Analysis and EMH for you.
_
 "The central proposition of charting is absolutely false, and investors who follow its precepts will accomplish nothing but increasing substantially the brokerage charges they pay. There has been a remarkable uniformity in the conclusions of studies done on all forms of technical analysis. Not one has consistently outperformed the placebo of a buy-and-hold strategy." (Princeton Professor Burton Malkiel)

"The only thing we know for certain about technical analysis is that it's possible to make a living publishing a newsletter on the subject."
Martin S. Fridson, Investment Illusions 

"Technical analysts are the witch doctors of our business. By deciphering stock price movement patterns and volume changes, these Merlins believe they can forecast the future."
William Gross, Everything You've Heard About Investing is Wrong! 

"Technical analysis is doomed to fail by the statistical fact that stock prices are nearly random; the market's patterns from the past provide no clue about its future. Not surprisingly, studies conducted by academicians at universities like MIT, Chicago, and Stanford dating as far back as the 1960s have found that the technical theories do not beat the market, especially after deducting transaction fees. It is amazing that technical analysis still exists on Wall Street. One cynical view is that technicians generate higher commissions for brokers because they recommend frequent movement in and out of the market."
William A. Sherden, The Fortune Sellers: The Big Business of Selling and Buying Predictions_

Wow them's fighting words for a bunch of academics eh? Mind you I think I just heard Tech/A's heartbeat hit the roof so let me reassure you that EMH *does* have it's critics, me among them, but let me remind you that what we are attempting to achieve through the use of technical and fundamental analysis "alpha" is an elusive and oft misunderstood beast. This is why I firmly believe that if you do not KNOW what you are doing, the search for Alpha will chew you up and spit you out. PRACTICE, PRACTICE PRACTICE and learn from your mistakes now you hear? 

*Technical V Fundamental*

At it’s most basic level, a technical analyst will look at a stock’s *probability of a beneficial outcome* from looking at it’s chart, and a fundamental analyst starts by looking at the company balance sheet. Without a doubt the majority of analysts around the world look at fundamental factors over technical factors. Some do use technical factors, but it's rare to find an analyst who will stake their reputation purely on the technical features of a stock. If you are wondering why that is, perhaps I should direct you towards the quotes above again. Technical Analysis tries to read *emotion* in the marketplace and emotion is one of the most chaotic forces that influence our market. 

*Fundamental Analysis.*
By looking at things like the balance sheet, cash flow statements, income statements or income projections, industry environment, cash burn, and other factors the fundamentalist tries to determine what a companies *value* is. (If you have ever heard of value investing this is what they are talking about – trying to find companies whose value is significantly above the current share-price). So for a fundamentalist if a stock trades below it’s *intrinsic value*, it’s a good investment.  

So how does an analyst determine what is the intrinsic value for a company. If you've ever looked over one of those research notes put out by a major broking house, you can see what sort of metrics or measurements are used by fundamental analysts. Without a doubt the majority of analysts employed by big business use fundamental analysis. Here are some common metrics used. 

P/E (Price to Earnings) Ratio - http://www.investopedia.com/terms/p/price-earningsratio.asp
EPS (Earnings per Share) - http://www.investopedia.com/terms/e/eps.asp
ROE - Return on Equity - http://www.investopedia.com/terms/r/returnonequity.asp
PEG ratio (Price/earnings to Growth) - http://www.investopedia.com/terms/p/pegratio.asp


Of course a fundamentalist is spoilt for choice at present – in the current economic climate just about everything is below it’s intrinsic value. So THIS is the major criticism of fundamental analysis is that it doesn’t take into consideration emotion and subjectivity, and greed and in this case fear are powerful forces in the marketplace. So how do you try and quantify such chaotic forces as human emotion?  Why by using Technical Analysis, which we will cover in part deux.

Cheers

Sir O


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## Sir Osisofliver (20 March 2009)

So I'm going to continue with Fundamental Analysis for a bit and then move into technical analysis. (What's the point of having such a large heading with only a paragraph behind it eh?)

By no means have I used an exhaustive list of metrics that can be calculated for fundamental analysis, there are plenty more out there. A common feature of ALL metrics used in fundamental analysis however is that they are all used for *comparative purposes*. It's important to realize this about fundamental analysis. It's only worthwhile using these metrics if you can compare *apples to apples*. So using P/E ratio on CBA, and comparing it to CBA two years ago...great...apples for apples comparison. Using the P/E ratio for CBA and comparing it to the P/E Ratio for NAN...completely useless and pointless. The object of comparison needs to have a close relationship for the metrics to have any relevance.  

One of the things you may have heard mentioned is the concept of Top Down research or Bottom Up research. Because there are so many comparatives out there for fundamental analysis that can be used how do we get meaningful data out of noise, and how do we decide where to look?  Analysts generally use Top Down and Bottom up approaches.

Top down looks at the macroeconomic picture first and attempts to identify from the prevailing economic conditions which sectors of the market will outperform. From this pespective it will then look at what macro factors each stock within that industry have, eg barriers to entry, intellectual property things that differentiate the stock and make it more attractive to a greater range of investors. (and therefore give us a higher probability of a beneficial outcome)

An example of a top down approach using Fundamental analysis is for example the CBM companies in the energy sector. By looking at the fundamental macro effects we can see why larger international companies are being predatory towards our CBM players at present. They are not her to service the 25 Million people that live in Australia. They are comng here to service the 2 *billion* people that live in Asia over the next ten years.  Macro effects

Bottom up approach  is the analysis you do using the metrics I mentioned above, and include things like what does the balance sheet look like, what forecasts are in place etc etc. It's all about the numbers and how they compare with similar companies and whether those numbers indicate "value".

OK I lied, Technical Analysis will be coming in part three (Son of Tech/A) 

Cheers 

Sir O


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## Sir Osisofliver (23 March 2009)

*Technical Analysis*

OK I'm finding myself with somewhat of a daunting task here. There are a number of different techniques that are used in technical analysis. I don't think there is any way that I can cover off against all of them and compress all of that information into a simple to understand and easy to interpret summary for beginners in a few pages of text (and a few charts if my Market Analyst _ever_ bloody works again - damn MA6 razza frazza). I don't plan to put myself forwards and blow smoke up my own back end to say that I'm an expert of all styles, so what I cover here will be general in nature.  Perhaps when I get to part two (not so newbie lessons) we can have some of the experienced members of this forum put forward the systems and techniques that they use to achieve their aims.

Technical analysis and systems to exploit the results of that analysis with consistent results takes *years* to accomplish - if ever - some people never achieve a consistent system. I've been doing technical analysis for a while now and I'm still learning and will probably do so until they put me in the ground. What may work and be extremely successful for one person may fail abysmally for the next person. (It's a bit like Schrodingers Cat for the stock market - your OWN emotional state can have an effect on the way that you perceive the information you are trying to extract.)

Largely this is because Technical Analysis seeks to quantify emotion in the marketplace, and how one person feels about an issue may be completely different to what someone else believes. Just have a look at the Housing Market threads. https://www.aussiestockforums.com/forums/showthread.php?t=4452

Or the dead cat bounce thread...  https://www.aussiestockforums.com/forums/showthread.php?t=14689&highlight=DCB

Ask a question like "have we bottomed yet?" or "Are Interest Rates going to fall further?" or "Will the American economy stabilize in the next 3,6 or 9 months?" and you'll inevitably find that on the issue you will have rabid and emphatic supporters of the concept who will pull up stats to support their view. You'll ALSO get rabid and emphatic detractors who will say the exact opposite. You'll ALSO get those people who don't have a clue either way and are reactive to whatever the prevailing wind says and the people who believe something somewhere along that range.

With the use of technical analysis you're trying to capture and exploit the aggregate result of all that emotion primarily by the use of patterns and trends and also not have your own emotional bias skew your consistency of getting the probability of a beneficial outcome.


Sorry Newbs - the wife is giving me "the look" and dinner is on the table - I might be back later to continue this.

Sir O


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## Sir Osisofliver (23 March 2009)

The ultimate aim of Technical Analysis is to accurately predict the movement of a share price based solely upon the *price and volume data that has already happened. * 

It's use by many academics in the field of Finance is viewed as dubious and inconclusive at best, and merely a revenue generating exercise for broking houses at worst. The theory of EMH is double edged. If someone finds a consistent and predictable way to use analysis (either technical or fundamental)  the moment that the market becomes widely aware of this methodology, system or indicator, it will be incorporated by the market and the advantage will disappear. So theoretically if you find something...keep it to yourself until you've made your billions.

In all likelihood in my opinion since we are dealing with complex chaotic system analysis, no one will ever find a methodology or indicator that will get it right every time. This is why I talk about *raising your probability of a beneficial outcome*, because we are trying to use imperfect mathematical tools to analyze a complex chaotic system. The best we can hope for is to raise our probability of returns and get it right more often than we get it wrong. If you want to learn more about Chaos Theory there are some interesting articles around if you search for them but most of them will do your head in. (This is also why I use fundamental analysis - to further raise my probability of a beneficial outcome). 

I'm telling you this not because I want to discourage you from using technical analysis but because I want to express how difficult it is to achieve a consistent and profitable system. If someone tells you. "Look it's simple you just need to use a wave analysis Gann, Fibonacci, EW approach, Candlestick with a stochastic oscillator and a MACD, Bollinger Bands, and look for H&S, Double Tops, Resistance Levels, Flags, Pennants, Triangles, and Dodecahedons (that last one is a joke BTW) - they are full of it. By all means examine what others use to achieve success, by all means create a system based upon what others have done and see if you can make it work for yourself, if you find something that works - use it. If you can't make it work....discard it and move on and their is no substitute for experience.

Now for some good news... There are some who are so successful that they have amassed huge fortunes from the use of technical analysis. These people like Larry Hite and Ed Seykota, William Eckhart, John W Henry, Victor Sperando and George Lane (He's the guy who coined the phrase "the trend is your friend") by their very consistency and success indicate that it is possible  to use technical analysis with great efficiency. By their very existence and track records they challenge the theory of EMH.

Ok next episode I'll actually begin discussing and giving examples on how to use some individual tools (If my MA6 is working by then and I can whack a chart up here).

Cheers

Sir O


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## prawn_86 (24 March 2009)

Fantastic stuff yet again Sir O, keep up the good work


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## Sir Osisofliver (25 March 2009)

Hi All,

Just a quick note - I'll be snowed under over the next couple of days.  Don't expect any updates till next month.

Sir O


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## Holy Roly (30 March 2009)

Sir O....

Where do you download your data from?

How much does it cost, if at all?

What software do you use to run the data through?

and, more personally...

Are you amassing anything close to a fortune?


Note: just trying to buy into TA trading, but still not convinced!


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## Sir Osisofliver (30 March 2009)

Holy Roly said:


> Sir O....
> 
> Where do you download your data from?



 Fundamental or technical?  Market data is Paritech 







> How much does it cost, if at all?



 I don't pay for it (the firm does)







> What software do you use to run the data through?



 Market Analyst software







> and, more personally...
> 
> Are you amassing anything close to a fortune?



 I don't yet have a solid gold toilet seat or a private jet 







> Note: just trying to buy into TA trading, but still not convinced!




Holy Roly  How are your math skills? - This is a newbie thread so I won't go into huge amounts of detail here. You can see above what a large number of people still think about the use of technical analysis.  That TA is all so much BS and fundamentals are everything.  When I went through University, the same tired old concepts of fundamental analysis were taught to me (and they still are), all based upon random walks and probability analysis.   You may even see that Standard Deviations are still used to describe the probability of events within a marketplace and lets not forget the good old Bell curve style of probability analysis. All this type of analysis is based upon "pure" probability analysis. IE Toss a coin 100 times and pure probability says that it will land 50 times heads up and 50 times tails up. 

Totally random results, no interconnectedness. But does it actually describe what happens in the market? Care to guess what the probability is that our market will drop 25% overnight like '87? It's about 10 to the power of 50. That's a lot of zero's eh? That's the sort of number that gets used to describe the number of planetary bodies in the galaxy. So much for totally random with no interconnectedness eh? So Pure probability and random walks understate the risks and cyclical nature of markets.

Why does it get used then? It's a tool that is "good enough" about 85% of the time. So during that 85% they get to make hay while the sun shines, and during the 15% where the market tanks? They get to blame things like black swans and say they couldn't see it coming.

This is why I discuss chaotic systems analysis, because it's a better model for prediction of outlying probabilistic events on bell curves and *increasing your probability of a beneficial outcome.* If you want to learn more about chaotic systems analysis, go read "The (Mis)behaviour of Markets" by Benoit Mandelbrot. It's an interesting read and not too technical.

Cheers

Sir O


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## Sir Osisofliver (7 April 2009)

A bit on technical analysis.

OK so I'm going to talk about the types of Technical Analysis that I employ and the reasons why.  Fair warning - this may challenge some of you who are using tools different to myself.  I'm going to say what I use and WHY I use it - and I do so relatively successfully. But to be fair - my way works for me.  It's not going to work for everyone. My advice to anyone trying technical analysis is to try ALL styles - abandon those that do not work for you and hone your skills in those that do.

Ok so if you look in the post above you can see what I think of traditional risk evaluation methods. I don't really mind that almost every analyst and advisor out there is trained in classical methods.  It gives me an edge over them that I have exploited for my own benefit time and time again. I don't get it right all the time, but I get it right a much larger percentage than I get it wrong. If you disagree with what I am about to say - please engage - I ALWAYS like challenges to my methodology - it makes me better at what I love to do.  

So lets think about risk... It's a really cool question to consider...how do we measure risk? You look at a ahcart and it goes up and down and as a pattern seeking animal with wish fulfillment you start a game where you go...if I bought here and sold here...... and then try an think about the risk involved.  If you are a firey french mathmatician you use variance and standard deviation as a proxy for risk. Standard deviation is the mathmatical base behind a very large number of finance tools, both fundamental *and* technical. These have been honed and built upon over a large period of time and given rise to Nobel prize-winning concepts like the Efficient Market Hypothesis, Capital Asset Pricing Model and Modern Portfolio Theory among others. (by the way if you are curious and want a chuckle - and also learn something that they won't tell you about Harry Markowitz - go research what happened when Markowitz decided to try reality rather than academia - you'll need to search for it as embarrassig black marks when you are the Father of Modern Portfolio Theory get obscured but it makes for very interesting reading).  

It's these tools that you or I as investors try and tease alpha out of the market. I don't know how to slot a picture in right here, but below there will be a picture of a bell curve, with standard deviations marked. This is how a very large percentage of the worlds brokers, planners, fund managers and analysts measure risk - on an individual stock - or across a portfolio. 

Once again this is my opinion - but standard deviation as a measure of risk IS BROKEN.  How can I say that?  What's the odds and standard deviation that a market (and hence a portfolio) will lose 29% of it's value in a single day? The answer is in the above post 1:10 to the power of 50 or over 20 standard deviations. Look at that bell curve...where is 20 standard deviations?  It's about three pages to the left of where that chart ends. It's so far outside of the bell curve that* it should never have happend if the bell curve was an accurate assessment of risk.*  Bah! the '87 crash was an anomoly I hear you say? Ok exclude it. What's the math behind a simple 7% movement of the market? Standard deviation tells us that it should happen very very rarely. (sorry I don't have the numbers handy) In reality it happens about 1500 times more frequently than the theory suggests. (I'll also say that figure comes from my imperfect memory - I can't be arsed to dig up the figure - either trust me that the statistical frequency of outlying probabilistic events in the market are much more frequent than the theory behind it suggests by a huge margin - or research it yourself).

What's the purpose of this little rant?  To get you to look at what tools you use and figure out which ones are based on faulty math. Go look up your favourite indicators - Do you use a Bollinger Band? (which incorporates a simple moving average with a standard deviation) - How about a MACD? Stochastic Oscillator? How about a Relative Strength Index? these a just a few of the many many indicators with Standard Deviation and variance at their core.  Why do these things still get used if they are broken?  Because they are right around 85% of the time *[the inner part of the bell curve] *(which you can still make money from with proper risk management in place). By all means use these indicators - but I've found that having an awareness of their limitations and understanding the math behind them is invaluable.

Sorry guys - this is taking longer than I thought - the mystery of what I use will need to wait for another day - too much to do.

Cheers 

Sir O


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## Sir Osisofliver (7 April 2009)

hopefully the picture is attached now (I can't tell)

If It isn't http://en.wikipedia.org/wiki/Standard_deviation


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## prawn_86 (7 April 2009)

Yeh, we have been taught standard normal distributions at uni. It sucks, cause i have to know it and use it for assignments, despite the fact that it is just utter cr@p in my opinion.

Academia is always behind the curve (pun intended  ) anyway


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## Sir Osisofliver (7 April 2009)

prawn_86 said:


> Yeh, we have been taught standard normal distributions at uni. It sucks, cause i have to know it and use it for assignments, despite the fact that it is just utter cr@p in my opinion.
> 
> Academia is always behind the curve (pun intended  ) anyway




Prawn - less than five years ago I was doing post grad stuff on advanced portfolio management (the stuff you do to become a fund manager) - and this stuff was being held up as the be all and end of of risk assessment..  The uncomfortable fact for academics in this field however is....

If you take it away....what do you replace it with? How do you measure risk without variance and standard deviation?

Until a better theory *rises to provable prominance* the old theory will be defended. Some people will look at what I have said here and say.."That Sir O! what a freaking cheeky sod, Markowitz won the Nobel prize for economics, where's Sir O's Nobel prize eh? Yeah he's just talking rubbish and taking pot shots with nothing to substantiate what he's said but anomolies in the data stream. It works 85% of the time!!  (Of course I view this behaviour as running around in circles shouting the earth is flat - maybe that is just me.)

Cheers

Sir O


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## beamstas (7 April 2009)

Thought i'd offer some advise here as no one else is



Holy Roly said:


> Where do you download your data from?




Premium Data. Premiumdata.net. You really get what you pay for when buying data, if you want free data it will normally be crap. Premiumdata is EOD data only but you can get intra day snapshots for about 20cents extra a day. 



Holy Roly said:


> How much does it cost, if at all?




$30 per month + $5.50 per month extra for intra day snapshots. That is asx only data, they have a pricing table take a look at premiumdata.net. 



Holy Roly said:


> What software do you use to run the data through?




Amibroker. That is imo the best for someone getting a "feel" for using Software. It has everything you'll need to get started, including pretty good graphing capabilities, backtesting (testing systems automatically from historical data), and pretty much everything else you'll ever need



Holy Roly said:


> Note: just trying to buy into TA trading, but still not convinced!




There is a big difference between T/A and Fundamentals, it's like choosing between Ford & Holden  Personally i use T/A as i do not believe fundamentals to be accurate. You'll have to make your own call on this!


Both Amibroker and Premiumdata offer free trials so you can determine if they are what you want

Brad


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## Bat_Ears (17 April 2009)

Thanks for posting this Sir O. I am looking forward to the next entry.


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## Gordon Gekko (17 April 2009)

Bat_Ears said:


> Thanks for posting this Sir O. I am looking forward to the next entry.




Once again thanks for all the great info! I'm hoping a future lesson will involve options!
I would like to learn how to protect my investments without having to sell them directly. Or have the option to buy.

Best

G


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## MRC & Co (17 April 2009)

Gordon Gekko said:


> Once again thanks for all the great info! I'm hoping a future lesson will involve options!
> I would like to learn how to protect my investments without having to sell them directly. Or have the option to buy.
> 
> Best
> ...




WayneL had a great blog on options, you won't get any better than it (no offence Sir O)!


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## Gordon Gekko (17 April 2009)

MRC & Co said:


> WayneL had a great blog on options, you won't get any better than it (no offence Sir O)!




Thanks for that MRC,

How do I find it here on the sight?
I tried to search for options but it was to broad? Maybe search for WayneL posts?

Thanks and all the best

G


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## MRC & Co (17 April 2009)

Gordon Gekko said:


> Thanks for that MRC,
> 
> How do I find it here on the sight?
> I tried to search for options but it was to broad? Maybe search for WayneL posts?
> ...




Yep, threads created by Wayne L and options as a keyword.

Also, go to his profile page, he used to have a link down the bottom to his own actual blog on options, it's a step by step introduction and guide to options.  

A few others around here, such as Sails, Mazza and Magdoran (probably missed a few, sorry), are skilled in the area also, so will happily answer any of your questions.

Just takes a while to get your head around the concepts, but after that, it's not overly complicated unless you are going to use them as your main instrument, then you would want to be extremelly proficient, which would take years.  

Good luck.


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## Gordon Gekko (17 April 2009)

MRC & Co said:


> Yep, threads created by Wayne L and options as a keyword.
> 
> Also, go to his profile page, he used to have a link down the bottom to his own actual blog on options, it's a step by step introduction and guide to options.
> 
> ...



Ive just been reading his posts! Thanks again.

Seems I've had a bit to much wine to take it in at the moment so I'll have a look tomorrow.

Thanks again

G


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## MRC & Co (17 April 2009)

No problemos Gordon.

Wine, mmmm, might pop a bottle myself!


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## tech/a (18 April 2009)

> Once again this is my opinion - but standard deviation as a measure of risk IS BROKEN. How can I say that? What's the odds and standard deviation that a market (and hence a portfolio) will lose 29% of it's value in a single day? The answer is in the above post 1:10 to the power of 50 or over 20 standard deviations. Look at that bell curve...where is 20 standard deviations? It's about three pages to the left of where that chart ends. It's so far outside of the bell curve that it should never have happend if the bell curve was an accurate assessment of risk. Bah! the '87 crash was an anomoly I hear you say? Ok exclude it. What's the math behind a simple 7% movement of the market? Standard deviation tells us that it should happen very very rarely. (sorry I don't have the numbers handy) In reality it happens about 1500 times more frequently than the theory suggests. (I'll also say that figure comes from my imperfect memory - I can't be arsed to dig up the figure - either trust me that the statistical frequency of outlying probabilistic events in the market are much more frequent than the theory behind it suggests by a huge margin - or research it yourself).




And in your view which form of analysis or indeed investment mitigates this outlier risk factor?


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## johenmo (18 April 2009)

Sir Osisofliver said:


> Nowadays it's all much more advanced. The paper system has been replaced with CHESS (Clearing House Electronic Subregister System) and transactions are handled electronically, no physical delivery of stock certificates needs to occur, the buyer and seller are represented by merely an order in a computer system.
> 
> SRN - Stands for Security Holder Reference Number and is a unique 10 digit number that starts with an I - (yes I know on your statements it looks like a 1 - trust me - it's an I) to designate an ISSUER Sponsored Security. EG I0001428793. If you have issuer sponsored stock it means your stock is not sponsored by a broker and is held on the ISSUER Sponsored Subregister. For each stock you have - you will have a different SRN.
> 
> ...




Great thread sir O.  This is yr post #43.  I understand the above.  What happens if you use a broker like IB or trade in US shares?  CHESS doesn't apply.  How does that work?

Tks


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## Uncertain Times (20 April 2009)

Great post.

Further discussion on FA and TA would be great to read. The way I see it is that as long as the information is correct and you believe the accountant telling the story FA is the way to go. However it has its limitations as has been proven in the last twelve months with profit downgrades, profit warnings, assets overvalued, misleading or hidden numbers. I realise that annual reports are signed off by CPA's but things can be hidden.
TA seems like watching the baccarat players at the casino using their scorecard to follow the run or betting against it. You will have good days and bad days but the only people making money consistently will be your broker. Just like the casino taking 5% or just betting against you.

I realise I am very much a newbie to all of this but at the moment the balance as always seems to be somewhere in the middle. You need to be able to understand the FA and follow the TA to make money or stop you from losing to much.


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## Julia (20 April 2009)

Uncertain Times said:


> Great post.
> 
> Further discussion on FA and TA would be great to read. The way I see it is that as long as the information is correct and you believe the accountant telling the story FA is the way to go.



Might be good not to limit yourself to such a conclusion just yet.

A company can have a great fundamentals and still not appeal to market sentiment.  Market sentiment is what will make the share price rise or fall.

In another thread Tyson suggests that BBI 's savaging has probably been at least in part because of the negative sentiment of Babcock and Brown Ltd.
Undoubtedly true.  He also points out that BBI still has some good assets.  True also.  But as long as there is a widespread belief that BBI is a dog, its share price will reflect that.


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## Mr J (20 April 2009)

Uncertain Times said:


> Great post.
> TA seems like watching the baccarat players at the casino using their scorecard to follow the run or betting against it. You will have good days and bad days but the only people making money consistently will be your broker. Just like the casino taking 5% or just betting against you.
> 
> I realise I am very much a newbie to all of this but at the moment the balance as always seems to be somewhere in the middle. You need to be able to understand the FA and follow the TA to make money or stop you from losing to much.




People who write off TA don't understand its use. Economists are generally not traders, so take their opinions on trading with a grain of salt. It's argued by many that TA is simply the flawed idea of studying the past and using it to try and predict the future. The problem with the criticism there is that history does repeat itself. Human behaviour is largely predictable and forms patterns. Technical analysis is the study of the behaviour of price. The price doesn't move at random, it moves for a reason, and a chart basically tells a story. As capturing movement in price is how a trader profits, knowing how and why the price moves is quite important.

One common criticism of technical analysis is the hypothesis of the efficient market. This is a load of rubbish, as everyone is doing their own thing in the market. Many different actions are being taken for many different reasons, causing the price to fluctuate. The value of a company surely doesn't fluctuate so precisely and quickly, so the logical conclusion is that all of this shorterm movement is noise, and therefore inefficient.



> Technical analysis and systems to exploit the results of that analysis with consistent results takes years to accomplish




I don't believe so. I believe it's reasonably simple, and a matter of just getting your mind in tune with it. The time taken to have competent knowledge will vary greatly, but the same goes for any activity. The most pure technicians also don't use systems, they use price action alone, and this is highly discretionary.



> The ultimate aim of Technical Analysis is to accurately predict the movement of a share price based solely upon the price and volume data that has already happened.




There can be no informed prediction (predicting probabilities of the outcome, not the outcome itself) if there is no knowledge of the past. The past must be studied to identify relationships that are significant.



> If someone finds a consistent and predictable way to use analysis (either technical or fundamental) the moment that the market becomes widely aware of this methodology, system or indicator, it will be incorporated by the market and the advantage will disappear.




I don't believe that is true. The market uses many different ways to aim to profit, and many discard and ignore many of those methods. Many participants will not consider a certain strategy because it is not logical to them. 

Also consider that action takes place on many different timescales and different timescales need moves of various sizes. The larger the participant, the larger the move they need and the greater their inefficiency. A move and timeframe that isn't worthwhile for one can be worthwhile for another. Much of the market isn't competing against each other, but competing against a very specific group in that market. For example, as a small independent trader I will never be threatened by institutions. I can make a great living off of the crumbs they leave on the table.

It will also not certainly be incorporated into the market and disappear. Many methods, often the most simple, have existed and been profitable for decades.



> In all likelihood in my opinion since we are dealing with complex chaotic system analysis, no one will ever find a methodology or indicator that will get it right every time.




It's both simple and chaotic, it's just a matter of perspective. We're not trying to be right every time, we're just looking for methodology that works over time.



> not because I want to discourage you from using technical analysis but because I want to express how difficult it is to achieve a consistent and profitable system




Like any other activity, people learn at different rates and have varying levels of success. It may be tough for some, but easy for others. It's a matter of perspective.


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## Uncertain Times (20 April 2009)

Julia - I think you missed my "however". There are limitations to just focusing on the FA that being do you actually trust what is being said by the company and that is where market sentiment comes into it. If the story teller is leading people on sooner or later it will be discovered and then the TA will show that in that sellers are exiting.
--
The thing I am trying to understand is what limitations does either side have so that I can be more aware of what to look out for. My casino example is not a great one and perhaps was a little simplistic in view. Yet when I read about all the different charting methods and the "names" that different patterns create I am reminded of the baccarat players who have done nothing but fill Crown's coffers over the years.
--


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## Mr J (20 April 2009)

Forget the name, the fact that is a pattern etc. Think "why does this formation develop?". Life consists of routine, and the market is no different. Patterns don't always work, they're really just a signal of what may be happening. Also consider that we have to pick points, that humans as a whole think alike, that we like reasoning and order. Much of this is self-fulfilling, but that doesn't make it any less true.

Patterns shouldn't be blindly traded and I don't pay much attention to them at all. You really need to understand why that pattern/action may be occuring.

As for the casino analogy, games in casino's are independent events (except for card counting with decent penetration, but that's an exception). One hand/spin doesn't impact another, so the patterns are quite pointless. However, all movements are connected in a market. Trades are made for many different reasons, but they're all connected as they participate in the same market.

Technical analysis (I don't like that term) is simply the study of price movement. Since trades are placed with reason (no matter how poor the reasoning), movement cannot be random. It can seem random, but it is not.


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## Sir Osisofliver (20 April 2009)

Hi All - I had this nice long reply written...and then my computer crashed. Here it is in brief..

1) I've got three months worth of work to do in four weeks...don't expect new lessons until I get more than four hours sleep a night.
2) Tech/A - I don't think anyone has cracked it yet - I like some of the work I've seen from Mandlebrot on this issue but think that it needs experience and an awareness of cycles in our market to protect against these events.
3)Johnemo - It varies - check ASX worldlink and with your broker as to what the arrangements are.
4) Mr J - I don't believe in EMH either - but I'm not quite ready to label the work of Nobel Prize winning Academics as "a load of rubbish" and felt that the newbs should know about it.  After all it does work *most* of the time, just not ALL of the time. As for the pace of learning, my experience tells me that MOST people find this sort of stuff daunting and confusing - maybe you're just smarter than the average bear.

Feel free to talk amongst yourselves for now class..and no throwing paper planes whilst I'm gone.

Cheers

Sir O


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## kincella (20 April 2009)

my 2 cents worth to newbies.. 

read these 3 books....in this order
*first   *'A fortunate life' by A.B. Facey..

*2nd*    'the 7 habits of highly effective people' by stephen covey,
3rd   '36 strategies of the chinese for financial traders'....by darryl guppy..............................................................................
Born in 1894, Facey lived the rough frontier life of a sheep farmer, survived the gore of Gallipoli, raised a family through the Depression and spent sixty years with his beloved wife, Evelyn. Despite enduring hardships we can barely imagine today, Facey always saw his life as a 'fortunate' one. 
......................................................................................


http://shop.abc.net.au/browse/product.asp?productid=513141


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## Mr J (20 April 2009)

> I don't believe in EMH either - but I'm not quite ready to label the work of Nobel Prize winning Academics as "a load of rubbish" and felt that the newbs should know about it.




It's a blunt and arrogant statement coming from a wannabe trader, but I don't consider it any more so than an economist stating that the markets are perfectly efficient. Anyone who suggests that cannot possibly be familiar with the market, and the logic is just absurd. Even intelligent people can be foolish, so I don't have any trouble challenging the opinion of someone who would be held in much higher regard than myself .



> As for the pace of learning, my experience tells me that MOST people find this sort of stuff daunting and confusing - maybe you're just smarter than the average bear.




Sure, but I think it's more about frame of mind than the "knowledge". It's easy to learn, but it's hard to change how one thinks. I believe trading and similar activities are suited to a certain thought-process that is usually only gained with experience. As for me, I might be being defensive since I've had top become a profitable trader within a month or two, and I'd like to believe I have and that it won't actually take six months or a few years .


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## Sir Osisofliver (21 April 2009)

Mr J said:


> It's a blunt and arrogant statement coming from a wannabe trader, but I don't consider it any more so than an economist stating that the markets are perfectly efficient. Anyone who suggests that cannot possibly be familiar with the market, and the logic is just absurd. Even intelligent people can be foolish, so I don't have any trouble challenging the opinion of someone who would be held in much higher regard than myself .




But the academics don't say '*perfectly efficient*" - they say weak or strong efficiencies.  Shades of grey - with some perceived perfectly efficient market up one end, and a perceived highly inefficient market at the other end with reality falling somewhere in between in weak or strong forms. 

During outlying probabilistic events (EG market corrections) EMH tends to be less meaningful because all stocks exhibit some degree of correlation with each other (even if they normally would not) due primarily to market sentiment and other factors affecting the market as a whole. Despite this weakness (which as I've said before is due to the incorrect use of Variance and Standard Deviation as a proxy for risk) the central lessons of EMH and modern portfolio theory - that we diversify a portfolio to lower the overall risk, that we use borrowings to increase our level of return etc etc still hold up as activities that are beneficial - especially during times that are NOT outlying probabilistic events. Remember it does work - most of the time - which is why it's still taught and used widely in the industry. 







> Sure, but I think it's more about frame of mind than the "knowledge". It's easy to learn, but it's hard to change how one thinks. I believe trading and similar activities are suited to a certain thought-process that is usually only gained with experience. As for me, I might be being defensive since I've had top become a profitable trader within a month or two, and I'd like to believe I have and that it won't actually take six months or a few years .




You've only been trading for two months? Um okay well I don't want to sound patronising but I don't think a couple of months counts as "Consistant" yet. I've been investing and trading for a while now...and I'm still learning - I don't think I'll ever be done.

Cheers

Sir O


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## Basilica (23 April 2009)

Sir Osisofliver said:


> Risk Management Techniques and Optimisation. (Part 1)
> 
> I'm going to try and keep this pretty simplistic - This IS a newbie thread after all.
> 
> ...




Hi Sir O, You should be knighted for your contribution to newbees like me.
Then we could call you Sir Sir O 

It is going back a few pages but i think i have lost the plot.
Customer A provides $1 million security to borrow $100,000
Lets say Customer B and C borrow $406,000 each with no security. (the $812,000)
If Customer B and C default the security Customer A provided will not help the bank???? Or does that mean if the liquidator takes over Customer A will loose the full $1 million security? 

Cheers,
Basilica


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## Sir Osisofliver (23 April 2009)

Basilica said:


> Hi Sir O, You should be knighted for your contribution to newbees like me.
> Then we could call you Sir Sir O
> 
> It is going back a few pages but i think i have lost the plot.
> Customer A provides $1 million security to borrow $100,000



Yup with you so far


> Lets say Customer B and C borrow $406,000 each with no security. (the $812,000)



 Whoa stop there...which bank lends out $812,000 with no security?  Ok aside from American Banks to unemployed people to buy houses and inflate the propery market...causing economic downturns, credit crisis and toxic debt? Ahem - anyhow there are very few banks that will lend money out unsecured, if they do lend it unsecured it's generally it's done via credit cards where they get extremely high interest rates.


> If Customer B and C default the security Customer A provided will not help the bank???? Or does that mean if the liquidator takes over Customer A will loose the full $1 million security?
> 
> Cheers,
> Basilica




Banks also have more than 3 customers, so it's only when a AGGREGATE level of customers default on their loans that banks get into trouble. They have this slush fund that they use to cover shortfalls in the interum.

Hope that ends your confusion.

Cheers

Sir O


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## Basilica (23 April 2009)

Sir Osisofliver said:


> Yup with you so far
> Whoa stop there...which bank lends out $812,000 with no security?  Ok aside from American Banks to unemployed people to buy houses and inflate the propery market...causing economic downturns, credit crisis and toxic debt? Ahem - anyhow there are very few banks that will lend money out unsecured, if they do lend it unsecured it's generally it's done via credit cards where they get extremely high interest rates.
> 
> 
> ...




Yes that does help. So the bank can only ever use the million security for the 100k loan. Would a liquidator have access to the full million in a wind up of the company?

Cheers


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## Kez180 (24 April 2009)

Basilica said:


> Yes that does help. So the bank can only ever use the million security for the 100k loan. Would a liquidator have access to the full million in a wind up of the company?
> 
> Cheers




The bank can only take the $1mill security property if the $100,000 loan is defaulted on....

EDIT: and even then in Australia they have to give $900,000 back...

Not so in the UK and USA....

EDIT EDIT: Sorry for jumping in Sir O!


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## Mr J (24 April 2009)

Sir Osisofliver:

Efficiency is subjective anyway. It can be measured, but as always it's a matter of perspective. An academic might label a market as quite efficient, while a shorterm trader might see as inefficient. The participants obviously make the market, but they are also what makes a market more efficient. I think how efficient a market is viewed will often depend on the timeframe of the participant. Shorterm traders will probably view it as far more inefficient than investors or academics.

Excuse the quote from wikipedia:



> The efficient-market hypothesis states that it is impossible to consistently outperform the market by using any information that the market already knows, except through luck. Information or news in the EMH is defined as anything that may affect prices that is unknowable in the present and thus appears randomly in the future.




That was my general understanding of the efficient market hypothesis, and I viewed it as the suggestion of academics that participants are basically flipping coins.



> You've only been trading for two months? Um okay well I don't want to sound patronising but I don't think a couple of months counts as "Consistant" yet. I've been investing and trading for a while now...and I'm still learning - I don't think I'll ever be done.




When someone says they don't want to sound xxxx, it means they're about to sound just that :. I never said I was consistent, I just stated that I wanted to be profitable within two months. However, I will say that I'm consistent, in terms of applying my methodology, and that I feel I've achieved my goal of being profitable. The latter is just my opinion, as whether I'm profitable or not is obviously an unknown. 

After going through this process several times (card counting, sportsbetting and poker), I do have reasonable experience in being able to gauge roughly where I am. In my experience, it doesn't take much to become profitable. It's just the first step of many on the path to becoming skillful.

In summary, I have no disillusions on where I currently am in terms of skill.


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## Uncertain Times (25 April 2009)

SirO,

When flicking throught the annual report looking at FA which section do you always look at first? I realise that possibly you study many things before coming to a conclusion but I am just curious as to which number interests you the most?
The reason that I ask is that cash may decrease to pay a dividend so the dividend is not always the best indicator. They may have also increased borrowings to pay dividend.
Cheers.


----------



## AllTheWay (26 April 2009)

I'm reading this with great interest and am esp keen to learn how to use the different technical indicators ie how to read and interprete them. There are so many indicators out there ie momentum, oscillating etc etc I feel I can't quite see the wood for the trees. Which ones are the most widely used and are fairly easy to understand. Are there are blogs where traders are willing to share their recent trade and share their thoughts as to what was the reason why they decided to enter the trade and then why they exited. 

For eg there's some recent trades:
21/04/2009	B	NWH	 5,000 	0.655
23/04/2009	S	NWH	 5,000 	0.715 they are now below the 15days SMA but still showing a little uptrend and much higher than what I sold for. I'm still a little hesitant to go back in.


I bought becoz stocks like AAX,ALS,BKN were moving up strongly but when I saw those same stocks trending down in the last week, I got cold feet and decided to get out quick. 

The same reasoning went for IIF in the A-Reit sector.
19/03/2009	B	IIF	 10,000 	0.165
19/03/2009	B	IIF	 10,000 	0.175	this was a mistake. I hit buy instead of sell which I was going to put in Sell 4 19.5c!!
23/04/2009	S	IIF	 20,000 	0.18	it went to 21c on 8 Apr, I was too greedy, didn't take a profit and when the price started to fall, I thought stuff this, I got to get out.


With AWC, I thought the price was trading above the SMA 15days but after I bought they annouced poor results, so I thought it was time to get out. 
7/04/2009	B	AWC	 2,500 	1.475
14/04/2009	S	AWC	 2,500 	1.485


Should I be using a few more indicators, wait a few more days, or maybe pick better trending stocks? I got a feeling I'm rather haphazard in my approach.



Hoping some out there are willing to bare their trading souls/thoughts.


----------



## Mr J (26 April 2009)

Volume and stochastics are probably the most widely used. I know MACD, CCI and RSI or whatever are popular. There's no rule that says you need indicators. I don't use them as they don't suit my trading style, and most indicators are lagging and formed from price action, so it's better to just get it from the price action directly. Experiment, see what seems to work for you.



> share their thoughts as to what was the reason why they decided to enter the trade and then why they exited




I enter because I believe I've identified a pivot. I exit because I believe I've identified the next pivot. Repeat . Not much more to it. Just identifying pivots and riding that move, provided there seems to be enough potential profit in it. That's what I do and it seems to work for me. Many others will do things differently.


----------



## Sir Osisofliver (27 April 2009)

Mr J said:


> Sir Osisofliver:
> 
> Efficiency is subjective anyway. It can be measured, but as always it's a matter of perspective.




True.  You may also hear the excuse that it's merely because they lack enough infomration and have to make guesses, just like a meteorologist predicting the weather.  If they had enough data they could accurately predict the weather all the time.



> An academic might label a market as quite efficient, while a shorterm trader might see as inefficient. The participants obviously make the market, but they are also what makes a market more efficient. I think how efficient a market is viewed will often depend on the timeframe of the participant. Shorterm traders will probably view it as far more inefficient than investors or academics.
> 
> 
> When someone says they don't want to sound xxxx, it means they're about to sound just that :.




I know, but it's still valid.  I don't want to discourage a newbie or sound patronising in this thread, I'm sure however that you'll look back in a couple of years and marvel at your new knowledge.



> SirO,
> 
> When flicking throught the annual report looking at FA which section do you always look at first? I realise that possibly you study many things before coming to a conclusion but I am just curious as to which number interests you the most?
> The reason that I ask is that cash may decrease to pay a dividend so the dividend is not always the best indicator. They may have also increased borrowings to pay dividend.
> Cheers.



I must admit I don't spend a lot of time reading Annual Reports. It also depends on whether I am investing long-term, or looking at a trading position as to whether I will bother looking at a stock in that level of detail. Going through annual reports is time consuming and boring. I'd reserve that for looking at a stock I'd intend to hold for 5+ years. 

That stock I would purchase ideally at the bottom of the economic cycle whilst many investors are running around like chickens with their heads cut off screaming the sky is falling, and it would be within the ASX 200 index (or more likely the ASX 100). With a minimum 10 year history I can look back on, because I want to see the robustness of their business model and consistency of their cash flows. The first thing I would do however is make sure that the share price consistantly matches or outperforms the ASX200 Index over that period of time.   So In effect I use price data (simple technical analysis) to filter what I'm going to spend time on doing fundamental analysis.

Anything that is in a trading position I'll be looking at Dividend and price data, might do a PEG ratio or two, but mainly be looking at the technical factors of the stock to massage my entry and exit.

Cheers

Sir O


----------



## Ashsaege (28 May 2009)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



Sir Osisofliver said:


> *Chapter 2 - How to manage your bank manager... secrets from the inside.*​
> This is gonna sound a little like bank bashing - and there is a reason for that. Simply put...when you go and see your bank manager does he have *YOUR* best interest at the front of his mind or *THE BANKS'* best interest?  We know the answer to that one it's the Banks best interest - otherwise your bank manager is out of a job. Yet the bank manager as an employee of the bank will do his or her best to appear to be your best friend and trusted banking professional who saves you money.
> 
> So when your bank manager appears all friendly and uses sales techniques against you - just remember - he or she works for the bank - not for you.
> ...




Sounds brilliant, but you still maybe better off paying your loan monthly.
The *Time Value of Money* concept needs to be taken into account - $100 now is worth more than $100 in the future.
In order to fully analyse the financial merit of one repayment scheme versus another, you really need to know what 'alternative uses' are available for your funds.
What opportunity do you lose by undertaking a particular course of action?


----------



## MrBurns (28 May 2009)

Sir Osisofliver said:


> Out of 100 people aged 15 today, by the age of 65
> 
> 38 will be deceased
> 38 will be living in poverty
> ...




Where did you get these figures from ?


----------



## Semillon (28 May 2009)

This thread is full of gold, thank you Sir O.

I would be very interested to hear your thoughts on long term investing, specifically potential dividend return vs potential capital growth.

I understand that your typical self funded retiree is more interested in the former since obviously they want an (somewhat?) reliable income to live on, however does that mean that the latter is inherently better for somebody who has a full time job?

My guess is that the situation is really not black and white and both should be taken into consideration by everyone, but perhaps the weightings will be skewed based on your circumstances and objectives...


----------



## Sir Osisofliver (28 May 2009)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



Ashsaege said:


> Sounds brilliant, but you still maybe better off paying your loan monthly.
> The *Time Value of Money* concept needs to be taken into account - $100 now is worth more than $100 in the future.
> In order to fully analyse the financial merit of one repayment scheme versus another, you really need to know what 'alternative uses' are available for your funds.
> What opportunity do you lose by undertaking a particular course of action?




Ahh but it's even more complex than you think Ashaege. Because that opportunity cost you are talking about is also dependent upon what interest rates are doing. So tell me Ash, which is better, paying a larger amount of your mortgage now when rates are low, or paying a larger amount of your mortgage in the future when rates are higher?

Most mortgages at present are running between 5 and 6 percent depending upon whether you choose to fix your loan or not.  The long term average however for loans runs closer to 9%, and there is a reasonable probability that we will return to this higher rate (and even exceed it over a thirty year period). When you start bringing this variable into the "opportunity cost" of paying off your mortgage sooner it can make things a) complex and b) pretty subjective.  I could say I expect home lender rates will return to 9% within 3 years and provide reasons, whilst someone else says it will stay where it is for the next five years.  I find it's simpler just to tell people to pay it off early in an economic cycle and draw their capacity at the end of the cycle.



> Where did you get these figures from ?




I've already provided links to answer that question previously Mr Burns



> This thread is full of gold, thank you Sir O.
> 
> I would be very interested to hear your thoughts on long term investing, specifically potential dividend return vs potential capital growth.
> 
> ...




You're welcome.

I've previously mentioned on these boards what *I* do to create core portfolio's for long term buy and hold positions.  If you search diligently you may find it. I use a set of rules for long term investing just as I do for shorter-term trading (although the rules are very different).  Right now I can positively gear an equity portfolio...magic stuff. Doing it a fair bit using a portfolio based approach (ie what is the yield across the portfolio rather than a single stock)to create these types of portfolio's so dividend income is important for that kind of strategy. Over time those dividends increase and widen the gap between the interest expense and revenue generated.

Cheers

Sir O


----------



## skyQuake (7 June 2009)

Sir Osisofliver said:


> ...Modern Portfolio Theory among others. (by the way if you are curious and want a chuckle - and also learn something that they won't tell you about Harry Markowitz - go research what happened when Markowitz decided to try reality rather than academia.




Hi Sir O, would you happen to have a few links for suggested books for that? Can't seem to find any info about Markowit's investing.

On a side note, he mentioned in one of his recent interviews: 

"Portfolio theory, as used by most financial planners, recommends that you diversify, with a balance of stocks and bonds and cash that’s suitable to your risk tolerance. Contrast this with Australian municipalities that put all their money into credit-default swaps. They’re bankrupt. That’s why we need to be diversified."
http://moneywatch.bnet.com/investing/article/harry-markowitz-getting-ready-for-recovery/277144/

What? Which Australian Municipalities?!


----------



## Sir Osisofliver (17 June 2009)

skyQuake said:


> Hi Sir O, would you happen to have a few links for suggested books for that? Can't seem to find any info about Markowit's investing.
> 
> On a side note, he mentioned in one of his recent interviews:
> 
> ...





WHOOPS!

SkyQuake that's a major whoops on my behalf.  Comes from too many bloody names in the finance industry.  It wasn't Markowitz that lost his shirt in the market back in the '90's but Scholes and Merton (both Nobel prize winners as well) the company was Long-Term Capital Management running out of Wall Street, went kablooey in 1998 after the Ruskies defaulted on their bonds and was bailed out and taken over.

Look for those names - you should be able to find something.

Once again my apologies If you've been searching for Markowitz losing his shirt...

Cheers

Sir O


----------



## awg (17 June 2009)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



			
				Sir Osisofliver;

Ok this is something that EVERY bank will do and by doing this will save you THOUSANDS. When you get a mortgage said:
			
		

> You pay exactly the same over the course of a year.[/B]
> 
> Now ask yourself why would they do that? Go ahead - ask your bank manager (and remember that he'll use sales techniques against you) you probably won't get the REAL answer.... Here it is.
> 
> ...




Thanks for all the info

Re: Amortisation

If it is standard for the banks to amortise fortnightly payments, 

how easy is it to get the payments NON-amortised ?

I was not aware of the above, and will be rolling over an IP loan soon.

I pay my loan weekly.

I would have to check the contract to see whether payments are amortised, not that it matters much at this point in the loan, but it will be a learning exercise to see if I can spot the clause

Will hopefully ensure I can get the best deal at time to roll loan


----------



## Sir Osisofliver (17 June 2009)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



awg said:


> Thanks for all the info
> 
> Re: Amortisation
> 
> ...




Ask them for a monthly figure, then ask for a weekly and fortnightly figure...when the figures are different ask them why.

Have fun with the double-speak.

Tell them it's too confusing and ask them to provide you with a written example.

When they balk ask them how much they want your business.

When you have your examples ask them to calculate the term of the loan using weekly,fortnightly and monthly non amortised figures.

When the period for the weekly and fortnightly non amortised payments is less ask them why they didn't advise you to do this in the first place...

Laugh when they blush.

Have fun.

Cheers

Sir O


----------



## awg (17 June 2009)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



Sir Osisofliver said:


> Ask them for a monthly figure, then ask for a weekly and fortnightly figure...when the figures are different ask them why.
> 
> Have fun with the double-speak.
> 
> ...






Thanks for the speedy reply, 

now that you will be paid hourly rate, send me the invoice by PM

I did this at the start, and the difference over fortnightly versus monthly was, ( and I go from memory here), was a reduction of 4 yrs on a 25yr loan via a saving of around $50k...on a sub $200k loan!

However, when I inquired as to what the advantage was going weekly, I was puzzled as to why, too my memory, they said there would be no difference.

Maybe that was the reason. (amortisation)

I will prepare to negotiate in a more detailed manner this time, ( partially thanks to yr post) 

trouble is, when you speak to the call centre staff, they are not well informed, which makes it a pain.

Have you got any opinions about the usefulness of mortgage brokers?

I have found them to be helpful in the past.


----------



## Sir Osisofliver (18 June 2009)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



awg said:


> Thanks for the speedy reply,
> 
> now that you will be paid hourly rate, send me the invoice by PM
> 
> ...





Who pays the Mortgage Brokers fees?

Is it a)  The bank - we know they love to spend money.

or 

b) You 

I've used Mortgage brokers in the past - but only when I don't have the time personally to deal with the banks.

Cheers

Sir O


----------



## awg (18 June 2009)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



Sir Osisofliver said:


> Who pays the Mortgage Brokers fees?
> 
> Is it a)  The bank - we know they love to spend money.
> 
> ...




I used them in the past, cause I was too busy, and lacked the time and knowledge.

I have more time and knowledge now.

I will do my own research, including websites where the mortgager bids for MY business.

I used a mortgage broker, to do a really drawn out deal on a property development.

When I sold up and cashed the loans, the credit provider clawed back the brokers commission.

He wrote me a nice letter, explaining what had happened, and said that I could throw it in the bin, or send him a cheque for what I thought he was worth.

I did the latter


----------



## andygunn (20 June 2009)

Hi all... I am newbie in stock trading... I wish I am posting in the correct thread... 

I opened an account with CommSec last week, and I noticed something about Issuer Sponsored Holdings and CHESS Participant Sponsored Holdings.

My question is: 
1. Does CHESS tie into my CommSec account? E.g. everytime I buy shares, it will automatically be CHESS sponsored.
OR
Does CHESS tie into every shares that I buy? E.g. initially, when I buy shares, those shares will be Issuer Sponsored. What I need to do to make it CHESS sponsored is to transfer those shares to CHESS.

2. In CommSec, to be able to use trading tool, I may need to be CHESS sponsored. Is that the only advantage of CHESS sponsored?

Thank you


----------



## kotim (21 June 2009)

Sir OSIS, are you aware that when you apply for a loan from the bank to purchase a property that as part of the contract you assign power of attorney to them(bank) to allow them to create a promissory note in your name, which they then use as a deposit itself.

And generally speaking in finance when a promissory note is placed on deposit in an account it becomes CASH.

Just seeing how deep your knowledge is that all.


----------



## Sir Osisofliver (22 June 2009)

andygunn said:


> Hi all... I am newbie in stock trading... I wish I am posting in the correct thread...
> 
> I opened an account with CommSec last week, and I noticed something about Issuer Sponsored Holdings and CHESS Participant Sponsored Holdings.
> 
> ...




page 3 post 43 has your answers

Cheers

Sir O


----------



## Sir Osisofliver (22 June 2009)

kotim said:


> Sir OSIS, are you aware that when you apply for a loan from the bank to purchase a property that as part of the contract you assign power of attorney to them(bank) to allow them to create a promissory note in your name, which they then use as a deposit itself.
> 
> And generally speaking in finance when a promissory note is placed on deposit in an account it becomes CASH.
> 
> Just seeing how deep your knowledge is that all.




Kotim, next time I apply for a loan I'll check. I don't claim to be the fount of all finance knowledge, just know a few things... Of course if _you_ have a few secrets please share them.

For example...what advantage do I get with the above? 

Cheers

Sir O


----------



## Australia (24 June 2009)

SGP announced their estimated dividend distribution up to june 30 2009 on 16th June, record date is 30th June. I bought this shares on 17th June.

Will I get those dividends?

Comsec website says ex dividend date is today 24th June, and dividend paid is $ 0 . What is the difference of record date (30th June) and ex dividend date?


----------



## Sir Osisofliver (24 June 2009)

Australia said:


> SGP announced their estimated dividend distribution up to june 30 2009 on 16th June, record date is 30th June. I bought this shares on 17th June.
> 
> Will I get those dividends?
> 
> Comsec website says ex dividend date is today 24th June, and dividend paid is $ 0 . What is the difference of record date (30th June) and ex dividend date?




Australia your question is a simple one,  you are confused between the difference of a record date and an ex date.

The *ex dividend date* is the date that you must be on the registry to be entitled to the distribution. So if you purchased your SGP shares on the 17th of June, *and the ex dividend date *is the 16th of June, you are NOT entitled to the dividend.  You would have to purchase the shares on the 11th of June (T +3 until settlement) to have been entitled if the share went ex dividend on the 16th. 

(A quick check on ASX.com tells me that the Ex date of Stockland Group is the 24th of June, if you purchased on the 17th you should be entitled).

The record date is the date the the registry locks the records held on the register. This is your last chance to advise the registry of any changes to your details such as payment details, use of a DRP (Dividend Reinvestment Plan), address etc. 

Simple really.

Cheers

Sir O


----------



## Gordon Gekko (26 June 2009)

A question I hope someone can help me out with is the following and it is based on allot of assumptions.

Im convinced that the US dollar will far further in the future as inflation takes hold due to government debt. If This happens gold should also increase as a flight safety.
So the question is wouldn't you buy international shares in gold miners valued in US$?
If gold does rise and the US$ does fall wouldn't you get more bang for you buck as compared to AUS shares.

Total newbie question, I'm sure I am missing something simple and as I said its based on allot of assumptions.

Thanks for the help!!!

G


----------



## Sir Osisofliver (29 June 2009)

Gordon Gekko said:


> A question I hope someone can help me out with is the following and it is based on allot of assumptions.
> 
> Im convinced that the US dollar will far further in the future as inflation takes hold due to government debt. If This happens gold should also increase as a flight safety.
> So the question is wouldn't you buy international shares in gold miners valued in US$?
> ...




GG I'm going to ignore your assumptions - they are YOUR assumptions after all, hopefully you have *done your own research* and have valid reasons for your assumptions.

_
So the question is wouldn't you buy international shares in gold miners valued in US$? If gold does rise and the US$ does fall wouldn't you get more bang for you buck as compared to AUS shares._

What are Australian Miners Valued in?  If you ask this question Gordon you'll find that a great many "Australian" miners - especially those whose operations or a portion of their operations are overseas based, are already valued in USD. 

You'll also find that many Australian Miners (because they don't want to be subject to fluctuation in currency rates) will hedge against this risk. 

Once you can answer these two questions (what is the project currency and what is the level of Hedge), for your targets, then if you believe your assumptions are correct then you take advantage of them.  Of course if your assumptions are wrong then it will go against you.

Cheers

Sir O


----------



## awg (29 June 2009)

Sir Osisofliver said:


> Australia your question is a simple one,  you are confused between the difference of a record date and an ex date.
> 
> The *ex dividend date* is the date that you must be on the registry to be entitled to the distribution. So if you purchased your SGP shares on the 17th of June, *and the ex dividend date *is the 16th of June, you are NOT entitled to the dividend.  You would have to purchase the shares on the 11th of June (T +3 until settlement) to have been entitled if the share went ex dividend on the 16th.
> 
> ...




#################################################

The latest you can buy to be entitled to the dividend is in the closing matchout the business day before exdiv date.

Then the earliest you can sell to be still entitled to the dividend (provided that it was bought before exdiv date) is on the open matchout on exdiv day.

The important buy/sell dates for the dividend entitlement, is your buy/sell contract dates.....T3 settlement is irrelevant.
__________________
rozella

##############################################

Hi Sir O.

yr answer and this answer from a previous thread seem to be in conflict.

Can you please clarify


----------



## nomore4s (29 June 2009)

awg said:


> #################################################
> 
> The latest you can buy to be entitled to the dividend is in the closing matchout the business day before exdiv date.
> 
> ...




Rozellas post is correct. T3 is irrelevent - as long as the share is purchased before ex-div day you will receive the D/E. The record day is normally 3 days after ex div day so shares are settled by record day and you appear on the registry.


----------



## JaZLee (6 July 2009)

Hi awesome thread, thanks for the lessons Sir Osisofliver

Some great insights of how the banks work and loans.

I'm in the process of sorting out a budget for the first time ever and building 
a plan to make my $ grow. 

Been saving 10% for awhile now, time to figure  
out how best to make the dollars work for me. 

I really enjoy reading about Warren Buffet and how he simplifies what appears to be complicated, will most likely go for value investing to start with

Looking forward to the next chapter 

Cheers
Jason Lee


----------



## outbackjack (26 July 2009)

*Listed Investments Companies*

Hi there,

I have two holdings in my big share portfolio.

I have NAB and AFI(Australian Foundation Investment Company Limited).

About 8k in total and just been approved for new marginal loan for 40K. So about to get more shares.

I am not asking your advice only your opinion on LIC`s? For a complete green skin like me are they a good thing? Or should a newbie buying the shares direct?

Cheers


----------



## Josho1 (2 August 2009)

Hello all, 

I am fairly new to the "Trading Game".. Firstly im just wanting to know where most of you get your information from, any good tips to know, any trading programs that may be better then most. Really anything that will make ma a successful investor, i relies i will not get rich over night and it will take a while to get into the right state of mind. with saving money  haha.. ive probably have a million questions but they will have to wait.. 


thanks 
Josh


----------



## korrupt_1 (17 August 2009)

Direct Reinvestment Plans....

I've always signed up for cash payouts, but decided to do a DRP on one of them..

So here's an example... I would have got paid $100 cash of dividends if elected for a payout, but instead I elected for a DRP. The stock price is, say at the time of the ex-div date, is $60... so what happens to the remaining $40? Does it mean I only get 1 additional share in the stock and the rest is a cash payout of $40?

Or does it get rounded up? and I end up with additional 2 shares?

Or does it just disappears and it's my bad luck?


----------



## prawn_86 (17 August 2009)

korrupt_1 said:


> Or does it just disappears and it's my bad luck?




As far as im aware its rounded down and bad luck you should be happy with the discount.


----------



## korrupt_1 (17 August 2009)

prawn_86 said:


> As far as im aware its rounded down and bad luck you should be happy with the discount.




so... if the stock price at ex-div is $100... but you only have $99 of divy... you get NO DRP and NO Cash? it just doesn't make sense...


----------



## prawn_86 (17 August 2009)

korrupt_1 said:


> so... if the stock price at ex-div is $100... but you only have $99 of divy... you get NO DRP and NO Cash? it just doesn't make sense...




Again im not 100% sure, but i think it is in the fine print of the DRP. I recall looking it up a couple years ago. Perhaps it is on the ASX website?


----------



## beamstas (17 August 2009)

Stock Price $60
Div $100

*You get 1 share and a $40 credit next time around*

If the SP next time is $70 and the div is $100

You'll have $100 (div) + $40 (unused DRP last time) = $140 worth of DRP
Shares Rec'd = $140/$70 = 2

Regards
Brad


----------



## prawn_86 (17 August 2009)

Well that sure makes me look like a douche


----------



## ROE (17 August 2009)

JaZLee said:


> I really enjoy reading about Warren Buffet and how he simplifies what appears to be complicated, will most likely go for value investing to start with
> 
> Looking forward to the next chapter
> 
> ...




Buying stock is easy 
work out what stock to buy and at what price is the hard part 
and it harder when people jump ship and you buy and it keep going down. 

What do you do? buy more or join the crew and commit capital punishment


----------



## jono1887 (18 August 2009)

beamstas said:


> Stock Price $60
> Div $100
> 
> *You get 1 share and a $40 credit next time around*
> ...




so essentially, the company gets to hold that remaining $40 until next year, whilst you just wait?


----------



## korrupt_1 (18 August 2009)

beamstas said:


> Stock Price $60
> Div $100
> 
> *You get 1 share and a $40 credit next time around*
> ...




thanks brad... that makes a lot of sense to me now... 

and as jono1887 rightly said above... they get to keep the $40 in their pockets? :/


----------



## Cink (18 August 2009)

Hi, 

as an international student and dipping my feet around in the shares market recently, what kind of taxes am i looking at with the profits i make (if any?)

Thanks


----------



## pedrod (21 August 2009)

Cink said:


> Hi,
> 
> as an international student and dipping my feet around in the shares market recently, what kind of taxes am i looking at with the profits i make (if any?)
> 
> Thanks




I would not bother worring of the tax until you have the profit.


----------



## Cink (21 August 2009)

pedrod said:


> I would not bother worring of the tax until you have the profit.




ok, i have the profit now :newbie::newbie:


----------



## Krusty the Klown (21 August 2009)

Cink said:


> ok, i have the profit now :newbie::newbie:




You will have to declare your capital gain (profit) in the capital gains section of your Aussie tax return if you are classed as a resident for tax purposes. If not declare it on your tax return in your country of origin.

You will also have to declare any gains on currency exchange as a capital gain.

You can offset any capital gains with any capital losses.

If you are trading in Australia, you really should see a tax adviser for advice on your individual circumstances - particularly as you are from OS - and that is where it will get tricky.


----------



## Cink (21 August 2009)

Thanks Krusty, will do just that.


----------



## johenmo (22 August 2009)

ROE said:


> Buying stock is easy
> work out what stock to buy and at what price is the hard part
> and it harder when people jump ship and you buy and it keep going down.
> 
> What do you do? buy more or join the crew and commit capital punishment




A lot of opinion here is dollar averaging down is not a good financial management plan.  Sounds fine to me.  If it keeps going down then shorting may be an option.  What about your stop loss?


----------



## Harleyquin (30 August 2009)

We were with storm financial and have lost most assets and all cash.  How and where do we start again.  Can't trust a financial planner or accountant.  Any tips for starting small and starting again.


----------



## white_crane (30 August 2009)

Harleyquin said:


> We were with storm financial and have lost most assets and all cash.  How and where do we start again.  Can't trust a financial planner or accountant.  Any tips for starting small and starting again.




Save, save, save!  And have a budget, so you know exactly where every cent is going.  Then work out ways to cut down on your spending.  The basic equation is spend less than you earn.  Set up a direct debit so that part of your earnings are automatically banked into a savings account.  You won't miss it!

High interest savings account etc - things with less risk, until you start to get your confidence back.  Then maybe move on to investments with a bit more risk later on.

Also, how did you get to where you were before you lost everything?  There might be a lesson in that.


----------



## Krusty the Klown (30 August 2009)

white_crane said:


> Save, save, save!  And have a budget, so you know exactly where every cent is going.  Then work out ways to cut down on your spending.  The basic equation is spend less than you earn.  Set up a direct debit so that part of your earnings are automatically banked into a savings account.  You won't miss it!
> 
> High interest savings account etc - things with less risk, until you start to get your confidence back.  Then maybe move on to investments with a bit more risk later on.
> 
> Also, how did you get to where you were before you lost everything?  There might be a lesson in that.




I'll second this.


----------



## shoe crew (30 August 2009)

sounds like pretty solid advice for the newbies...
as I am a newbie here,
what sectors should I be looking at?


----------



## Zaij (30 August 2009)

The ones you'd most like to invest in.

Don't think we're allowed to give advice like that, sorry.


----------



## etingsoon (31 August 2009)

Zaij said:


> The ones you'd most like to invest in.
> 
> Don't think we're allowed to give advice like that, sorry.




Great one Zaij !!!


----------



## staghorn (31 August 2009)

Hi all, great thread.  Thanks Sir O and everyone else for sharing all of this, it's great for dabblers like me ...
I have a question that someone might be able to answer ... I have just recently discovered conditional trailing sell orders to manage losses (through my online broker), having made my way through the last couple of years more by luck than judgment.  I am not a trader, but I don't like to lose too much, even on paper.  These trailing orders seem like a no brainer, so I'm just wondering what I am missing?
Are there disadvantages that aren't obvious?  
If not, how did my super fund manage to lose 20% of my capital last year? (trusting they'll make it up this year of course)
Grateful for any assistance and greetings to all.
cheers


----------



## GAS HUNTER (1 September 2009)

This is my first time using Aussie Stock Forums and I am trying to find information on Karoon Gas (KAR) and I cannot fnd anything.  Am I doing something wrong?


----------



## Joe Blow (1 September 2009)

GAS HUNTER said:


> This is my first time using Aussie Stock Forums and I am trying to find information on Karoon Gas (KAR) and I cannot fnd anything.  Am I doing something wrong?




Click the link in the navigation bar above that says "Search" and enter KAR in the search box being sure to also check the box that says "Search Titles Only". (see attachment) Then click "Go" and you'll find the thread you're after.


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## Early Bird (1 September 2009)

hi all,

just want to add my thanks to sir O and others for their invaluable advice, and look forward to the rest when it comes! if i ever meet you i'll buy you one of those martinis in your avatar!

I must say though I didn't realise what a cliche I was until reading the opening post of this thread!

Very interesting to read the discussions on EMH as I learned all this at uni and was quite sold on the concept. i still wonder whether for every person who beats the market there is someone who does not... so on average it would hold true. but then i suppose thats too hard to figure out, esp with inflation to factor in. certainly i would think that a managed fund on average wont beat an index tracker by enough to justify the fees, but maybe i am wrong on that as well, based as it is on a 10 year old academic learning with no real life experience to back it up!

i've been saving for a couple of years and have a bit of cash, but probably only enough to do one thing well. i'm more naturally inclined towards long term investing, either in stocks or property, due to risk aversion I suppose, but at the same time would like to try my hand at trading to increase my short term cash flow and give me more options. 

from the sounds of it though i need to do a hell of a lot of learning about fundamental and mechanical techniques, as well as investing in various data streams... it all seems quite a barrier to entry. do you think its possible to start in a small way and learn as i go, or better to do all the learning first and then jump in? i wonder if there is a specific share type or market sector that lends itself to a certain kind of techniques, for example? (if that doesnt stray into "advice" territory)

i'm also struggling to decide whether borrowing to invest is a good idea, although strangely i wouldn't feel the same with a mortgage on an investment property (which i have) - i guess its a tangible asset and i can see where the interest payments are coming from (ie rent) - i don't understand enough about dividends i suppose to rely on them to repay interest.

anyway, that was a bit of a long and rambling collection of thoughts, just wanted to say hello really, and great forum/thread!

cheers
EB


----------



## white_crane (1 September 2009)

staghorn said:


> I have a question that someone might be able to answer ... I have just recently discovered conditional trailing sell orders to manage losses (through my online broker), having made my way through the last couple of years more by luck than judgment.  I am not a trader, but I don't like to lose too much, even on paper.  These trailing orders seem like a no brainer, so I'm just wondering what I am missing?
> Are there disadvantages that aren't obvious?




If you're not already using them as a stop loss/protect profit order, then you probably should be!  Great for people who trade end of day.  The downside?  They usually cost extra if the order is met.  The other downside is that there is potential for the stock to climb/tank after your sell/buy order is triggered and met.  However, what's an extra $10 when it could potentially save you from losing substantially more?


----------



## white_crane (1 September 2009)

Early Bird said:


> i've been saving for a couple of years and have a bit of cash, but probably only enough to do one thing well. i'm more naturally inclined towards long term investing, either in stocks or property, due to risk aversion I suppose, but at the same time would like to try my hand at trading to increase my short term cash flow and give me more options.
> 
> from the sounds of it though i need to do a hell of a lot of learning about fundamental and mechanical techniques, as well as investing in various data streams... it all seems quite a barrier to entry. do you think its possible to start in a small way and learn as i go, or better to do all the learning first and then jump in? i wonder if there is a specific share type or market sector that lends itself to a certain kind of techniques, for example? (if that doesnt stray into "advice" territory)
> 
> ...




My (general) advice.  Read everything you can on this forum - there is so much help out there it's not funny.  When you've done that, read it again.  Then read it again.  Then work out:
What you are doing,
Why you are doing it and
What you hope to achieve by doing it.

Then set some realistic goals that are appropriate to your situation.  Always keep in mind that money management is one of, if not the most important part of trading/investing.

You need to develop a plan/system that you can utilise - after all you are doing the investing and it's your money.


Hope this helps.

From someone slightly higher up on the learning curve,
white_crane


----------



## Early Bird (2 September 2009)

Thank you for the wise words, white crane... i do indeed have soem thinking to do.


----------



## Australia (2 September 2009)

Why do people put extremely high bid price and low offer at the closing of the market?


----------



## Trembling Hand (2 September 2009)

Australia said:


> Why do people put extremely high bid price and low offer at the closing of the market?




To be part closing Auction,

See this thread. Open/Close same process,

https://www.aussiestockforums.com/forums/showthread.php?t=11619


----------



## Sir Osisofliver (4 September 2009)

Hi All,

Holy cr@p I've had a busy last couple of months (and unfortunately the light at the end of the tunnel appears to be a train).  The pressure has eased a little though so I thought I'd drop in an say G'day and maybe answer a few questions.....



awg said:


> #################################################
> 
> The latest you can buy to be entitled to the dividend is in the closing matchout the business day before exdiv date.
> 
> ...




Rozella is correct.  I've trained myself for the T+3 rule because of entitlements and corporate actions which work on the T3 principle.  Any corporate action like an SPP, rights issue etc you need to allow for T3...so it's in my best interest (and the best interests of my clients) for me to think like that.

Cheers
Sir O


----------



## Sir Osisofliver (4 September 2009)

*Re: Listed Investments Companies*



outbackjack said:


> Hi there,
> 
> I have two holdings in my big share portfolio.
> 
> ...




Personally I generally don't like LIC's. The moment you allow someone to get between yourself and the direct asset, someone is making an income. the only way this doesn't work against you is if the managers are of such high quality that they make more transacting on the shares within their portfolio than they cost in managing the assets.

It's also an issue of control, you cannot ring the LIC and say "I think it's time you exited BHP because I expect Iron ore prices to fall". I'm a control freak so it goes against the grain.

Cheers

Sir O


----------



## nunthewiser (4 September 2009)

nice to have u back sir o


----------



## Timmy (4 September 2009)

nunthewiser said:


> nice to have u back sir o




Hear, hear.


----------



## Sir Osisofliver (4 September 2009)

Aww shucks guys

Cheers

Sir O


----------



## swm79 (4 September 2009)

Timmy said:


> Hear, hear.




hear hear... agreed

great thread loving your work Sir O. I've previously worked at a FP & Accounting firm and think you're doing a great job here. Not all FP's are bad... its just a few rotten apples that spoil it for the rest of us! (a previous collegue of mine being one of them!)

i think the biggest question is - when's the next chapter coming?????


----------



## Sir Osisofliver (4 September 2009)

Harleyquin said:


> We were with storm financial and have lost most assets and all cash.  How and where do we start again.  Can't trust a financial planner or accountant.  Any tips for starting small and starting again.




In addition to Krusty's great comments

1) My condolances

2) *What you do not know is what hurt you*. Unfortunately those that know what you do not know are those you now cannot trust. If you cannot trust (ad I don't blame you if you don't) you therefore need to LEARN for yourself what it is that you don't know. The best person to look after your money IS YOU. You will not rip yourself off. (*You owe it to yourself therefore to be educated enough to make the right decisions.*

I will say that there was nothing intrinsically wrong with Storms basic principle of borrowing against your assets and margining in a double debt scenario. It's a strategy I've used myself and for clients. Where they fell down was a matter of timing and minimal risk management. If they had done something as simple as written a put option in March 08 to cover the portfolio, you'd never have been in your current predicament. What *they* didn't know HURT YOU.

Tips for the future.


Budget well
understand risk management 
do not become so scared of borrowing that you ignore it as an investment option

Cheers

Sir O


----------



## Trembling Hand (4 September 2009)

Sir Osisofliver said:


> I will say that there was nothing intrinsically wrong with Storms basic principle of borrowing against your assets and margining in a double debt scenario. It's a strategy I've used myself and for clients. Where they fell down was a matter of timing and minimal risk management. If they had done something as simple as *written a put option in March 08 *to cover the portfolio, you'd never have been in your current predicament.






Sir O don't you mean purchase a put option?


----------



## Sir Osisofliver (4 September 2009)

swm79 said:


> hear hear... agreed
> 
> great thread loving your work Sir O. I've previously worked at a FP & Accounting firm and think you're doing a great job here. Not all FP's are bad... its just a few rotten apples that spoil it for the rest of us! (a previous collegue of mine being one of them!)
> 
> i think the biggest question is - when's the next chapter coming?????




Um well I was up to technical analysis and techniques that I personally use.  That's going to take a fair bit of time to do it justice (and numerous screenshots and attachments).  On the upside my Market Analyst program is a lean mean charting machine at present after having been given a thrashing over the last couple of months 

I'd really rather make it a collaborative effort that I can manage in bite sized pieces,  so how about we take a poll on which tech tools to cover first? 

NOTE: I will not be using current data - if I do I have to put those nasty disclaimers around the thread so I will be using data AT LEAST six months old for my examples.


1) MA's (moving averages)
2) Stochastics
3) Fibonacci and Elliot Waves
4) ?? Other

Cheers

Sir O


----------



## Sir Osisofliver (4 September 2009)

Trembling Hand said:


> Sir O don't you mean purchase a put option?




That's the second time I've done that 

yes I mean PURCHASE a put option

Cheers 

Sir O


----------



## swm79 (4 September 2009)

Sir Osisofliver said:


> In addition to Krusty's great comments
> 
> 1) My condolances
> 
> ...




in other words - *"educate yourself"*... you're going to look after your financial situation better than anyone else will. Granted you may not have the depth of information at your disposal, but in time you will be able to spot good and bad advice and choose which strategies work best for you.

Some points about *SOME* financial planners (i.e. the ones who DONT do their job properly, creating a bad name for everyone else )

Think about these things:

   1. It is a simple but effective accident of history that means most customers don’t know they are being sold to, and that they are dealing with a commission-based salesperson. They think they are just being advised. Many advisers are very good at what they do, many are not. It’s pot luck. And as for getting sophisticated, relevant analysis of investment markets and techniques … forget it.
   2. The basic technology being “sold” is a simple computer program called a platform or wrap account that passively administers investment portfolios and which wholesales to advisers for a couple of hundred dollars a year. Yet “advisers” charge thousands for it - a service that costs them almost nothing and is basically a device for selling other products (managed funds) for extra commissions.
   3. Worst of all, every service in the industry – advice, administration and investment management – is billed as a percentage of the customers’ assets.

This is the greatest rort of all.

WITH THAT SAID - some FP's are great at what they do and are invaluable. Its just a matter of finding these ones... which for the newbie is harder than it sounds.

Hence this thread i guess...


----------



## swm79 (4 September 2009)

Sir Osisofliver said:


> Um well I was up to technical analysis and techniques that I personally use.  That's going to take a fair bit of time to do it justice (and numerous screenshots and attachments).  On the upside my Market Analyst program is a lean mean charting machine at present after having been given a thrashing over the last couple of months
> 
> I'd really rather make it a collaborative effort that I can manage in bite sized pieces,  so how about we take a poll on which tech tools to cover first?
> 
> ...




have you seen the ew debate thread??? its gonna be a war! hahaha


----------



## Trembling Hand (4 September 2009)

Sir Osisofliver said:


> I'd really rather make it a collaborative effort that I can manage in bite sized pieces,  so how about we take a poll on which tech tools to cover first?
> 
> 1) MA's (moving averages)
> 2) Stochastics
> ...



Only the ones that "work", that should make it a short post.:

If its "Newbie Lessons" anything other than trends will have newbies zigging when they should be zagging.


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## Sir Osisofliver (4 September 2009)

Trembling Hand said:


> Only the ones that "work", that should make it a short post.:
> 
> If its "Newbie Lessons" anything other than trends will have newbies zigging when they should be zagging.




LOL - Didn't you know TH? They all work...for a given value of "work".  sorry math joke.

I'll *try* and keep it clear, concise and explain what and why and hopefully leave the wars to other threads. Perhaps a request that if you wish to discuss the techniques in lots of detail you do so in other threads dedicated to discussion of those techniques?

Cheers

Sir O


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## swm79 (4 September 2009)

Trembling Hand said:


> Only the ones that "work", that should make it a short post.:
> 
> If its "Newbie Lessons" anything other than trends will have newbies zigging when they should be zagging.




Nothing like a bit of Buffett rehtoric "I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer" aye TH????

True. EW might be a bit technical. maybe just a basic overview of what it is and the basics of of pin pointing waves...


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## swm79 (4 September 2009)

swm79 said:


> the basics of of pin pointing waves...




with a wry smile..... *"BASICS"* of pin pointing waves.... haha


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## Sir Osisofliver (4 September 2009)

swm79 said:


> with a wry smile..... *"BASICS"* of pin pointing waves.... haha




Point taken. Lets leave Fib and EW to last shall we?

OK so MA's, Stochastics or Other Newbs?

Cheers

Sir O


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## swm79 (4 September 2009)

Probably Moving Averages is an easy place to start


----------



## Trembling Hand (4 September 2009)

Sir Osisofliver said:


> Point taken. Lets leave Fib and EW to last shall we?
> 
> OK so MA's, Stochastics or Other Newbs?




It should be left at trends, up trends HH & HL, down trends LH & LL, Basic support and resistance. 

It should be clear giving inexperienced "traders" oscillators will blind them to the only thing that matters - Trends. Just have a look at the amount of posts in the XAO thread with,



> looks overbought here and is due for a bull back, have a look at the RSI/stochastic/MACD




For the last 6 month and 1200 points.


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## swm79 (4 September 2009)

i agree... otherwise you're giving a course in TA... there's too much depth and then you're going to ask "where do i stop?"

basic support and resistance with possibly a few (the main) indicators should be more than enough

if people want in depth analysis they should start looking for TA books rather than this thread


----------



## Sir Osisofliver (4 September 2009)

swm79 said:


> i agree... otherwise you're giving a course in TA... there's too much depth and then you're going to ask "where do i stop?"
> 
> basic support and resistance with possibly a few (the main) indicators should be more than enough
> 
> if people want in depth analysis they should start looking for TA books rather than this thread




OK  Trends it is Newbs.....but not today...work to do

Cheers

Sir O


----------



## nunthewiser (4 September 2009)

swm79 said:


> if people want in depth analysis they should start looking for TA books rather than this thread





plenty of TA mish mash in these threads to fill plenny of books , agree with TH re keeping it simple ...... seems to work the best


----------



## Sir Osisofliver (7 September 2009)

OK newbs  Technical Analysis...

*Noise versus data.*  I want to show all the newbs the difference between random events and non-random events.  What we want to learn is what is non random, but we need to learn what non-random is before we can apply it, so I want all the newbs to do a simple experiment.  Grab a piece of graph paper and draw a line down the center of the page and turn it on its side to create a T Bar.To look like this.... |-----      Then grab a coin.

The probability of a head or tails is a 50:50 event. Not very random right? So based upon the math if you toss your coin 50 times, you will get 25 heads and 25 tails.  Now start at the beginning of the T-Bar and toss your coin 50 times marking down each head and tail on your graph, up for heads, and down for tails in one long unbroken line.

What happens when you do this is that you will see that whilst the probability of a head or tails is a 50:50 event (and you may indeed see 25 heads and tails in this simple experiment) chaotic elements mean that you are very very unlikely to get a head, followed by a tail 25 times. (even though this is what the math predicts).  In all likelihood you will receive a number of heads, followed by a number of tails in a random order.  
Look carefully at your graph....does it start to look like a share chart with its up’s and downs?   Welcome to random.  

Place this graph above your computer terminal as a reminder that what we seek is non random events.  Now this experiment is based upon a very simple single event 50:50 probability and yet it very quickly begins to appear much more complex. Now think about the market and how many things may influence a specific share price. Interest rates, commodity prices, general market conditions, consumer confidence, unemployment, Project development timelines etc etc etc. With each of these things you will have several different viewpoints that can influence the share price (or several different probabilities) about what will happen, those that think up, down, stay same; those that try and pre-empt the market and are looking at some point in the future etc etc. All these things can create noise. If you want to learn to trade successfully have a clear understanding of the difference between noise (random data events) and trend (non-random data events).

So what is non random?

When we look at share price data, we want to ensure that we are using the highest quality statistical data that we can find.  Something that is non-random and can be distinguished from noise *needs* a high quality data set. For this reason the only chart I ever use is referred to as a HLC bar chart  (or Bar chart for short) and includes a data point for HIGH LOW OPEN CLOSE, which gives us those four data points in a single data event.  Looks like this...



The left hand point is the open, the top of the bar is the intraday high, the bottom of the bar is the intraday low and the right hand point is the closing price.  It’s a wealth of data and one of the highest quality statistical data streams available displayed in a very simple to understand data array.  This isn’t the only way to display these points of data, you can have candlesticks, Kagi’s, Gann Swings, Line graphs etc etc.  For me this is the right balance between simplicity and quality of data.  It’s also the most common...but it’s the most common for a reason.  If you want to discuss different displays and how you think a Gann Swing is the bees knees of display methods, or why you prefer a simple line chart, please take that discussion out of this thread.

Up Bar’s Down Bars, Inside Bars, Outside Bars *hic*

*Up Bar* is a bar with a higher high and higher low than the previous bar. The bars marked off are in an uptrend. Notice how the close is higher than the open until what turns out to be the last bar of the trend where the close is lower than the open. There were more sellers then buyers on the last bar.

*Down Bar* is a bar with a lower high and lower low than the previous bar. The bars marked off are in a downtrend. Notice how the close is lower than the open until what turns out to be the last bar of the trend where the close is higher than the open. There were more buyers then sellers on the last bar.

*Inside Bar*, also called a narrow range bar, is a bar with the high that is lower than the previous bar and low that is higher than the previous bar. Some traders do not consider an inside bar that has either an equal high or an equal low as an inside bar, others do. Inside bars usually represent market indecision. As on any bar, the closer the open and close are to each other shows just how undecided the market is as neither the buyers or sellers are in control. Buyers are in control on the inside bar marked on the chart because the close is at the top of the bar.

*Outside Bar*, also called a Wide Range or Engulfing Bar, is a bar with a high that is higher than the previous bar and with a low that is lower than the previous bar thereby engulfing the previous bar. Since the open and close are close together on the marked bar, neither the buyers or the sellers are in control and the market is undecided which way to go.

When the open is in the bottom quarter/third of the bar and the close is in the top quarter/third of the bar, it is said to be bullish engulfing with the buyers in control. When the open is in the top quarter/third of the bar and the close is in the bottom quarter/third, it is said to be bearish engulfing with the sellers in control.

More to come guys...
Cheers

Sir O

P.S. Would one of you sterling Mod's edit this post to add the graphics into the right place?  Cheers


----------



## antzlovinit (8 September 2009)

If i sell shares today, when do i expect the money to fall into my account. They said 3 days. So therefore the monies will be in on friday or Monday? Not sure if today is counted?


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## Sir Osisofliver (8 September 2009)

antzlovinit said:


> If i sell shares today, when do i expect the money to fall into my account. They said 3 days. So therefore the monies will be in on friday or Monday? Not sure if today is counted?




T + 3 Today is not counted. So if you do a transaction today (being Tuesday) it will be in your account on Friday. (Barring failure)

Cheers

Sir O


----------



## LonelyTrader (9 September 2009)

Thanks Sir O.  This thread is great - very informative.  I am looking to start some trading on my own (have been using an alert system to date).  Will keep checking in with your lessons.  Thanks again


----------



## SmellyTerror (14 September 2009)

Sir O: THANKYOU, and also I love you and want to seks you up.

The basic trend stuff you posted on the 7th has really helped. Funny how you can keep seeing the edge of something that everyone else knows and never quite *get* it until someone stops and uses small words.

LH HH LL HL .... ahhhh. At last you guys make sense.

PS: 


> Up Bar is a bar with a higher high and higher low than the previous bar. The bars marked off are in an uptrend. Notice how the close is higher than the open until what turns out to be the last bar of the trend where the close is lower than the open. *There were more sellers then buyers on the last bar*.




Re: the bolded bit - is this necessarily the case when the close is lower, is it something you get from the data shown here, or is it something you have to read off the volume graph that's not shown above?


----------



## Sir Osisofliver (14 September 2009)

SmellyTerror said:


> Sir O: THANKYOU, and also I love you and want to seks you up.




I'm taken



> The basic trend stuff you posted on the 7th has really helped. Funny how you can keep seeing the edge of something that everyone else knows and never quite *get* it until someone stops and uses small words.
> 
> LH HH LL HL .... ahhhh. At last you guys make sense.
> 
> ...




It's from the data displayed here.

In relation to the volume. SELLS = BUYS.  It cannot be any other way. The use of the volume indicators therefore only has meaning when you include other metrics or indicators. People talk about the number of sellers and buyers in the market (I did it above for example), because it's easy to think of it in that way but it's a little bit lazy. 

Perhaps what I should have said is that there was more Selling PRESSURE than buying PRESSURE. The actual number of sellers or buyers may be irrelevant. (Think about it, one large Institutional seller or buyer acquiring or disposing of volume in the market can trade with a much larger number of smaller investors). 

Included with this is a concept of hidden volume - Many brokers (because they have operators and direct access to the market through a SEATS platform) do not disclose the size of the trades they are performing. The operator may have 200,000 shares to purchase, but will work the order and only disclose a small portion of the trade, and continue to add volume to not frighten the sellers or buyers away. 

This is the kind of behaviour in the market that can only be seen if you are a) looking at the tick data (live data trades as they happen) b) it's not summarized so you can see the individual trades (like the screen grab below) and c) you have some inkling of who they are.  Who performs a particular trade eg Macquarie is no longer disclosed to the market - market participants now have the option to disclose their transactions should they choose to do so after three days.  This is the result of some serious lobbying from the broking industry - but personally I feel it takes away from the transparency of the market.

Cheers

Sir O


----------



## SmellyTerror (14 September 2009)

Cool,that makes sense. Thanks.


----------



## Sir Osisofliver (14 September 2009)

OK Newbs Technical Analysis Part Deux  Support and Resistance

Ok Newbs if I slip up and say more sellers than buyers, from Smellys question above you can see that I'm just being lazy, and I'm referring to the amount of selling or buying pressure rather than an actual volumetric.

Some people will have you believe that Support and Resistance can be a complex topic for newcomers to Technical Analysis. The reason for this is that we are entering the stage where certain chart features become _subjective_. A stock hits it's resistance level and starts to come down, will it drop till it hits the support level?  Will it double top? (come back up and hit the resistance level), Triple top? Break through? 

What everyone thinks (and how the markets react to all those different thoughts (IE NOISE)) will determine the actual movement of the share price. Traders therefore tend to get nervous (an *emotional response*) around support and resistance levels because the market is uncertain, and an uncertain market is one in which you have a higher probability of getting it wrong. It's ALSO the point at which the trader has the greatest potential of making a profit so these points tend to get a great deal of attention.

These support and resistance levels are subjective because of noise (random events and uncertainty in the market) and personal experience. You've learnt about what noise is and how that can affect the market and specific stocks.

*What is the importance of personal experience?*

Your experiences when you trade will colour your *emotional* reaction to what you are doing. This is why they say that psychopaths make the best traders, because they tend not to have any emotional responses. If you have a particularly good trade EG you punted on some QGC shares at 15 cents and made a bundle, naturally you will react positively and *look for more of the same*. It's a positive feedback loop. I did well in this I should look for more of it and is a perfectly natural reaction.

Similarly when we get burned in something, ABC Learning Centres for example, we tend to think that ALL childcare centres are the pits and you wouldn't touch them with a ten foot barge pole. I'm sure the company directors of Peppercorn Management Group disagree with that assessment.

It's important to try and at least be aware of what your emotional responses to a particular event is and whether they are intuitively affecting your response.

Moving right along then... What is a support and resistance levels?

Support levels. 

Simply put, support levels are where the buyers (or bulls) feel that the stock has been oversold, represents good value or simply feel that it cannot go any lower and buy the stock, arresting the drop in the share price. Buying bids also tend to accumulate at certain price points creating these resistance levels. If you look at the nice chart below where the stock bounces several times off the same price, you can see the obvious support level in the stock. (notice how frequently Inside and Engulfing bars indicating uncertainty appear at the turning points). 

Resistance levels are the flip side of this. Sellers (or bears) in the share accumulate orders at certain price points, where they think that the price is too high and we get a ceiling on the price. Like the graph below…

OK Newbs, now what do you think will happen if we get a support line or a resistance line that rises or decreases over time?

Stay tuned for the next lesson where we talk about rising/falling lines of resistance or *Trends*

Cheers

Sir O


----------



## longcall (22 September 2009)

Hi guys,

I'm new to the sharemarket and I am very interested in buying renounceable rights. Does anybody know where to get a list of all current renounceable rights that can be bought on the ASX? 

I was thinking there might be a website that lists them perhaps...

thanks team


----------



## Michael Dempsey (26 September 2009)

Sir Osisofliver said:


> Hi All,
> 
> Let me make this point clear. ANYONE can retire very comfortable. It doesn't matter what your income level is, your level of education, whether you went to a private school or any other factors - all it takes to become financially independent is 1) Self Discipline and 2) A small amount of Knowledge.
> 
> ...




I have to agree 100% with what I quoted above.

I started seriously investing at 25. I sold my business and retired age 35. Interesting to read that I fall into the "Wealthy" as described above.  

I was a high school drop out and a simple tradesman. I never earned big money. Just simply used the principles described above. I did use a tone of debt though. Debt was the key. The other part of the puzzle is knowing what to invest in. 

I invested in anything I could get my hands on. Property, shares, business opportunities. Looking back, if I just focused on investing in quality stocks only, I'd be much richer, like 3 or 4 times. 

Anyone can achieve financial freedom


----------



## Cink (12 October 2009)

Just a general question here.

If some1 from Mel wanted to call me using her landline/moblie to my moblie, does she have to include like QLD area code 07 in front of my moblie or just go 04xxxxxxxx .


----------



## NeuromanceR (12 October 2009)

Cink said:


> Just a general question here.
> 
> If some1 from Mel wanted to call me using her landline/moblie to my moblie, does she have to include like QLD area code 07 in front of my moblie or just go 04xxxxxxxx .




Yep, just the 04xxxxxxxx mobile number. No area code.


----------



## senortodd (15 October 2009)

Hi,
I am very new to this and still very much in the early days of learning about shares (try first month). 

Anyways my stupid question is:

What is the significance of a price rise on low volumes? Does it mean anything different to a price rise on high volumes?

Cheers,
Todd


----------



## Sir Osisofliver (16 October 2009)

senortodd said:


> Hi,
> I am very new to this and still very much in the early days of learning about shares (try first month).
> 
> Anyways my stupid question is:
> ...




Todd,

I'd prefer some context with this question.  Which stock was it that had a price spike on low volume, which stock had a price spike on high volumes?  Define high volumes? How tight is the registry? What are the market caps of the stocks involved? What is the usual liquidity of the stock/

So much of the market is perspective and context. 

Cheers

Sir O


----------



## person (20 October 2009)

Sorry,  I know this question is from a million years ago but I cannot work out what PPR means on the second page.

It isnt defined anywhere in the first few pages and it isnt in the Acronyms thread.  Also there are 65 Acronym matches if I google it and even then I cant see a relevant one.  Can someone please spill the beans?

Thanks


----------



## arco (20 October 2009)

person said:


> Sorry,  I know this question is from a million years ago but I cannot work out what PPR means on the second page.
> 
> It isnt defined anywhere in the first few pages and it isnt in the Acronyms thread.  Also there are 65 Acronym matches if I google it and even then I cant see a relevant one.  Can someone please spill the beans?
> 
> Thanks




Principle Place of Residence


----------



## swm79 (20 October 2009)

person said:


> Sorry,  I know this question is from a million years ago but I cannot work out what PPR means on the second page.
> 
> It isnt defined anywhere in the first few pages and it isnt in the Acronyms thread.  Also there are 65 Acronym matches if I google it and even then I cant see a relevant one.  Can someone please spill the beans?
> 
> Thanks




Principle Place of Residence

meaning the house you primarily live in i.e. not your rental property or beach house etc


----------



## swm79 (20 October 2009)

echo.... echo.... echo....

haha 

just got in before me!


----------



## person (20 October 2009)

Thanks guys.


----------



## Sir Osisofliver (20 October 2009)

person said:


> Sorry,  I know this question is from a million years ago but I cannot work out what PPR means on the second page.
> 
> It isnt defined anywhere in the first few pages and it isnt in the Acronyms thread.  Also there are 65 Acronym matches if I google it and even then I cant see a relevant one.  Can someone please spill the beans?
> 
> Thanks




*Hands person his bifocals*



> Let’s say you have a significant asset with a low LVR (This could be your *PPR* or an investment property for example). Currently the bank loves you - they get to use your asset and make lots of money from you by using the currently unused security value of your asset.
> 
> You would be MUCH better off if instead of the bank using that security value - you yourself use it. But how do we use it effectively so as not to endanger the viability of the asset?
> 
> In the case of a *PPR (principle place of residence)* there are a couple of important things you need to consider.




You only had to read about 5 lines 

Cheers

Sir O


----------



## mrlawler46 (20 October 2009)

Sir O,

I have recently begun trading and have been following a report with my father (Which has had quite good success), and I have followed this person into an option which is up now on when I bought it (Thankfully). 

But, I was wondering what the hell I have done and what it means..... Also if I choose to execute it; a) How would I go about it and, b) when would be a good time to execute if at all?

The option is as follows:

This was on offer to existing shareholders on a 1 for 1 basis to acquire 1 option in the Company at a price of 1 cent. The option gave the holder the right to convert the option into a share by paying a further 3 cents at any time up to 29 June 2010. 

I know this seems very self explanitory but I may be reading too much into it.

Any explanation would be appreciated,

Matt


----------



## Sir Osisofliver (21 October 2009)

mrlawler46 said:


> Sir O,
> 
> I have recently begun trading and have been following a report with my father (Which has had quite good success), and I have followed this person into an option which is up now on when I bought it (Thankfully).
> 
> ...




Matt,

From the sound of it (since you didn't give an ASX code for the option) it appears to be a listed option. If it is a listed option it will be designated by a four letter code. EG MPOO (Molopo Option now defunct). 

The option is an agreement *by the company* to sell you a fully paid ordinary share for three cents. You have already paid a premium to acquire your option (1 cent) to the company, which the company gets to keep.

If the fully paid ordinary shares trade above 4 cents your option is "in the money" - you will make a profit. If the shares do not trade above 4 cents before 29th June 2010, you would be silly to exercise the option as you would be paying three cents for something worth less than three cents.  The option would expire worthless.

To exercise your option get in touch with the broker who you bought the shares from and they should exercise the option for you. Alternatively ring the registry and request to exercise the option.

Companies do this because a) they get a small premium which adds towards their operating capital immediately, and b) in the future (in this case before 29 June 2010 which is quite a narrow window), they will receive additional funds if the options are exercised. *Be aware that this can be a dilutionary effect depending upon where the share price is.* If the option expires worthless, they haven't lost money - it's no skin off their nose.

Hope that helps

Cheers

Sir O


----------



## dazza22 (22 October 2009)

Hey,
Thanks so much for all your advice and explanations on "how it all works"(special mention to Sir O), I've kinda been "trading" for 2 months now and had no real idea on what i was doing. ie. saying that stock sounds good im going to buy some of that, really more straight out gambling than investing, and luckily fluctuating a bit over even. I've been to a few seminars held by the asx and stuff to try and gauge a general idea of what i'm doing though am still pretty vague on everything. I'm trying to stay aware of whats going on reading the news and stuff. Like recently there was an interest rate rise by our reserve bank and that was awesome for our economy and a large portion of shares jumped, and they are predicting another rate rise on Melbourne cup day.

What my question is really is, if the market knows an event is going to occur ie. intrest rate rise, has it already adjusted itself as though it has already happened, and deviates according to how accurate the predictions were or does it choose not to fluctuate until much closer to the date. Also i hear alot about "these figures were worse/better than what the market expected causing blah blah blah", what kind of material do i need to be studying to know what the market is expecting(ie. rough ball park figures) I know this isn't a very straightforward question, though i would just like your opinion on how you tackle this sort of information with your analysis techniques.

Thanks in advance for any advice dazza22


----------



## dazza22 (22 October 2009)

I've just been delving around other beginners threads and keep reading, RESEARCH RESEARCH RESEARCH. like thats all well and good for someone who knows what they're talking about but as a beginner i have no idea what that means(maybe im a little behind the 8 ball ). Does it mean boot up google and type in the asx code and see the shares performance against an index such as the all ords, does it mean look at what dividends its likely to pay out..... Another piece of advice ive gotten(i know to take it all with a pinch of salt so don't say) is that stuff in the news has already happened so theres no point in buying something that has recently had a big story, lets say hypothetically this is the case. im not psychic so how am i meant to predict a stock that has a high probability for growth?? (sorry if this seemed a bit ranty)


----------



## dazza22 (22 October 2009)

I'll let someone else post next lol

ive also been delving into software to help with my learning aswell. Two programs ive found useful are fc charts and quotetracker which work nicely with my comsec account, the main pros to these being that they are free and useful lol. I have allot of time on my hands being a uni student haha, my life consists of 20 contact hours during a trading week and everything else i do i cram into the afternoons, also because i live in wa the trading days over by about lunch time, so i was wondering if i could get some advice specifically on how to be an active or even a day trader(i cant seem to do this successfully and my profits from longer trades are mainly used to cover mistakes from these day trades).

Thanks dazza22


----------



## Sir Osisofliver (26 October 2009)

dazza22 said:


> Hey,
> Thanks so much for all your advice and explanations on "how it all works"(special mention to Sir O), I've kinda been "trading" for 2 months now and had no real idea on what i was doing. ie. saying that stock sounds good im going to buy some of that, really more straight out gambling than investing, and luckily fluctuating a bit over even. I've been to a few seminars held by the asx and stuff to try and gauge a general idea of what i'm doing though am still pretty vague on everything. I'm trying to stay aware of whats going on reading the news and stuff. Like recently there was an interest rate rise by our reserve bank and that was awesome for our economy and a large portion of shares jumped, and they are predicting another rate rise on Melbourne cup day.



Dazza I know it says all your questions answered, but it doesn't mention the word.."Timely", I've been avoiding answering your novella until I could spare the time I needed to respond properly.

How is a rate rise "awesome for our economy?" When interest rates are increased the Reserve Bank is attempting to slow our economy down. By increasing interest rates, it is now more expensive for companies to borrow money, how is this a good thing? Householders now have to put more money on the mortgage, so they have less to spend, less expenditure is a slowing mechanism.

So do you know the reason then why the shares had a little movement? (To quote the Matrix movies "This is how you come to me, without why, without power." [insert bad french accent]) 

The reason for that movement was that we are the first western economies to initiate such a slowing mechanism, so there is some sentiment attached to that.  It also means that those economies that currently have a very low interest rate like 0% for example can move that money into Australia and get a higher rate of interest. Capice?

So knowing this do you think *another* rate rise will have the same effect and do you think everyone agrees with you? (because only the aggregate opinion matters).




> What my question is really is, if the market knows an event is going to occur ie. intrest rate rise, has it already adjusted itself as though it has already happened, and deviates according to how accurate the predictions were or does it choose not to fluctuate until much closer to the date.




Define "Knows".  The word you are searching for here is "anticipates". The market (with a higher or lower degree of certainty) *anticipates* that there will be a rate increase. Depending upon a) the degree of certainty, and b) the time period to the event; it will adjust according to the aggregate whim of the market participants. When the event occurs, those market participants who did not anticipate correctly (or misread the degree of change, or who try and take a larger position when proved right etc etc etc), move in line with the actual occurrence. It's the difference between Forecast and Actual when you look at company accounts.  The forecast is someone's opinion, the actual is what really happens. 







> Also i hear a lot about "these figures were worse/better than what the market expected causing blah blah blah", what kind of material do i need to be studying to know what the market is expecting(ie. rough ball park figures) I know this isn't a very straightforward question, though i would just like your opinion on how you tackle this sort of information with your analysis techniques.
> 
> Thanks in advance for any advice dazza22




Don't get confused Dazza - this is media, not reporting. Even consensus numbers can be wrong (and frequently are - after all the consensus numbers would have you believe in July 07 that the market would be strong for years to come). Reporters and some paid information providers collate the opinion of analysts together, as if the sum of the parts is greater than the whole and the media refer to it as "the market". It's very much like taking a poll of 1000 people and correctly determining the actions of a billion people. It's frequently inaccurate and wrong - but to understand why it's wrong, you need to read the analyst reports - and I have better things to do with my time than reads other people's _opinion_.



dazza22 said:


> I've just been delving around other beginners threads and keep reading, RESEARCH RESEARCH RESEARCH. like thats all well and good for someone who knows what they're talking about but as a beginner i have no idea what that means(maybe im a little behind the 8 ball ). Does it mean boot up google and type in the asx code and see the shares performance against an index such as the all ords,



 Investigate RSI's or relative strength indicators







> does it mean look at what dividends its likely to pay out.....



 investigate value investing







> Another piece of advice ive gotten(i know to take it all with a pinch of salt so don't say) is that stuff in the news has already happened so theres no point in buying something that has recently had a big story, lets say hypothetically this is the case. im not psychic so how am i meant to predict a stock that has a high probability for growth?? (sorry if this seemed a bit ranty)




Dazza go to the investing resources section of this forum and read up on what books others have read to start them on their way. You need to have a good grounding before you know what questions to ask.  Many here will also tell you not to bother with the questions you are asking because all the information you need will be in the share chart. This question is a bit broad for me to answer concisely so all I can do is wish you good luck on your Journey towards enlightenment.




dazza22 said:


> I'll let someone else post next lol
> 
> ive also been delving into software to help with my learning aswell. Two programs ive found useful are fc charts and quotetracker which work nicely with my comsec account, the main pros to these being that they are free and useful lol. I have allot of time on my hands being a uni student haha, my life consists of 20 contact hours during a trading week and everything else i do i cram into the afternoons, also because i live in wa the trading days over by about lunch time, so i was wondering if i could get some advice specifically on how to be an active or even a day trader(i cant seem to do this successfully and my profits from longer trades are mainly used to cover mistakes from these day trades).
> 
> Thanks dazza22




Dazza Take my advice.  Give up daytrading for a while and run a practice account.  It will save you money in the short-term and make you a better trader.  You don't know what it is you don't know, and have no way of knowing what it is you don't know.  But that lack of knowledge has the potential to HURT you.  Go read the Brisconnection thread on this forum for a little eye-opener on how bad your lack of knowledge could hurt you.  Or alternatively go read the Storm Financial thread on what happens when you leave it some advisers hands. Go to the Uni library and take out lots of books, ask the finance students for their textbooks. Learn to walk before you try and run. Currently it sounds like you are gambling, not trading, not investing and the rule about gambling is... the house always wins. 

Cheers

Sir O


----------



## Albi (26 October 2009)

Hi,
Is AFT a new company, because it's share are at .001 cent on high or low. I try to read about company infor but could not find out. Can you advice actually what it is, is it a right issue or real shares, same is my question about AUZ.
Thanks in advance.
Albi


----------



## dazza22 (27 October 2009)

Haha
Thanks alot Sir O, i guess alot of those questions i really knew the answer to before i asked, I was hoping that a few words from an expert would make me an instant pro haha. I think i might learn to swim from the shallows instead of the deep, as a second attempt at it. I have now taken out a few beginners books and now have a better point of veiw as to what sources of information to delve into, (an even better one at the end of the week when i finish them), still not a great one though, but i guess that will come with time and experience. 

Though still another question about the interest rates. My wording probably wasn't the best last time. When the interest rates rose for the first time  it showed other economies that ours was stabalising (becoming less volatile) and as a result allot of foreign investors saw Australia as a safer option, with a better risk vs return ratios than other western markets.
Just recently the chairman of the(american) federal reserve stated that the turmoil of the financial system was abating. So i thought that a further gain in interest rates would further better our stance in the scheme of the world economy. I guess this falls back to the point you made 


Sir Osisofliver said:


> So knowing this do you think another rate rise will have the same effect and do you think everyone agrees with you? (because only the aggregate opinion matters).




One last thing actually, I regularly check com sec for their video reports, would you recommend that i just stick with their research announcements, charting and fundamental analysis for starters, or do factors like media have an impact on stocks that is too big to ignore?

Thanks again for all your help and advice. i will bother you in a week or two once ive done a bit of ground work if thats alright?

Dazza22


----------



## dazza22 (27 October 2009)

albi, im still very new to the game but i might recommend using the asx website to gain a base insight into a particular share, 
heres asx's site for AFT
http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=AFT#chart

It sais that the company was listed in 92 so i doubt its new.You should be able to find the answers to the rest of your questions on there.
Hope it helped Dazza22


----------



## dazza22 (27 October 2009)

Maybe i should have read for another hour before i began asking questions again. Ignore that post thats 2 posts up, since I dont know how/if i can delete it.

Thanks Dazza22


----------



## Albi (4 November 2009)

Hi all,
I have an account in Margin lending on comsec and my credit limit is quiet sufficient. My question is - if I use that credit to buy the shares and sell it on the very same day, Is this naked selling? Can I do this on comsec or not. Some times I am sure that price will go high but due to lack of money I dont buy them.  Your answers will be highly appreciated.
Thanks in advance
Albi


----------



## Sir Osisofliver (4 November 2009)

Albi said:


> Hi all,
> I have an account in Margin lending on comsec and my credit limit is quiet sufficient. My question is - if I use that credit to buy the shares and sell it on the very same day, Is this naked selling? Can I do this on comsec or not. Some times I am sure that price will go high but due to lack of money I dont buy them.  Your answers will be highly appreciated.
> Thanks in advance
> Albi




Albi,

If you buy and sell the same shares on the same day, most market participants (including commsec) will simply credit one transaction off against the other. (This is not naked selling as you own the underlying security that you are selling).  They have other system's in place to stop unusual sized transactions from going ahead. Note however that depending upon the LVR of the stock you wish to purchase this can have a large effect on your credit reserves and borrowing capacity.
Cheers

Sir O


----------



## skyQuake (4 November 2009)

Sir Osisofliver said:


> Albi,
> 
> If you buy and sell the same shares on the same day, most market participants (including commsec) will simply credit one transaction off against the other. (This is not naked selling as you own the underlying security that you are selling).  They have other system's in place to stop unusual sized transactions from going ahead. Note however that depending upon the LVR of the stock you wish to purchase this can have a large effect on your credit reserves and borrowing capacity.
> Cheers
> ...




Just like to add if you Short then cover same day without borrow, then that is naked short selling. Even if you held the position for a minute.
ASIC are pretty strict on that


----------



## johnpat (7 November 2009)

Hi Sir O
I am an experienced fundamental investor.I  believe fundamental investers need to use momentum(tech indicators).After much searching you have been the best starting point by far.
While I wait for your next lesson could you suggest a couple of books for
a fund. investor that wants to use bar charts for buy and sell timing for medium term for indiv.stocks and the market generally.(there are so many ) 
thanks
johnpat


----------



## Sir Osisofliver (9 November 2009)

johnpat said:


> Hi Sir O
> I am an experienced fundamental investor.I  believe fundamental investers need to use momentum(tech indicators).After much searching you have been the best starting point by far.
> While I wait for your next lesson could you suggest a couple of books for
> a fund. investor that wants to use bar charts for buy and sell timing for medium term for indiv.stocks and the market generally.(there are so many )
> ...




Johnpat thanks for your kind words. Read the following: -

(Mis)behaviour of Markets by Benoit Mandlebrot

it will make you question your fundamentals but is highly valuable.

"trading for a living" by Alexander Elder is good, as is...

"Trading Tactics" by Darryl Guppy.

Cheers

Sir O


----------



## johnpat (11 November 2009)

Hi Sir O
Thanks
J


----------



## boratz (12 November 2009)

Sir O,

Many thanks for the time and effort you have put into educating those of use new to these ideas. 

Cheers,
Boratz.


----------



## metal_loz (14 November 2009)

Hi, I am new to the forum and have a quick question.

I want to find the average market return of the All Ords and ASX200. I am on the S&P website and it has the total return and also the price return for only the past 5 years. Where could I find historical data that goes back further?

The price return is lower than the government bond rates, so I am a bit confused on how to use it in the CAPM formula.

Thanks


----------



## vine (16 November 2009)

Can anyone tell me what causes there to be mulltiple single digit share trades in a stock. I have noticed this with a few stocks I hold  esp.GBG over the past few days  Is this normal or is there any significance to this. 
Thx.


----------



## Airfireman (26 November 2009)

Gday all,

Newbie Question:

Why is that the shares market rises with great interest in the first few hours of trading and then slowly fades away by the afternoon????

Do i buy shares in the afternoon and sell in the morning????

Thanks

Tim


----------



## Wysiwyg (28 November 2009)

Airfireman said:


> Gday all,
> 
> Newbie Question:
> 
> ...



Well share markets fall with great interest in the first few hours and rise with vigour by the afternoon too. 

When testing strategies, the fact that most interest is generated at opening and closing times is most important and should be taken into consideration when deciding upon entry and exit times.


----------



## Investor82 (6 December 2009)

Short of experiance what is the best source of education you would recomend. A course, books, a person?

I dont yet have a charting program, which one(s) do you use and why. 
Im looking to develop a trading system (one which will hopefully work ) 

But Im just starting out. 

Cheers


----------



## Sir Osisofliver (8 December 2009)

Investor82 said:


> Short of experiance what is the best source of education you would recomend. A course, books, a person?




I honestly can't answer this question except from a personal level. Everyone will be different so different methods will work for different people. Many people will say that you will not learn until you have something to lose, but I do suggest back-testing as a way of learning how to create a system with positive expectancy and to gain experience. There are several threads on these boards about books and various courses that you can look at.

Gaining an experienced mentor is *invaluable*, but truly difficult to find such people who have the time to devote to your needs. I help the girls in the office learn how to trade, but only spend a hour or so every month doing actualy training.



> I dont yet have a charting program, which one(s) do you use and why.




Market Analyst



> Im looking to develop a trading system (one which will hopefully work )
> 
> But Im just starting out.




Good luck



> Cheers




Hey that's my signoff!!

Sir O


----------



## lasty (8 December 2009)

I would recommend a person.
Experience counts.

As for courses it depends who is running them.
There are many who are charlatans.
When looking into courses I would verified their credentials with  references,industry experiences etc..
I would not listen to anyone who didnt have 20 years experience under their belt in the professional world.


----------



## raytm84 (26 December 2009)

thanks for the posts sir o.

will review it all in a few months to make sure it all sank in!

cheers,
ray


----------



## Onceblue (31 December 2009)

Does anyone know of a calculator that allows you to calculate capital withdrawals and add on interest over a 6 year time frame?

I have a substantial expense $x which will be payable over 6 years in three intallments per year. I have $y saved which is less than $x and I would like to calculate (given an interest rate of $z) how much I need to add to the capital each month to ensure the expense is covered. I've looked at my bank's website but their budgeting tools are very basic.

Also an unrelated query, can a person have more than one CHESS sponsor? and where can I find out more about bonds? It seems to me from Newbie lesson by Sir O in Aug 08 that bonds have more potential than term deposits because they can possibly increase in value, worst case being they just run their term.


----------



## akkopower (31 December 2009)

use excel.

good link to hybrids and the assorted here

http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc

if u search the thraed "hybrid scurities here there is a lond discussion


----------



## Sir Osisofliver (2 January 2010)

Onceblue said:


> Does anyone know of a calculator that allows you to calculate capital withdrawals and add on interest over a 6 year time frame?




Yes I do - and it took me ages to build so you cannot have it.  Make you own - use excel, don't forget anything important.



> I have a substantial expense $x which will be payable over 6 years in three intallments per year. I have $y saved which is less than $x and I would like to calculate (given an interest rate of $z) how much I need to add to the capital each month to ensure the expense is covered. I've looked at my bank's website but their budgeting tools are very basic.
> 
> Also an unrelated query, can a person have more than one CHESS sponsor?



Of course - one for each broker that you deal with.


> and where can I find out more about bonds? It seems to me from Newbie lesson by Sir O in Aug 08 that bonds have more potential than term deposits because they can possibly increase in value, worst case being they just run their term.




There is plenty on these boards about bonds - but I would caution you to remember that anything that can possibly increase in value, *can also decrease in value* if the circumstances are reversed.

So do you know what conditions need to exist for Bonds to increase in value?  The answer to this question is a falling interest rate environment. Would you consider that we are in such an environment at this time?  We have just come up off a 49 year low in RBA cash rates, and the most probable direction for interest rates is upwards.

Cheers

Sir O


----------



## imdrunk (9 January 2010)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*

Hay Sir O, Im a beginner who began to read your effective lessons a few days ago and as i was reading this lesson above there were certain points which i didn't understand.. 

If you decide to pay fortnightly (AND YOU SHOULD), when you get your mortgage documents, if you are paying attention and haven't gone glassy-eyed from reading all the legalese, you will see that they will amortise your fortnightly payments across the year so that you pay exactly the same as someone paying monthly. *You pay exactly the same over the course of a year.*

Lets say example i pay $2500 interest with about $1000 off the principle a month together it equals 3500, If i was to go and enquire about paying fortnightly payment does that mean i get charged higher interest rates? 

Next question is How does a bank have more interest(they like to deal with) in someone who pays interest on credit card debts than a person who borrows $100k on thier $1m House which then allows a bank to lend out as you said about $800k and interest on that? thats exluding the interest being payed on the $100k by the owner of the $1m liabilty, so is liabilty better then debt and if i repay my mortgage fortnightly does that mean i save money and how much? 

sorry for the question and if it wasnt understandable then please let me know so i can clarify them thank you and i appreciate your answer


----------



## Sir Osisofliver (11 January 2010)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



imdrunk said:


> Hay Sir O, Im a beginner who began to read your effective lessons a few days ago and as i was reading this lesson above there were certain points which i didn't understand..
> 
> If you decide to pay fortnightly (AND YOU SHOULD), when you get your mortgage documents, if you are paying attention and haven't gone glassy-eyed from reading all the legalese, you will see that they will amortise your fortnightly payments across the year so that you pay exactly the same as someone paying monthly. *You pay exactly the same over the course of a year.*
> 
> Lets say example i pay $2500 interest with about $1000 off the principle a month together it equals 3500, If i was to go and enquire about paying fortnightly payment does that mean i get charged higher interest rates?




No - your interest rate is subject to a contract (even if the contract states _variable_), neither party can change the contract without the other's permisson. If you have an existing loan agreement where you pay your mortgage monthly, simply change this to a fortnightly payment structure. Instruct your bank to set up a periodic transfer from whateer account you usually pay your mortgage from on a fortnightly basis. DO NOT change your mortgage contract unless you can get a better interest rate in doing so. 




> Next question is How does a bank have more interest(they like to deal with) in someone who pays interest on credit card debts than a person who borrows $100k on thier $1m House which then allows a bank to lend out as you said about $800k and interest on that? thats exluding the interest being payed on the $100k by the owner of the $1m liabilty, so is liabilty better then debt and if i repay my mortgage fortnightly does that mean i save money and how much?




imdrunk -  I think you need to read that section again. If you have a $100k mortgage on a $1m property, then the bank has your million dollar asset as security and has your _unused_ security. It can then use this to lend out to other bank customers, be they other mortgages, credit cards (at much higher interest rates) overdraft facilities etc.

By paying your mortgage fortnightly instead of monthly, over the course of year you will make two *extra* payments. So it is more expensive in the short term to do so. These payments result in significantly fewer payments in the longer term. How much you will save is entirely dependent upon the size of your mortgage.

I hope I answered that correctly and it makes sense.

Cheers 

Sir O


----------



## Onceblue (3 February 2010)

Hi, I'd like to ask a couple of unrelated questions:

1. I'm watching a stock because I hold it and it's dropped in value by 80% (missed the boat to unload it). Anyway I look at the company announcements and they all relate to company share buy backs. I've assumed  that this implies the company has faith in its own stock. However there seems to be a price limit on what the company can pay and according to these notices its still got heaps more buying to do. Is this buy back both propping up the sp and holding it back?

2. I've come accross the term "crystallizing a loss" i.e. selling a share you've lost on and then buying it back at exactly the same price. Is this still a valid method i.e. acceptable to ATO? 

3. Another query I've got is why when you put in a buy order at limit the buy is always executed exactly at that price. Why isn't the order interpreted as "I'd like to buy XYZ and the maximum I'll pay for it is $abc but if you can get it any cheaper that'd be great"? Same with selling at limit.

4. Today I thought it would be good to sell some BHP and I took a look at the market depth to try an get a feel for a realistic asking price. On the buy side of the table was a price of $50 (way more than going rate) and on the sell side was a price of $35 (much lower than going rate). I'd like to know where these prices come from? Was the $50 buyer trying to influence sentiment? Would the transaction have gone through and at what price? I tried to put through a sell order at limit $50 but the system wouldn't accept the order 

5. Also when I've looked at course of sales sometimes there are sales of  single shares. Who would buy or sell just one share? Is it just the system topping up orders? it just dosen't seem worth the brokerage otherwise.


----------



## Trembling Hand (3 February 2010)

Onceblue said:


> 1. I'm watching a stock because I hold it and it's dropped in value by 80% (missed the boat to unload it). Anyway I look at the company announcements and they all relate to company share buy backs. I've assumed  that this implies the company has faith in its own stock. However there seems to be a price limit on what the company can pay and according to these notices its still got heaps more buying to do. Is this buy back both propping up the sp and holding it back?



No idea sounds like a dud.



Onceblue said:


> 2. I've come accross the term "crystallizing a loss" i.e. selling a share you've lost on and then buying it back at exactly the same price. Is this still a valid method i.e. acceptable to ATO?




No. Its called a washed sale and mostly its not allowed.



Onceblue said:


> 3. Another query I've got is why when you put in a buy order at limit the buy is always executed exactly at that price. Why isn't the order interpreted as "I'd like to buy XYZ and the maximum I'll pay for it is $abc but if you can get it any cheaper that'd be great"? Same with selling at limit.



 It is. If there are already offers in the market at a lower price than your limit order and of sufficient volume you get them. 



Onceblue said:


> 4. Today I thought it would be good to sell some BHP and I took a look at the market depth to try an get a feel for a realistic asking price. On the buy side of the table was a price of $50 (way more than going rate) and on the sell side was a price of $35 (much lower than going rate). I'd like to know where these prices come from? Was the $50 buyer trying to influence sentiment? Would the transaction have gone through and at what price? I tried to put through a sell order at limit $50 but the system wouldn't accept the order
> .



 You must of looked outside of trading hours or during the opening and closing acution. See here. Nothing about trying to "influence sentiment".



Onceblue said:


> 5. Also when I've looked at course of sales sometimes there are sales of  single shares. Who would buy or sell just one share? Is it just the system topping up orders? it just dosen't seem worth the brokerage otherwise.



 Only retail  traders pay min brokerage per trade. Instos and brokers pay per volume so it doesn't matter if they do 100 trades of 1 share or 1 trade of100 shares. they could do this for any number of reasons, internal cross so they need a market price, could be leftovers from a uncompleted order, could just be a bored trader.


----------



## Sir Osisofliver (4 February 2010)

Trembling Hand said:


> No idea sounds like a dud.



 +1 What's the company?




> No. Its called a washed sale and mostly its not allowed.



 +1 It's still a fairly grey area as far as the tax department is concerned however.  if it's _obvious_ that it is a wash sale (IE same volume, same day) then the ATO are on firm ground.  If it is not obvious (Different volume, fortnight apart, material news items), then you can say that you had a legitimate reason for re-investment and ATO does not have much of a leg to stand on. BUT - this is no something you want to get wrong. No one likes a tax audit.



> It is. If there are already offers in the market at a lower price than your limit order and of sufficient volume you get them.



 +1 Go read the sticky in the beginners section on opening conditions of the market. 







> You must of looked outside of trading hours or during the opening and closing auction. See here. Nothing about trying to "influence sentiment".



 +1







> Only retail  traders pay min brokerage per trade. Instos and brokers pay per volume so it doesn't matter if they do 100 trades of 1 share or 1 trade of100 shares. they could do this for any number of reasons, internal cross so they need a market price, could be leftovers from a uncompleted order, could just be a bored trader.



 +1

Thanks for that TH - that's almost exactly the answers I would have given.

Cheers

Sir O


----------



## Onceblue (4 February 2010)

Thanks TH and Sir O, I appreciate your input. 

Stock I was referring to is SDG. Not one I'd attempt to "wash".



Trembling Hand said:


> You must of looked outside of trading hours or during the opening and closing acution.



Yes, I was looking outside trading hours, I try not to get caught browsing charts at work.


----------



## Trembling Hand (4 February 2010)

Onceblue said:


> Yes, I was looking outside trading hours, I try not to get caught browsing charts at work.




I believe there is worst thing you can get caught browsing at work.


----------



## Izabarack (8 March 2010)

*Re: Newbie Lessons - Non-commercial packages*

Maybe that's not the correct term; the search function did not return any hits.   I'm tidying up the portfolio in anticipation of a bit more time to devote to learning more and more activity in share investment.   I have discovered I hold a share package currently worth less than $50 on the market.   My understanding is that this package is classed as "non-commercial" at that value and cannot be disposed of on the open market.   The shares are an old spec buy in mining and I just want to clear the holding from my books.

Can anyone offer any advice on what to do?

Iza


----------



## Trembling Hand (8 March 2010)

*Re: Newbie Lessons - Non-commercial packages*



Izabarack said:


> Maybe that's not the correct term; the search function did not return any hits.   I'm tidying up the portfolio in anticipation of a bit more time to devote to learning more and more activity in share investment.   I have discovered I hold a share package currently worth less than $50 on the market.   My understanding is that this package is classed as "non-commercial" at that value and cannot be disposed of on the open market.   The shares are an old spec buy in mining and I just want to clear the holding from my books.
> 
> Can anyone offer any advice on what to do?
> 
> Iza




If its a company share & the shares are still listed and trading you should be able to sell it. Maybe call your broker if you are having trouble selling it when the market opens.


----------



## Sir Osisofliver (8 March 2010)

*Re: Newbie Lessons - Non-commercial packages*



Izabarack said:


> Maybe that's not the correct term; the search function did not return any hits.   I'm tidying up the portfolio in anticipation of a bit more time to devote to learning more and more activity in share investment.   I have discovered I hold a share package currently worth less than $50 on the market.   My understanding is that this package is classed as "non-commercial" at that value and cannot be disposed of on the open market.   The shares are an old spec buy in mining and I just want to clear the holding from my books.
> 
> Can anyone offer any advice on what to do?
> 
> Iza




If it's listed you can transact in the share. Be aware that brokerage may cost you more than the value of the holding so all you will be doing is clearing it out (and probably crystallizing a loss).

Infrequently, listed companies will act to clear out their registries of non-marketable parcels as a brokerage free transaction. 

You might wait for this but if it is a very small company they may not do it for some time.

Cheers

Sir O


----------



## Izabarack (8 March 2010)

*Re: Newbie Lessons - Non-commercial packages*



Sir Osisofliver said:


> If it's listed you can transact in the share. Be aware that brokerage may cost you more than the value of the holding so all you will be doing is clearing it out (and probably crystallizing a loss).
> 
> Infrequently, listed companies will act to clear out their registries of non-marketable parcels as a brokerage free transaction.
> 
> Sir O




Thanks guys.   I'll contact the company first on the chance that, they too, want to do some housekeeping.   Failing that, it will go on the list for the Broker to deal with and I'll just wear the cost.

Iza


----------



## Sir Osisofliver (9 March 2010)

*Re: Newbie Lessons - Non-commercial packages*



Izabarack said:


> Thanks guys.   I'll contact the company first on the chance that, they too, want to do some housekeeping.   Failing that, it will go on the list for the Broker to deal with and I'll just wear the cost.
> 
> Iza




I'd be surprised if they tell you... that information would be considered material and subject to continuous disclosure legislation.

Cheers

Sir O


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## adobee (9 March 2010)

Thought I would post this here rather than a new thread. .. If I have just opened a comsec account with my super and I want to sell some of my current holdings and buy them in the super is it possible to have the broker at cba do this directly ie a cross trade rather than trying to do it on market ?


----------



## skyQuake (9 March 2010)

adobee said:


> Thought I would post this here rather than a new thread. .. If I have just opened a comsec account with my super and I want to sell some of my current holdings and buy them in the super is it possible to have the broker at cba do this directly ie a cross trade rather than trying to do it on market ?




Why not just get them to do an off mkt transfer?


----------



## Izabarack (9 March 2010)

*Re: Newbie Lessons - Non-commercial packages*



Sir Osisofliver said:


> Infrequently, listed companies will act to clear out their registries of non-marketable parcels as a brokerage free transaction.
> 
> You might wait for this but if it is a very small company they may not do it for some time.
> 
> ...




I emailed the company concerned and received a prompt and helpful reply.   The reply tells me that companies can clear out their registries of non-marketable parcels as through a compulsory acquisition process.  After announcing intent and giving notice, the company can dispose of non-marketable parcels by selling them on the market unless shareholders who do no wish to sell, advise in writing in response to the notice.  I did not ask about brokerage and there was no info in the reply on that aspect of the process.

The reply further tells me that no process is in force at the moment (at that company) but triggered by my query, it will be an agenda item at the next board meeting.

Just going to wait for the moment and see what happens next.

Iza


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## Cobweb (29 March 2010)

Hi, i was aware of the advantage of fortnightly payments but had no idea i still had to ask the bank manager not to amortise my payments aswell. Am i understanding correctly, is this the case?


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## Sir Osisofliver (29 March 2010)

Cobweb said:


> Hi, i was aware of the advantage of fortnightly payments but had no idea i still had to ask the bank manager not to amortise my payments aswell. Am i understanding correctly, is this the case?




I don't know cobweb. When you set up trhe mortgage did you do so under a defined monthly or fortnightly payment structure?

If it was monthly and you are paying fortnightly...no problems

If it was fortnightly.....you will need to check and see if the figure they quoted you was an amortised figure. It's standard bank policy to amortise the payments...unless you specify otherwise.

Cheers

Sir O


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## Cobweb (29 March 2010)

thanks for that Sir O, i will be in the market for a house by July so i will be sure to quiz my bank manager about amotisation.


----------



## TMR0412 (30 March 2010)

Hi all,

Thanks for all the good info. in this thread so far. 

Excuse my ignorance for this simple question, but do listed companies have a finite numbers of shares?  I'm pretty sure they don't, but I've heard people say that every time you buy a share there has to be a seller (and vice versa).  I'm not sure what this means.

Many Thanks


----------



## cutz (30 March 2010)

TMR0412 said:


> Excuse my ignorance for this simple question, but do listed companies have a finite numbers of shares?  I'm pretty sure they don't, but I've heard people say that every time you buy a share there has to be a seller (and vice versa).  I'm not sure what this means.
> Many Thanks




G'Day,

A listed company has a fixed amount of shares unless an issue / buyback occurs, when you buy a stock there is a seller on the other side of the transaction with compelling reasons to sell, these are not new shares just part of the current float.


----------



## brty (30 March 2010)

TMR,

All companies have a set number of shares that are listed, this number can change when the company issues new shares. 

When you buy shares on the stockmarket, you are purchasing off other holders of shares in the company. Hence for every buyer there is a seller.

When the company issues new shares, it does so off market, usually to existing shareholders and also to institutions via placements.

brty


----------



## jaydebono (31 March 2010)

Thanks brty,

how does it work when a company runs an employee share plan? do they create new shares for employee's or purchase existing ones from the market?


----------



## brty (31 March 2010)

jaydebono,

They will be new shares issued from the company. The same with options granted to execs. They are options over new shares to be issued.

When a company buys back shares on the market, they are retired. The company does not turn around and re-sell them.

brty


----------



## akkopower (31 March 2010)

What do u mean by retired?

Can they sell them at a future time?


----------



## Edwood (31 March 2010)

Probably more one for the newbie day traders 

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

[FONT=Calibri,sans-serif][FONT=Times New Roman,serif]The life of a newbie trader[/FONT][FONT=Times New Roman,serif][/FONT][FONT=Times New Roman,serif]
 1. Notice a website from a broker, this looks easy, download demo[/FONT][FONT=Times New Roman,serif][/FONT][FONT=Times New Roman,serif]
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 4. Trash Account[/FONT][FONT=Times New Roman,serif][/FONT][FONT=Times New Roman,serif]
 5. Add more to account, thinking that it's just bad luck[/FONT][FONT=Times New Roman,serif][/FONT][FONT=Times New Roman,serif]
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 7. Read BabyPips, and think Oh! now Ive got it![/FONT][FONT=Times New Roman,serif][/FONT][FONT=Times New Roman,serif]
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 11. Get over confident[/FONT][FONT=Times New Roman,serif][/FONT][FONT=Times New Roman,serif]
 12. Lose your new found profits[/FONT][FONT=Times New  Roman,serif][/FONT][FONT=Times New Roman,serif]
 13. Start drinking and smoking[/FONT][FONT=Times New  Roman,serif][/FONT][FONT=Times New Roman,serif]
 14. Give up[/FONT][FONT=Times New Roman,serif][/FONT][FONT=Times New Roman,serif]
 15. Start thinking about it some more[/FONT][FONT=Times New  Roman,serif][/FONT][FONT=Times New Roman,serif]
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 Alas, this is the learning curve of the newbie trader[/FONT][/FONT]


----------



## TMR0412 (31 March 2010)

Many thanks guys, that makes sense.

Could I also ask, what determines the price of a share?  Obviously the more demand the higher the price, but is a company trading at $20 simply worth ten times more than a company trading at $2?

Thanks


----------



## Trembling Hand (31 March 2010)

TMR0412 said:


> Many thanks guys, that makes sense.
> 
> Could I also ask, what determines the price of a share?  Obviously the more demand the higher the price, but is a company trading at $20 simply worth ten times more than a company trading at $2?
> 
> Thanks




The value of the company is share price X shares issued.

So a $3 share like Telstra with 12,443,074,357 issued (market cap 37 bil) is worth a lot more than a company like $20 Flight Center with 99,755,858 shares issued (Market cap 2 bil).


----------



## Trembling Hand (31 March 2010)

akkopower said:


> What do u mean by retired?
> 
> Can they sell them at a future time?




No they are cancelled. That is the point of the company buying them. To reduce the amount of shares on issue and therefore, in theory, increase the value of the remaining shares.


----------



## Cobweb (5 April 2010)

Great thread Sir O, I have read every single post from everyone and although i have learnt before much of what you have written, your insights have reinforced my understanding and filled many gaps in my learning. I cant wait for the next instalment in the series, especially on the TA stuff its been gold. Are you continuing? and when do you think it might be?


----------



## Sir Osisofliver (6 April 2010)

Cobweb said:


> Great thread Sir O, I have read every single post from everyone and although i have learnt before much of what you have written, your insights have reinforced my understanding and filled many gaps in my learning. I cant wait for the next instalment in the series, especially on the TA stuff its been gold. Are you continuing? and when do you think it might be?




Hi Cobweb - glad the info has been helpful.

Work has been crazy busy - and I mostly give up my lunch hour to write this stuff. Writing the technical stuff in an easy to understand format takes time - generally more than a hour given that I'm not the worlds fastest typer. The stuff I do personally with technical analysis is a bit more complex than basic price action, so I'm finding it hard to summon the enthusiasm to write about it. It's easier for me to comment on what others have written (not that I seem to be doing much of that with help from other posters like Trembling Hand, brty, cutz and others). Thanks Guys.

If you want, you could pose a question on something specific and I'll do my best to answer it.

Cheers

Sir O


----------



## Cobweb (11 April 2010)

Sir Osisofliver said:


> Hi Cobweb - glad the info has been helpful.
> 
> Work has been crazy busy - and I mostly give up my lunch hour to write this stuff. Writing the technical stuff in an easy to understand format takes time - generally more than a hour given that I'm not the worlds fastest typer. The stuff I do personally with technical analysis is a bit more complex than basic price action, so I'm finding it hard to summon the enthusiasm to write about it. It's easier for me to comment on what others have written (not that I seem to be doing much of that with help from other posters like Trembling Hand, brty, cutz and others). Thanks Guys.
> 
> ...




Of course Sir O! - I was just enjoying it so much and got to the end of the thread. I look forward to it when it does come.

I don't have any questions at the minute about T/A although I'm sure i will very soon as i am reading up on it all the time.

However I do have a question regarding my girlfriends out of control credit card and personal loan. I thought with your underground banking intelligence you may be able to throw some advice my way, albeit general.

My girlfriend has a credit card that has a credit limit of $8,000 which is maxed out. Interest on purchases is about 12% and interest on cash advances is about 21%. The GF also has a personal loan with the same institution for $9,500 at a rate of 14%.

The personal loan repayment cycle is set at monthly however she is usually making payments weekly.

The credit card has a total of $X for debits on purchases and $X on cash advances. Not until recently were we aware that the cash advance and the interest that goes with it at 21% was not paid off when she made her next payment on the card, instead the interest on these cash advances (and the cash advance fee + the interest attached to this fee) remains until the total balance of the purchases is paid in full. 

On her last statement she was charged $94 in interest on her cash advances and $24 interest on purchases. So the $94 will remain each month until the balance on purchases is repaid (she cant afford to do this at the moment).

We have made an appointment with the bank for this Tuesday. At the moment I see my only option being to refinance the credit card balance onto the personal loan, so she will be paying off a total of $17,000 @ 14.75% over 5 years @ $102 per week. Interest is only charged on the balance.

So she will be paying $20 more in repayments per week than she was but she will have no debt in 5 years (although she will probably find a way to rack up some more for me) and wont be paying just the interest off on her credit card each month.

What i would like to know is:

- Can you see another option for her? 

- given this is over 5 years and where the interest rate cycle is, is it right to go fixed.

- Does what you discussed at the beginning of the thread regarding amortisation apply with personal loans. This is what the bank has said:

              One year is assumed to contain approximately 52 weeks or 26 fortnights. Fortnightly repayments are calculated based on 24 (2 x 12 months) fortnights, weekly calculations as based on 48 (4 x 12 months) weeks. Over each calendar year, the equivalent of one extra month’s repayment is made hence resulting in the loan being paid off sooner than the original loan term entered. 

However the bank then indicated on one of their calculators that the loan would be paid off in roughly about 4.5 years but there is no mention about any interest saved from the 6 month reduction on the loan term. So what have they done here? Have they factored in the interest they would lose from the reduction of the loan term into the monthly repayments over 4.5 years.

Is there anything i can do here - is this a case of them amortising the weekly and fortnightly payments over the year so the term is reduced but i still pay the same amount of interest? Can i ask them to not amortise my repayments in this case.

- Is there anything else I should consider.


Thanks so much for anyone's assistance. ( my appointments in 2 days, sorry for the short notice


----------



## Edwood (11 April 2010)

errrr - sounds like a depreciating asset to me, time for a trade in?

fundamental rule - not just in 'trading / investing', but in life in general - is to cut the losers early, move on, & focus on the winners.


----------



## Edwood (11 April 2010)

unless her dad owns a brewery


----------



## Sir Osisofliver (13 April 2010)

Oops!  I had a long weekend - hope this gets to you in time Cobweb.



Cobweb said:


> Of course Sir O! - I was just enjoying it so much and got to the end of the thread. I look forward to it when it does come.
> 
> I don't have any questions at the minute about T/A although I'm sure i will very soon as i am reading up on it all the time.
> 
> ...



 Don't fall into the trap that by "clearing" the credit card, you now have $8,000.00 available. Banks are quite willing to let you get into a situation where you are working to pay them interest and never clearing the principle. 







> So she will be paying $20 more in repayments per week than she was but she will have no debt in 5 years (although she will probably find a way to rack up some more for me) and wont be paying just the interest off on her credit card each month.
> 
> What i would like to know is:
> 
> - Can you see another option for her?




Plenty of banks are willing to compete for credit card debt. For them it's a fantastic revenue spinner and a chance to cut the other guys lawn. Look at the below link for comparison rates - you will find some that are below the rates she is currently being charged on her interest.

http://www.canstar.com.au/interest-rate-comparison/compare-credit-card-rates.html

Plenty of banks also offer introductory rates on transfer of credit debt from other banks, so if you don't mind the hassle of changing your credit card every few months you can pay *significantly lower* than you currently are.




> - given this is over 5 years and where the interest rate cycle is, is it right to go fixed.



 I cannot provide advice as far as this is concerned. I will tell you however that I think it is likely that rates will continue to go up over the next few years. [/quote]

- Does what you discussed at the beginning of the thread regarding amortisation apply with personal loans.



> Of course




 This is what the bank has said:

              One year is assumed to contain approximately 52 weeks or 26 fortnights. Fortnightly repayments are calculated based on 24 (2 x 12 months) fortnights, weekly calculations as based on 48 (4 x 12 months) weeks. Over each calendar year, the equivalent of one extra month’s repayment is made hence resulting in the loan being paid off sooner than the original loan term entered. 

However the bank then indicated on one of their calculators that the loan would be paid off in roughly about 4.5 years but there is no mention about any interest saved from the 6 month reduction on the loan term. So what have they done here? Have they factored in the interest they would lose from the reduction of the loan term into the monthly repayments over 4.5 years.

Is there anything i can do here - is this a case of them amortising the weekly and fortnightly payments over the year so the term is reduced but i still pay the same amount of interest? Can i ask them to not amortise my repayments in this case.

[/quote] I doubt there is anything you can do it that specific situation (without looking at the loan documents myself). Personal loans are unsecured loans (no asset behind them that the bank can sell and get its' money back). As such they tend to be more militant about the conditions of the loan. 







> - Is there anything else I should consider.
> 
> 
> Thanks so much for anyone's assistance. ( my appointments in 2 days, sorry for the short notice




Hope that helps

Cheers

Sir O


----------



## goponcho (3 May 2010)

Just a quick ty for ur time & effort Sir O, it is appreciated!


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## grim61 (21 June 2010)

Hi Guys,

I have been curious about something for some time (and forgive me if it sounds stupid): If I hold a portfolio of xyz as a longterm investment through a stock standard online broker like commsec, is there anyway I can rent these shares out to short sellers to gain a little extra income from the stocks? - I have only ever really bought and held shares in the past and am interested in finding ways to squeeze more income out of them.

Thanks.


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## Sir Osisofliver (22 June 2010)

grim61 said:


> Hi Guys,
> 
> I have been curious about something for some time (and forgive me if it sounds stupid): If I hold a portfolio of xyz as a longterm investment through a stock standard online broker like commsec, is there anyway I can rent these shares out to short sellers to gain a little extra income from the stocks? - I have only ever really bought and held shares in the past and am interested in finding ways to squeeze more income out of them.
> 
> Thanks.




Grim61,

To be able to do so (at one of the companies I worked at - I'm not clear if it is industry standard) you would need the following: -

1) Sophisticated Investor Status
2) A decent sized Holding 
3) A full service broker (who also shorts)

It may be worth your time in looking at Option strategies for income generation (but using leveraged products in this way is fraught with danger so I would strongly suggest you become very educated about the process).

Cheers

Sir O


----------



## RipnRun (22 June 2010)

Hey guys, 
New to the forum and just thought id say hello and thank you for threads like this one.
Im a complete newb to the sharemarket and finance in general and stumbled across ASF while looking for a place to begin my education, looks like the perfect place to start! 
Im completely blown away at the level of knowledge shown and shared freely here.

Like alot of other people here i too have a background in poker both online and live and am hoping i can eventually transfer some of the skills learned at the tables to my investing. 
I say eventually because even though i cannot wait to start investing im not opening an account until i at least have a decent knowledge base about what im getting myself into, like poker im definatley not looking to gamble and am taking a disciplined path.

So, for the past few weeks i have been completing education modules from the ASX website and have purchased The Intelligent Investor revised edition, and am looking to buy The Universal Principles of Successful Trading by Brett Penfold very soon. 
What im asking i guess is am i getting to far ahead of myself with these books and should just focus on using online resources such the ASX modules for the time being?

Id also love to hear some other suggestions to further my learning. 

Anyways the purpose of this was to say hi and thank members like Sir-O for taking time out their days (and lunch breaks) to educate the uneducated, so again thank you.


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## Jako (23 June 2010)

Hi Sir O, 

I have read through every page of this thread & have found it Fantastic to increase my knowledge of investing broadly & the stockmarket in particular.

A brief history of me.

About 7 yrs ago I took out a stock standard Com Sec account.

I did some dumb things for a couple of yrs & luckily did not lose much money, mind you I didnt start with very much to begin with.

I realised I was not the worlds best stock picker, so I began following someone who invested the way that suited me & that I trusted.
I started following on the coat tails of Robert Millner from WH Soul Pattinson.
If I liked their stock holdings or new picks all I did was to do was obtain a reasonable entry price for the existing stocks or a cheaper one than them for the new investments & I was set.

I invested in SOL initially & began running my ruler over their other investments, some of which I invested in, like NHC TPM CBD etc. others I did not.

While this has served me well, however it's a bit boring & I felt I could/should do more.

About a year ago I started building a stock valuing tool on excell (using FA), it started out very basic, but has developed into quite an ongoing project.
I just about had to get a masters degree in maths to complete it, I have put in more & more things & deleted others, & it's mostly complete now.

So far my small investments havnt done so well, I bought into OKN (have a client taking them to court) so I sold out for a small loss of $36 (incl. brokerage). I also bought into NWH ( henry tax review have killed them & CEO has resigned ) & I still hold them.

I do not have any risk management in place, although I know I should, I dont understand how to go about it, when to use it, or how ??
I look forward to your covering this in the future.

Now for some questions.

How much money should someone have,  before you can go to a Full Broker Service with out them laughing at you after you leave ??

Is there a "Part Broker Service" available ??, to run idea's past them before you invest.

How much does a Full Broker Service cost (round about) ??

No matter how much reasearch I do, Brokers seem to know more than I do. (like other listed investments, land holdings or property holdings etc.) Is this because they can speak to company liaison people and I cant ??

Can I do "stop loss" on my basic Comm Sec account ?? or do I need to change over to another Broker ??

I've got a few more questions, but this will do for now.

Thanks again for your time & effort on this thread.   ..


----------



## Sir Osisofliver (23 June 2010)

RipnRun said:


> Hey guys,
> New to the forum and just thought id say hello and thank you for threads like this one.
> Im a complete newb to the sharemarket and finance in general and stumbled across ASF while looking for a place to begin my education, looks like the perfect place to start!
> Im completely blown away at the level of knowledge shown and shared freely here.




You are welcome I hope you have an enjoyable and successful time here at ASF.



> Like alot of other people here i too have a background in poker both online and live and am hoping i can eventually transfer some of the skills learned at the tables to my investing.
> I say eventually because even though i cannot wait to start investing im not opening an account until i at least have a decent knowledge base about what im getting myself into, like poker im definatley not looking to gamble and am taking a disciplined path.
> 
> So, for the past few weeks i have been completing education modules from the ASX website and have purchased The Intelligent Investor revised edition, and am looking to buy The Universal Principles of Successful Trading by Brett Penfold very soon.
> ...




RipnRun - all Learning is self paced. Do whatever you feel comfortable in doing. I would suggest a couple of books to add to what you have.

The (Mis) behaviour of Markets by Benoit Mandlebrot
Against the Gods by Peter Bernstein

Both of the above can be a bit dry but there are some excellent lessons in there that will challenge what you think you know.

I would also suggest that you learn by doing - just don't use real dollars for now. I trade using systems and most of my successful systems have taken years to refine.  The earlier you start the better you will get at it.

Cheers 

Sir O


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## prawn_86 (23 June 2010)

Jako said:


> No matter how much reasearch I do, Brokers seem to know more than I do. (like other listed investments, land holdings or property holdings etc.) Is this because they can speak to company liaison people and I cant ??




This is because they spend a lot of time, and have access like you suggest. But also its a sales pitch. They seem to know more because they are confident with their analysis. A lot of finance is just bluff and bluster.


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## Julia (23 June 2010)

Jako said:


> How much money should someone have,  before you can go to a Full Broker Service with out them laughing at you after you leave ??



Hello Jako, maybe don't have so much confidence that a so called full service broker (who will charge an arm and a leg in commission) is necessarily going to offer you good advice.
Many years ago, I was in a similar position to that which you appear to be in now and made the naive assumption that a full service broker would (a) have my best interests at heart, (b) be competent, and (c) give me advice that would actually make me money.
They made 14 stock suggestions.  In the belief that they had good reason to advise these stocks would rise I accepted all of them.  At the end of 12 months, (and in a strong bull market at the time) 12 of the 14 had lost ground, some considerably.
I know my experience is far from unique.

Have you considered, in addition to your FA approach, learning something about price movement/charting?



> How much does a Full Broker Service cost (round about) ??



Best to phone a few and ask.
I was paying around $400 on a $15,000 trade.



> No matter how much reasearch I do, Brokers seem to know more than I do.



What is the basis of your belief here?
What evidence do you have?

I also look forward to Sir O's response to these questions.


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## Sir Osisofliver (23 June 2010)

Jako said:


> Hi Sir O,
> 
> I have read through every page of this thread & have found it Fantastic to increase my knowledge of investing broadly & the stockmarket in particular.
> 
> ...



 That is somewhat of a broad topic to cover Jako. There are quite a few threads on here already that do discuss risk management and it would be worth your time to investigate some of them. It really depends however on what sort of investor you are.  Something that suits me dealing with a couple of weeks timeframe would not suit you if you had a timeframe of a couple of months. 







> Now for some questions.
> 
> How much money should someone have,  before you can go to a Full Broker Service with out them laughing at you after you leave ??




Just curious but why the interest in going to a full service broker?

To be brutally honest, unless you have a couple of mill behind you, you will most likely end up with a broker who doesn't have a great deal of experience. New clients to a firm generally go to new (and younger) advisers. Whilst the firms make sure that advisers are compliant at least, this does not mean that the broker you are placed with will know what they are doing. You don't want to end up being someone's churn and burn or learning experience when they are still finding their feet. 

Remember however that many full service brokers are essentially sales people. One individual cannot maintain a good level of fundamental knowledge across every stock in the exchange. They will therefore rely heavily upon the research department of the firm - and you don't want to be some analysts learning experience either. 

I don't wish to speak ill of some of the companies I have worked at and I will mention no names - but I have seen full services brokers comb their client bases for trades, not that are for the benefit of the client, but rather simply to generate revenue for the adviser.

Don't get me wrong, there are good full service brokers out there - but finding them is the trick.


> Is there a "Part Broker Service" available ??, to run idea's past them before you invest.



 No why would you buy the cow if you get the milk for free? If you wanted to ring me up and kick my tires to see if I was any good, the amount of time I would have spent on you would mean I would have lost revenue by not dealing with my other clients who I don't have to convince. You would therefore if you were a small client be wasting my precious time and time wasters get booted pretty quickly.



> How much does a Full Broker Service cost (round about) ??



 As in most things in life this is negotiable. If you bring a sizable account to a broker expect to pay 1% or less on each trade. If you bring a smaller account expect to pay industry standard rates of around 2.5% or a $70-$90 minimum charge.







> No matter how much reasearch I do, Brokers seem to know more than I do. (like other listed investments, land holdings or property holdings etc.) Is this because they can speak to company liaison people and I cant ??




Brokers are immersed in this stuff for a large proportion of their working lives. The generally arrive at work at 7am and have research meetings, read the paper and any new research before the market opens. They are then on the phone whilst the market is open or having meetings with clients and company management. You will frequently see brokers at their desk at 7pm at night. Unless you are prepared to spend the same amount of time - of course they will be aware of a lot of stuff you probably won't be.....but remember - most brokers are salespeople - so the *depth* of knowledge that they have may seem impressive to a layperson, but in reality may be just enough to *sell* you into a position. 







> Can I do "stop loss" on my basic Comm Sec account ?? or do I need to change over to another Broker ??



 Sorry I don't use Commsec I don't know the answer to this question 







> I've got a few more questions, but this will do for now.
> 
> Thanks again for your time & effort on this thread.   ..




No Worries

Cheers

Sir O


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## Jako (23 June 2010)

Julia said:


> Hello Jako, maybe don't have so much confidence that a so called full service broker (who will charge an arm and a leg in commission) is necessarily going to offer you good advice.
> Many years ago, I was in a similar position to that which you appear to be in now and made the naive assumption that a full service broker would (a) have my best interests at heart, (b) be competent, and (c) give me advice that would actually make me money.
> They made 14 stock suggestions.  In the belief that they had good reason to advise these stocks would rise I accepted all of them.  At the end of 12 months, (and in a strong bull market at the time) 12 of the 14 had lost ground, some considerably.
> I know my experience is far from unique.
> ...




Julia,

I am a holder of NHC and recieved a letter from Ord Minnett saying that they have  a full report on the company and it is available to shareholders free of charge (just trying to drum up some extra business no doubt), anyway as a shareholder and someone who has just built a tool on excell to value stocks I was interested in what they would have to say & what value they have on the company compared to mine.

I was sent about 10 pages of company info & how the RSPT may affect the business.

A paragraph in the report talked about their substantial land holdings (which I did not know about) and place a value on them.

I have tryed very hard to know as much about my holdings and any stocks I'm interested in as possible, but I didnt know this.

Interestingly the Ord Minnett report placed a current value & a future value very close to the value the excell tool I built.(within .20 cents), so atleast I'm sort of on the right track.

Finally, yes I am looking into charting and trends, both for sectors & individual stocks.

Thanks for your reply


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## Sir Osisofliver (23 June 2010)

Jako said:


> Julia,
> 
> I am a holder of NHC and recieved a letter from Ord Minnett saying that they have  a full report on the company and it is available to shareholders free of charge (just trying to drum up some extra business no doubt), anyway as a shareholder and someone who has just built a tool on excell to value stocks I was interested in what they would have to say & what value they have on the company compared to mine.




Jako,

The share registry of NHC is able to be viewed *by anyone*, including those people who would want to market to the shareholders on that list. (This means you).

Broking houses can therefore pay a fee (and with the permission of the company in question) and can take the full shareholder list with which to engage in marketing activities. Usually if they provide something free of charge (such as the reseach report you describe) such permission is willingly granted. (especially if it is a complementay research report)

You see full service brokers in Australia are not allowed to cold call or directly solicit (yes that is the correct word) for clientele. What they can do however is market in the above fashion. Once you have contacted them (yes I would like your research) they then have your details on file and can now contact you.  You must request to be removed from their computer systems via their compliance officer in accordance with the privacy policy of the firm. (which is generally in writing).

You are correct that broking houses do this to drum up business, guess which type of adviser deals with queries?  Yup new advisers still trying to build their client bases. 



> I was sent about 10 pages of company info & how the RSPT may affect the business.
> 
> A paragraph in the report talked about their substantial land holdings (which I did not know about) and place a value on them.
> 
> ...




Don't be too concerned that you didn't know a particular fact about a stock you hold. Everyone makes decisions in the absence of perfect infomormation.


Cheers

Sir O


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## JimBob (23 June 2010)

Jako said:


> Can I do "stop loss" on my basic Comm Sec account ?? or do I need to change over to another Broker ??




You can do Stop Loss order on Comsec, they have Conditional Trading that you have to complete a short quiz on in order to have it activated on your account.  It can cost between an extra $10-$15 depending on what type of order you do.  I cant recall how to get it activated but you should be able to find a 'Conditional Trading' tab somewhere when you log in to your account which should help you out.


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## bullet21 (22 July 2010)

hey guys,

first question im ever posting and thanks for the wealth of information in the past.

Ive been looking into trading Index futures and have been reading lots of the books recommended on this forum as well as other web sites.

what i dont understand is how does short selling of Index futures work. With a stock, you anticipate decline, sell the borrowed stock then buy it back once it bottoms out. The differance is your profit.

So if you anticipate the DAX is going to fall, how does one short sell it? what are you borrowing and where is the money come from.

sorry for the newbiness but i cant get my head around it.


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## brty (22 July 2010)

bullet,

When you open a sale of a futures contract, it is just that, a contract. If you wish to open to go short, all that happens is a new contract is opened with a  buyer, an agreement about a time in the future that you will deliver $xxx worth of the DAX. (futures contracts are set sizes) There are always plenty of both buyers and sellers available in a liquid market. In an illiquid market your spread will be wider.

You will have to deposit a margin for opening the trade, your broker will tell you how much as it can vary depending upon the volatility of the index. You will also have to monitor the trade because if it goes against you, you can be asked for more deposit to make up to a level called the maintenance margin.

When you close out the contract, buying in your case, the contract is effectively canceled and disappears off the 'open interest'.

brty


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## Albi (28 July 2010)

I am currently holding MST. They have announced share purchase plan with existing share one share and three options. They have different catagory of options. As I have never traded options,  I dont know what it is. I am thinking to take offer, but confused with options and what would I do with options. As like shares, I can sell options also or options are just right, that i cannot sell. Can anyone explain this. Thanks in advance


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## Sir Osisofliver (2 August 2010)

Albi said:


> I am currently holding MST. They have announced share purchase plan with existing share one share and three options. They have different catagory of options. As I have never traded options,  I dont know what it is. I am thinking to take offer, but confused with options and what would I do with options. As like shares, I can sell options also or options are just right, that i cannot sell. Can anyone explain this. Thanks in advance




Many of your answers are contained in the announcement from the 15th of July http://www.asx.com.au/asxpdf/20100715/pdf/31rbr4k82ly3sv.pdf

I cannot provide advice to you as to whether this is something you should do.

Be aware however that the issuance will be a *listed company option*. As such the option will be traded on the exchange in the form of a four letter code. EG MSTO

Go here to learn more

http://www.asx.com.au/resources/education/audio_visual/clips.htm


Cheers

 Sir O


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## 5424577 (18 August 2010)

I thank you sir osiso - you have changed my point of view and will continue to improve and serve this soceity well.


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## Nayte (26 August 2010)

Just wanted to say thanks to everyone that's posted in this thread, really informative stuff!


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## Albi (28 August 2010)

Hi Guys, I have started trading in in september 2009 with 10k. I sold just one stock in profit and rest I am still holding, bought for long term for my kid. I have to fill the tax return. Could you please advice me- do I need to pay tax on whole ammount or just the profit. Currently i am in loss. My 10 k is now 7 k. I am confused how to fill. Any advice will be highly appreciated. Thanks in advance.


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## trainspotter (28 August 2010)

Hi Albi ..... get an accountant to explain it to you. FWIW ..... the loss you have suffered "could" be tax deductible offsetting your "profit" you have made. (10k is now 7k) Depends also on which stock you sold ? Was it an Australian company? Were there any dividends paid during the holding of the stock? 

Get an accountant to look at it with a neutral point of view. IMO.


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## Julia (28 August 2010)

Albi said:


> Hi Guys, I have started trading in in september 2009 with 10k. I sold just one stock in profit and rest I am still holding, bought for long term for my kid. I have to fill the tax return. Could you please advice me- do I need to pay tax on whole ammount or just the profit. Currently i am in loss. My 10 k is now 7 k. I am confused how to fill. Any advice will be highly appreciated. Thanks in advance.



I'm not sure whether females are allowed to reply to your post addressed to 'Guys"?

You can offset capital gains against capital losses.  You do not take into account any profits which are at present unrealised.

So if you have a realised capital gain (a sold stock) of, say, $1000, you can offset this against $1000 of any capital loss.
Any remaining capital loss can be carried forward for use in future years against future capital gains.

May I make a couple of suggestions?
1.  You do some reading about how shares are taxed including the use of franking credits.

2.  If you're down to $7000 from your original $10,000 in less than a year, you consider standing aside from the market until you've found a more successful approach.
Sorry if that sounds unkind, but in this market if you maintain your current strategy, whatever that is, you could end up doing your entire $10K pretty quickly.


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## Tysonboss1 (28 August 2010)

Albi said:


> Hi Guys, I have started trading in in september 2009 with 10k. I sold just one stock in profit and rest I am still holding, bought for long term for my kid. I have to fill the tax return. Could you please advice me- do I need to pay tax on whole ammount or just the profit. Currently i am in loss. My 10 k is now 7 k. I am confused how to fill. Any advice will be highly appreciated. Thanks in advance.




You only have to pay tax on your profit, for example.

If you bought some shares for $1000+$30 brokerage and later sold them for $1300 - $30 brokerage you have made a capital gain(profit) of $240.

you have to pay tax on the $240 so it will be added to you income for that year.

One thing that will change this is if you have held for more than 12 months. If you have held for more than 12 months you will get a 50% capital gains discount. Meaning only half your gain is taxable so only $120 will be added to your taxable income.


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## Sir Osisofliver (30 August 2010)

Hi Albi,

You should speak to your accountant. If you do not have an accountant you should investigate yourself using the ATO website and call lines as your guide.  website is http://www.ato.gov.au/ the search function is quite efficient and will answer all your questions.

If you get something you are not sure of feel free to ring them on http://www.ato.gov.au/corporate/content.asp?doc=/content/15754.htm&mnu=4084&mfp=001 

Regards

Sir O


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## prawn_86 (31 August 2010)

Sir O (or others),

Whats your thoughts on ways for those starting out to make sure they are beating inflation with their returns, but not with enough saved to make it worthwhile purchasing a property?


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## Albi (1 September 2010)

Thanks all guys and girls, ladies  and gentlemen and all of my ASF friends for your advice. Yeah it is quiet depressing that I could not be successful in my share trading. I think my luck is not working. Instead of making research, getting advice, my shares are still down except one, from which I got profit. I will ring ATO. Thanks
Albi


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## youngone (15 October 2010)

prawn_86 said:


> Sir O (or others),
> 
> Whats your thoughts on ways for those starting out to make sure they are beating inflation with their returns, but not with enough saved to make it worthwhile purchasing a property?






What about the Aussie $$. Its going very strong atm. im a noob too


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## explod (15 October 2010)

prawn_86 said:


> Sir O (or others),
> 
> Whats your thoughts on ways for those starting out to make sure they are beating inflation with their returns, but not with enough saved to make it worthwhile purchasing a property?




This is a connundrum.  Foremost guidance in this direction and at this level borders on financial advice.

Second there is no "make sure".

If I was wanting my Son to go forward I would say, you need ballance and you need stability.  Focus on companies essential to the general community.

A good food stock that is performing reasonably, say WOW, Woolworths, mainly dividends but growth equal to inflation.    A solid coal producer.  A power producer.

In all investments the sector must be performing well with a medium term good outlook.  The company also, trending up.   Little or no debt, and they can be found.

Some in term deposits but not tied up too long.

He he he.   Some gold, some silver in physical form whilst it is trending up.  

Get to know your local Real Estate Agent and talk to him and the staff, get to know them and learn well before you embark.

Diversification ballance is tricky, too many stocks etc and you can lose sight of where you are going, too few and you risk your equity base.
Just a small brief, hopefully others can add.


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## gt88 (26 October 2010)

Hi all,

Ive read a lot of people say that you should do your own research into companies. What resources do people use? At the moment I currently have a read of the annual report (more specifically the financial reports) and look through the Commsec financial data section. What other resources should/can I use to investigate into companies and its industry.

Cheers


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## Frankie (28 October 2010)

Hi gt88,

E*TRADE has some great tools that help me research companies. You can find these tools under the Quotes and Research tab on their website.

I though I’d share below 2 tools I find really useful:

*1) ANALYST RESEARCH*
You will find a number of analysts that offer their stock recommendations! Some of the topics covered include – stocks to watch, stock of the week, market outlook etc

*2) BASIC STOCK FILTER*
The stockmarket is comprised of many different sectors - energy, financials, health care etc. This filter helps me find stocks recommended for the sectors I'm interested in. Let’s say I'm looking for a “strong buy” in the energy sector. This filter will provide me with a list of stocks that have been researched by Aspect Huntley.


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## joea (29 October 2010)

Frankie said:


> Hi gt88,
> 
> 
> *1) ANALYST RESEARCH*
> ...


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## Frankie (29 October 2010)

Hi joea,

Are you asking whether I believe my own company research can provide better results than the research I can get from my analyst?

If so, the answer is a big fat NO!​
When it comes to company research I'm really just as clueless as the next guy. There just ain't enough hours in the day to go through the fundamentals of every firm.  I believe that smart traders let others do the research for them.

Research firms have the people, the resources and the money to do all the fundamental research I’ll ever need.

This is what I do. I bring up a chart for each stock recommended on my providers list. If I see a chart I like, I set my profit and loss targets based on the price action of the chart. By doing this fundamental and technical analysis are combined together.

Why waste countless hours in life searching for good companies to trade in when someone else can do all of this for me?


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## joea (30 October 2010)

Hi Frankie.

No, I mean when they give you the recommendation do you get the info. in time to make the most of the price movement or is the recommendation just for the stock, and you make the decision when to buy in.
Some recommendations come with a price to buy and the value of the stock.

I also get a recommendation from  a broker, but they generally have discussions with the company then give a overview of the opportunity.
But these are for emerging stocks.
I actually think there is a much better service from some of these guys now than there was a few years ago.
And I agree with you, to go through all the figures yourself is painful. I got a mate doing that, and he spends more time going over the figures than actually trading.

Anyway good on you if you are getting the results.

Cheers


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## Frankie (31 October 2010)

Hi joea,

You’ve brought up a really interesting topic of discussion when it comes to stock picks.

There are 2 types of research analysts.

*Broad analysts
Specific analysts​*
The broad analyst produces a list of stock picks with a broad recommendation to buy, hold or sell various stocks.

The specific analyst goes one step further and tells you what price to buy and what price to sell the stocks recommended.

My trading plan is simple.​
I want to trade in and out of the same stock over a long period of time. Stated simply, I want to take “bites” out of a developing trend.

To answer your question above, it is totally ok if I miss the initial publication of my analyst buy recommendation. In fact, I prefer to enter the stock recommended some time after the initial publication date!

Why?​
I want to see evidence that the stock recommended is heading in the direction that my analyst predicted before jumping in. The price action provides me confirmation that my analyst has done his homework.


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## gt88 (14 November 2010)

Is there anyway to find out how many options a company currently has outstanding? I know you can look at the annual report but that shows the options for that prior period. I'm want to find out how many options are outstanding at present. Is this information attainable? If so, where can I get my hands on it?

Cheers


----------



## gt88 (14 November 2010)

Just in regards to my post above (sorry the edit button was available), I want to know how the EPS for dilution is calculated. If we take Forge Group (FGE) as an example, they have 7,522,527 options outstanding used to calculate the dilution EPS. At note 5 they show the options balance at 30/06/10 for the managment which is 3,410,000. How do they come up with 7,522,527?


----------



## pixel (14 November 2010)

gt88 said:


> Is there anyway to find out how many options a company currently has outstanding? I know you can look at the annual report but that shows the options for that prior period. I'm want to find out how many options are outstanding at present. Is this information attainable? If so, where can I get my hands on it?
> 
> Cheers




Hi gt88,
while there may be easier tabulations put out by some data providers or brokers, this is what I do. It's free and as up to date as can be.

Visit the ASX website and look for Announcements on the left:
http://www.asx.com.au/asx/statistics/announcements.do

Type in the code of the company in question and ask for the full year; for Neptune Marine, NMS, I get:
http://www.asx.com.au/asx/statistics/announcements.do?by=asxCode&asxCode=nms&timeframe=Y&year=2010

Then browse down to the most recent Appendix 3B - for NMS it's this one:
http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01115998
That PDF will show all instruments currently on issue: Shares, listed and unlisted Options, complete with expiry dates and strike prices. Unless the company secretary has made a mistake in adding up, that set of numbers will give you the most accurate and reliable figure for shares on issue and potential dilution.


----------



## Albi (15 November 2010)

Hi
I have bought a small punt of arw share in spp and they also gave options at no cost for each share. I dont have any knowlege how the option works. I know that 1 option is equal to 1000 shares. Am I right?  If I have to buy the ARW shares, how can I utilise my options. Do I have to contact company to buy shares. I do online, but I didnot see  anything that is asking if you have options of that company already.
Thanks in advance.


----------



## pixel (15 November 2010)

Albi said:


> Hi
> I have bought a small punt of arw share in spp and they also gave options at no cost for each share. I dont have any knowlege how the option works. I know that 1 option is equal to 1000 shares. Am I right?  If I have to buy the ARW shares, how can I utilise my options. Do I have to contact company to buy shares. I do online, but I didnot see  anything that is asking if you have options of that company already.
> Thanks in advance.




This kind of (company) options is different from the ETOs that you appear to refer to. A company option, e.g. ARWO, simply gives you the right to buy one share at the strike price on or before end date.
ARWO options have a strike of 1c and expire in December 2011. Therefore, you can (but don't have to) convert those options into shares by paying 1c per conversion. As to "How", you will receive (I already have received) a 1-page form that you can use to exercise that right. All you have to do is fill it out, attach a cheque, and you'll receive a holding statement, saying you're owning shares instead of options.

Of course, you can also and just as easily instruct your broker to sell the options. They are trading at roughly the difference between ARW's share price and the 1c strike/ conversion amount.


----------



## matthewdean (15 November 2010)

Tysonboss1 said:


> You only have to pay tax on your profit, for example.
> 
> If you bought some shares for $1000+$30 brokerage and later sold them for $1300 - $30 brokerage you have made a capital gain(profit) of $240.
> 
> ...




This is the information Ive been after for the past hour!
Cheers my friend.


----------



## pierrebfg (16 November 2010)

Hi Everyone, 

This is proberly a easy question but can someone advise where I can get for any certain stock the daily price,  daily high, daily low and daily volumn?
I know on the ASX website I can get this info for the last 5 days it has traded but where can I get this info for a bigger time frame? (1 month, 6 months, 1 year)

Thankyou regards Wes


----------



## Tanaka (16 November 2010)

Google Finance -  just type 'ASX:BHP' into google and it will take you there. for highs and lows make sure you change the settings to candle sticks


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## pierrebfg (16 November 2010)

Thanks Tanaka


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## burglar (24 November 2010)

pierrebfg said:


> Hi Everyone,
> 
> This is proberly a easy question but can someone advise where I can get for any certain stock the daily price,  daily high, daily low and daily volumn?
> I know on the ASX website I can get this info for the last 5 days it has traded but where can I get this info for a bigger time frame? (1 month, 6 months, 1 year)
> ...




My online broker, Netwealth, has 1 year history (rolling) with open, close, high, low, volume & value.
Free to join, but need to link to your bank account and some rigmarole too.


----------



## ginar (24 November 2010)

pierrebfg said:


> Hi Everyone,
> 
> This is proberly a easy question but can someone advise where I can get for any certain stock the daily price,  daily high, daily low and daily volumn?
> I know on the ASX website I can get this info for the last 5 days it has traded but where can I get this info for a bigger time frame? (1 month, 6 months, 1 year)
> ...




yahoo is a good free option and you can save it in formats to feed various chart software , this page is for bhp so you get the drift . just get a quote on whatever stock and click historical prices in left hand column . other option is to google free asx data , there are many sources out there . use google , its quick and easy


http://finance.yahoo.com/q/hp?s=BHP.AX+Historical+Prices


----------



## burglar (24 November 2010)

gt88 said:


> Hi all,
> 
> Ive read a lot of people say that you should do your own research into companies. What resources do people use? At the moment I currently have a read of the annual report (more specifically the financial reports) and look through the Commsec financial data section. What other resources should/can I use to investigate into companies and its industry.
> 
> Cheers




10 years ago, I used quarterly reports, and built a short watchlist.
And every trading day, trawl the announcements for interesting or positive headlines at the ASX link below: 
http://www.asx.com.au/asx/statistics/todayAnns.do

Good luck


----------



## ugotdan (24 November 2010)

Hi pps,

I have recently been studying books on options. It seems there is a TON of info to consider before trading, and it is difficult to keep track of it all. So to get it all in order, I put a list of checks together.
I know it's ridiculously long, but once I get the hang of it, hopefully it will come naturally... Are there any obvious/specific items you would add/subtract? 
Maybe some other newbies can use it too... (if it's any good)

1.	ID Stock 
   a.	Fundamental Analysis - Annual Report
   b.	Technical Analysis. - Not well studied here, mainly historical high/low +  support & resistance
2.	Assess direction of stock
3.	Assess Implied Volatility of stock – Analyze the IV of the underlying.
4.	Assess Delta & Gamma – Assess net delta for possible strategies.
5.	Assess Theta & time frame of movement  
6.	Select Strategy 
7.	Calculate max risk 
8.	Calculate profit targets 
9.	Calculate break even point 
10.	Review risk vs. reward 
11.	Trade Management/Capital to allocate...
12.	Trade Journal - records/reference
   a.	Make a note on your position
   b.	Notes on Stock 
   c.	Fundamental Analysis notes
   d.	Technical Analysis notes
   e.	Option Strategy chosen, why?
   f.	Max risk, reward & BE
   g.	Exit Strategies
   h.	Possible Adjustments
   i.	Review Trade & comment
   j.	Closure on exit
   k.	Win/Loss result, why?
   l.	Improvements 
13.	Open Position

Any feedback good or bad is welcome.


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## burglar (24 November 2010)

"Taming the Lion" by Richard Farleigh

It is the best book on trading that I've ever read!
Readability and content, I gave it ****

He lost over 100 Million pounds in "the Tech Wreck".             

Why should he teach us about investing??


Because afterwards, he still had millions left !!


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## pierrebfg (26 November 2010)

Thanks for all your posts to my last question. 
I have another one.
I have money in my trading account. If i buy shares when can i sell? 1 min later? 1 day? How long do i have to wait?
What is meant by the following?
Naked short selling is prohibited. Covered short selling is 
available only through CommSec's Term Short Selling 
facility. Therefore, in placing this order you are confirming 
that you own the stock you are selling and that the order is 
a regular "long sale" (not a short sale).

All your posts are appreciated, as you can see I'm pretty new to this whole thing and are learning a lot


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## Sir Osisofliver (26 November 2010)

pierrebfg said:


> Thanks for all your posts to my last question.
> I have another one.
> I have money in my trading account. If i buy shares when can i sell? 1 min later?



 Correct. Once you've purchased the shares they are yours to do with as you please, including sell them. 







> What is meant by the following?
> Naked short selling is prohibited. Covered short selling is
> available only through CommSec's Term Short Selling
> facility. Therefore, in placing this order you are confirming
> ...



  This basically means that you cannot sell shares you don't own, except in very limited circumstances. You will need to read Commsec's section of short selling to find out which possible shares you can do this with. I would also suggest that you search these boards for "short selling" where there is plenty of material. a Regular long sale refers to simply a sale in which you own the shares and is the opposite of short selling.







> All your posts are appreciated, as you can see I'm pretty new to this whole thing and are learning a lot




Cheers

Sir O


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## pierrebfg (26 November 2010)

Thanks for that. I didn't realise you could sell shares if you didn't own them.


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## burglar (26 November 2010)

pierrebfg said:


> Thanks for that. I didn't realise you could sell shares if you didn't own them.




"1969–1970: The Poseidon bubble (a mining boom triggered by a nickel discovery in Western Australia) caused Australian mining shares to soar and then crash, prompting regulatory recommendations that ultimately led to Australia's national companies and securities legislation."
Source http://en.wikipedia.org/wiki/Australian_Securities_Exchange

I believe that "selling short" caused the boom!
The subsequent bust caused a ban on "selling short" in Australia for many years thereafter!

I heard that brokers turned their backs on clients to trade with each other! *testosterone*
Funniest part of all is that there wasn't all that much nickel there (IT'S STILL IN THE GROUND TODAY) - and it was Lateritic Nickel to boot! (a newbie may want to google Lateritic nickel, it would be instructive to know)


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## burglar (26 November 2010)

Sir Osisofliver said:


> Cheers
> 
> Sir O




Sir O,

Love this post - learnt a lot - thanks heaps


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## Squillion (2 December 2010)

Hi Guys,

I'm brandnew to trading and this site, came across it doing some research and looks like a good spot to learn. 

Question - 

I have made my first trade, all going well so fair. Moving onto second trade I have two stocks I am interested in and only enough funds for one buy.

Can I have two open buy orders at the same time and witch ever is filled first is the stock I will end up with?

I'm using ANZ E-Trade. And at his stage I can only seem to be able to place one order per amount of funds available in trading account.

Hopefully I'm in the right section for this and someone can help.

Thanks


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## burglar (2 December 2010)

Squillion said:


> Hi Guys,
> Hopefully I'm in the right section for this and someone can help.
> 
> Thanks




Yes and yes. My typing is slow, be patient, or do call in later.


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## Julia (2 December 2010)

Squillion said:


> I have made my first trade, all going well so fair. Moving onto second trade I have two stocks I am interested in and only enough funds for one buy.
> 
> Can I have two open buy orders at the same time and witch ever is filled first is the stock I will end up with?
> 
> ...



I'm puzzled as to why you don't simply phone Etrade and ask them, rather than depend on what could be incorrect advice on a forum?

As far as I know Etrade will not accept an order (orders) for an amount which exceeds the amount in your cash a/c.
You have obviously already discovered this.


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## burglar (2 December 2010)

Squillion said:


> Hi Guys,
> 
> I'm brandnew to trading and this site, came across it doing some research and looks like a good spot to learn.
> 
> ...




1. Nice wheels.
2. Some people here are helpful, nice, professional, downright, forthright or all of the above! 
3. Read this thread from beginning. Sir O is F****ng brilliant.
Don't let on, it may make his day! 
4. Re-read this thread from beginning if you need to. 



Squillion said:


> I'm using ANZ E-Trade. And at his stage I can only seem to be able to place one order per amount of funds available in trading account.



That seems normal, I am with Netwealth.
Total of all Buy orders must be covered by funds available.
Gets easier after profits. 



Squillion said:


> Can I have two open buy orders at the same time and witch ever is filled first is the stock I will end up with?



Probably not, the first may fill, then the second may fill, you look them up and you have them both! If you're lucky you can cancel one if the other fills.
All depends when conditions are met!

Welcome to ASF and lucky trading!
burglar


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## Squillion (2 December 2010)

Julia said:


> I'm puzzled as to why you don't simply phone Etrade and ask them, rather than depend on what could be incorrect advice on a forum?




I work in the mines and am currently on swing, Mobile phones are not permitted on site. This in mind making phone calls while on a computer between business hrs is quite difficult.

Someone’s answer will be proven to be correct or incorrect when I have the chance to check there feedback on line. This dose not mean I will or would take someone advice on a forum as gospel in any situation.

I'm simply trying to get some info to keep the ball rolling and move forward until I’m home and can be on the phone and online at the same time between business hrs.

Thanks for your feedback.


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## Squillion (2 December 2010)

Thanks burglar,

I Haven't been though the hole thread but will take the time over my weekend to do so.

The reason I ask is one of the guys at work can set up multiple trades for the day and under the one amount of funds. I believe he is on the Westpac equivalent of E-Trade.
And I thought there may be a few more E-trade users about to help with my inquiry.

Thanks again


----------



## burglar (2 December 2010)

Squillion said:


> Thanks burglar,
> 
> I Haven't been though the hole thread but will take the time over my weekend to do so.
> 
> ...




Serious business first.

There are ETraders about. 
ETrade have conditional trades ... of that I am certain.
These conditional trades attract a premium brokerage  ... of that I am certain.
They are ideal for a working man ... of that I am certain.
You'll need edumicating to understand the intricacies of these 
a). to avoid pitfalls
b). to take strong advantage of them esp. as they will cost more.

Find an ETrader ... well worth it.

Find a mentor ... it may save your sanity!! 

Now pedantics (just for fun) 
I use google when I need spillchecker, in separate tab, and it sez "did you mean says"
I asked Joe Blow, he said spillchecker is coming soon

Most here don't care bout spelling, I'm just getting used to it . I like to hav a bit of fun with it! 

Cheers,
burglar


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## jzell67 (4 December 2010)

My first post and im all excited.

Decided to use shares as my way to get rich (yeah right ) as i cant get a home loan as 50% of my earnings are from Workers comp payments. Saved enough for a deposit but oh well....

So here i am sucking in everyones experience and will hopefully come out of this with heaps of knowledge...

So thanks everyone who takes the time to post, this newbie appreciates it


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## Julia (4 December 2010)

That must be disheartening for you.  Do you anticipate being able to get back to work?


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## burglar (4 December 2010)

jzell67 said:


> My first post and im all excited.
> 
> Decided to use shares as my way to get rich (yeah right ) as i cant get a home loan as 50% of my earnings are from Workers comp payments. Saved enough for a deposit but oh well....
> 
> ...




Yeah! Ouch!
If my kids could afford own house, I would not be investing.
I would not be investing if Kevvy had made houses affordable.
But for the stoopid new tax, I would be doin' Ok


----------



## nunthewiser (4 December 2010)

Please refrain from Hijacking this Very valuable thread with crap.

Thankyou.

sorry for sticking my 2 cents in Mr O 

keep up the good work


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## Julia (5 December 2010)

nunthewiser said:


> Please refrain from Hijacking this Very valuable thread with crap.



Seconded.
Ditto various other threads.


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## Sir Osisofliver (6 December 2010)

Geez I go on a weeks holiday.... 

Looks like everything is up to date in this thread

Cheers

 Sir O


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## splintax (10 December 2010)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



Sir Osisofliver said:


> Lets say you have a piece of property worth $1M and you want $100,000 to go invest it into the share market.  You rock up to your bank manager and make the request and he says something along the lines of..."Hmmm investing it into the market? I'm not sure, let me see what I can do I'll have to ask head office." (This by the way if you can't recognise it is a sales technique).  Inside the bank manager is jumping up and down, because for loaning $100,000, they now have *as security* a $1M asset. This security then *lets the bank lend out about a further $812,000 to other lenders*.  You are most valuable to a bank when you have large assets and small liabilities, because they get to _use your assets to make more money on top of the interest that you get charged_. Neat eh?




I don't understand how the bank can use your house as security for other's debts. If you default, the bank can only take enough to satisfy your debt. The net proceeds are returned to the mortgagor. Am I missing something?


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## pierrebfg (10 December 2010)

Partial order.

Hi I had a order in for about 250000 units, i was able to buy only half of these today so there is still a order for 125000. My broker is comsec, do i have to pay the brokerage twice? I did look it up and it said yes but then it went on to say if under $10,000 you only pay upon the first transaction. Can someone who uses comsec clarify? I just want to double check. 
Thanks in advance for your help.


----------



## Julia (10 December 2010)

Pierre:  you will not pay twice.  Usually the brokerage for the full order is charged on the first part of the order that is filled, and then the remainder is filled when sufficient shares are available.

However, I'm not sure what would happen if you were charged the full brokerage and then subsequently decided to cancel the balance of the order.
I've never done it.

Someone will know.


----------



## So_Cynical (10 December 2010)

Julia said:


> However, I'm not sure what would happen if you were charged the full brokerage and then subsequently decided to cancel the balance of the order.
> I've never done it.
> 
> Someone will know.




I've done this a couple of times...comsec don't give you a brokerage discount or anything because your whole order wasn't filled...ive always cancelled the rest of the order that wasn't filled so i have never got to find out what happens if its left open. :dunno:


----------



## pierrebfg (10 December 2010)

Thanks Julia


----------



## Sir Osisofliver (13 December 2010)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



splintax said:


> I don't understand how the bank can use your house as security for other's debts. If you default, the bank can only take enough to satisfy your debt. The net proceeds are returned to the mortgagor. Am I missing something?




Hi Splintax,

What's unclear here?  The bank have your asset as security. Therefore they can make loans that are covered by that security. Whilst if you default on your loan the bank will sell the property and return any net proceeds to you... No bank only has a single client...and every bank has procedures to ensure as few defaults as possible. This is why the property crisis in America was so damaging.  The numbers of defaults was so large that it threatened to topple some of the biggest companies in the world...because they were using the security of those houses in the manner I described.

This is also why bank are subject to capital adequacy ratio's (To ensure that the bank has enough funds to carry them through in the event of multiple defaults).

Clearer?

Sir O


----------



## jun1031 (13 December 2010)

Hi all,

Im not sure if i am suppose to post it here but i have a question regarding buying a share. I have recently bought KGL; and when i looked at the purchase price it was at an average of .205. But it never reached .205. Is this possible? i use comsec. Hopefully some one can help me!

Cheers


----------



## Sir Osisofliver (13 December 2010)

jun1031 said:


> Hi all,
> 
> Im not sure if i am suppose to post it here but i have a question regarding buying a share. I have recently bought KGL; and when i looked at the purchase price it was at an average of .205. But it never reached .205. Is this possible? i use comsec. Hopefully some one can help me!
> 
> Cheers




Sometimes the broker will give you a price that includes the brokerage charge. I don't use commsuck though, but that would be my guess.

Cheers

 Sir O


----------



## nomore4s (13 December 2010)

jun1031 said:


> Hi all,
> 
> Im not sure if i am suppose to post it here but i have a question regarding buying a share. I have recently bought KGL; and when i looked at the purchase price it was at an average of .205. But it never reached .205. Is this possible? i use comsec. Hopefully some one can help me!
> 
> Cheers




Average cost might include brokerage?


----------



## awg (13 December 2010)

jun1031 said:


> Hi all,
> 
> Im not sure if i am suppose to post it here but i have a question regarding buying a share. I have recently bought KGL; and when i looked at the purchase price it was at an average of .205. But it never reached .205. Is this possible? i use comsec. Hopefully some one can help me!
> 
> Cheers




There is something a bit weird going on here!

I own some KGL, and could swear it has been over 20c, a few weeks ago?

Shows a 12 month high of 22c on Commsec, BUT not on their charts.

Also does not show a high over 20c on other data sources, so I'm stuffed

Good news is I expect it to be over 20c soon, but not until the 13c rights issue is digested

ring Comsec up...thats what they are there for


----------



## jun1031 (13 December 2010)

Thanks,

Ill try calling comsec and figure it out. Because all the graph says it has never reached above .20.


----------



## splintax (13 December 2010)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



Sir Osisofliver said:


> What's unclear here?  The bank have your asset as security. Therefore they can make loans that are covered by that security. Whilst if you default on your loan the bank will sell the property and return any net proceeds to you... No bank only has a single client...




What's unclear to me is how the bank can exploit the full value of my security. I'll try to explain with an example.

Say I secure a $100k loan against my $500k house. If I'm understanding you correctly, you're saying the bank can then loan out an additional $400k to other customers and it'll be 'covered by that security'. Lets say they lend out $10k to another customer.

If that customer defaults, they can't sell my house to cover their loss. And if I default, they can sell my house and recover $100k (plus costs) - but they have to discharge the mortgage and return the remaining $400k to me.

How is the other customer's loan 'covered' by my security?


----------



## pierrebfg (13 December 2010)

awg said:


> There is something a bit weird going on here!
> 
> I own some KGL, and could swear it has been over 20c, a few weeks ago?
> 
> ...




On the 5th of November this year they had a high of 22 cents, they opened at 21 cents and finished they day at 20.5 cents. 
http://www.tradingroom.com.au/apps/qt/quote.ac?code=kgl&section=pricehist&submit=Go!
Have a look at the 1 year price history for kgl


----------



## Sir Osisofliver (14 December 2010)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



splintax said:


> What's unclear to me is how the bank can exploit the full value of my security. I'll try to explain with an example.
> 
> Say I secure a $100k loan against my $500k house. If I'm understanding you correctly, you're saying the bank can then loan out an additional $400k to other customers and it'll be 'covered by that security'. Lets say they lend out $10k to another customer.




No they can lend out roughly $450,000 (including your $100K) against that asset.  The remaining is the capital adequacy reserve they are required to keep. Now lets say that the bank has 1,000 mortgages that are exactly the same as yours.

That is 500M worth of assets with 100M of loans currently against it.  They have the ability to lend out $450M so there is $350M they can lend out into whatever they choose.  







> If that customer defaults, they can't sell my house to cover their loss. And if I default, they can sell my house and recover $100k (plus costs) - but they have to discharge the mortgage and return the remaining $400k to me.
> 
> How is the other customer's loan 'covered' by my security?




Because the sum of the parts means that when you get added to the 1000 other mortgage holders you're a very small amount in the scheme of things....clear? 

Cheers
Sir O


----------



## FxTrader (17 December 2010)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



splintax said:


> I don't understand how the bank can use your house as security for other's debts. If you default, the bank can only take enough to satisfy your debt. The net proceeds are returned to the mortgagor. Am I missing something?



While I am still researching this, I believe you are almost certainly correct. The lender is a secured creditor over your asset and is only entitled to recover the value of the loan (their asset) in default.  The value of the banks security then is only the value of the loan amount and while they have a security interest in your asset, this would not entitle them pledge almost the entire value of your asset as security for other loans as claimed.

If a bank could pledge almost the entire value of your asset as collateral for additional lending, even though the value of their asset (your loan obligation) is only a fraction of this, then in essence they would seeking and providing unsecured loans from and to other entities.

Consider also the implications for risk management at a bank if they could actually secure loans from other institutions by pledging collateral where their secured interest is only a small fraction of what they are borrowing. Since this fails a common sense test, I seriously doubt it's true.


----------



## burglar (17 December 2010)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



splintax said:


> ... Am I missing something?




"Since no one other than the goldsmith knew how much gold he held in store and how much was the value of his receipts held by the public, he was able to issue receipts for greater value than the gold he held. Gold deposits were relatively stable, often remaining with the goldsmith for years on end, so there was little risk of default so long as public trust in the goldsmith's integrity and financial soundness was maintained. Thus, the goldsmiths of London became the forerunners of British banking and prominent creators of new money. They created money based on public trust."

http://en.wikipedia.org/wiki/History_of_money


----------



## jzell67 (18 December 2010)

How do you find out what the minimum buy is for a share? ie 100, 500. Tx


----------



## Julia (18 December 2010)

jzell67 said:


> How do you find out what the minimum buy is for a share? ie 100, 500. Tx



It doesn't relate to the number of shares but to the dollar amount of the total.  I don't actually know what average min buy is.
Check with your broker.


----------



## jzell67 (18 December 2010)

Julia said:


> It doesn't relate to the number of shares but to the dollar amount of the total.  I don't actually know what average min buy is.
> Check with your broker.




Thanks Julia. Im with CMC.

Ive placed three different buy orders and they all been rejected. Maybe thats a sign 

One order was rejected for an invalid stock code??? WOW, woolworths???

I may give up...


----------



## Trembling Hand (18 December 2010)

jzell67 said:


> Thanks Julia. Im with CMC.
> 
> Ive placed three different buy orders and they all been rejected. Maybe thats a sign
> 
> ...




CMC broking or CMC CFDs? With the CFDs there is no minimum the last time I looked. You should check that you have permission to trade that market, ASX in WOW case, if you have a CFD account? And you will probably be slugged data fees to turn on the ASX.

Most brokers have a minimum purchase value of $500 if its CMC broking.


----------



## jzell67 (18 December 2010)

Trembling Hand said:


> CMC broking or CMC CFDs? With the CFDs there is no minimum the last time I looked. You should check that you have permission to trade that market, ASX in WOW case, if you have a CFD account? And you will probably be slugged data fees to turn on the ASX.
> 
> Most brokers have a minimum purchase value of $500 if its CMC broking.




CMC broking.

Signed up last week, got my trading password. I have had problems with it though and have had to get it reset four times already.

Thanks for the heads up re minimum $500. Must of missed that important info somehow.

Not sure whats wrong with the two conditional buys i placed with WOW and TLS. Both came back with invalid filter stock code....

Man im such a newbie.... :

Thanks for you help. Will call CMC on Monday. Im sure it will be something stupid ive done.


----------



## boofis (19 December 2010)

After completely reading this thread I just had to join in the chorus and say thank you to Sir O and all other more knowledgeable members who have contributed to the past 18 pages of gold.


----------



## pixel (19 December 2010)

jun1031 said:


> Hi all,
> 
> Im not sure if i am suppose to post it here but i have a question regarding buying a share. I have recently bought KGL; and when i looked at the purchase price it was at an average of .205. But it never reached .205. Is this possible? i use comsec. Hopefully some one can help me!
> 
> Cheers







If you bought sometime after the 9th, there has been no trade at 20.5c; the only trades above 19c were executed after you posed the question. Assuming a standard brokerage of $33, including the brokerage would mean you could have bought no more than about 2000 shares: 
2000 * 0.19 = $380, add $33 = $413 or 0.2065
When I was trading via Commsec (I no longer do) there was a minimum trade size of $500 if I remember correctly. So, something doesn't add up.
I'd like to know -


How many KGL did you buy?
Did you place the order "at market" or "at limit"?
if the latter, what was your limit?


----------



## pixel (19 December 2010)

awg said:


> I own some KGL, and could swear it has been over 20c,* a few weeks ago?*
> 
> Shows a 12 month high of 22c on Commsec, BUT not on their charts.



 Hi awg: That's the crucial point!
On November 15th, they announced a significant capital raising, 3 (new) shares at 13c for every five (old) shares held. 
see http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01120574

That diluted the price significantly and led to a re-adjustment of the pre-SPP data to reflect the mix of 5 old and 3 new shares.
Old data are always adjusted in such a case, in order to be able to "compare apples with apples" as it were. The announcement refers to the pre-SPP vwap as 19c; looking at the current chart, that's about 3c above the average price NOW showing between mid October and mid November. So: If our friend had bought those 20.5c shares *before* the 15th November, it would make complete sense.


----------



## wolfie3556 (1 January 2011)

Hi everyone. happy new year. 

Sir O thank you so much for all the efforts you have put in to explain a fraction of your what must be a huge knowledge base.


I would like to thank all the others which have also made their knowledge available. 

Hope in time i can be of help to others as well

cheers

wolfie


----------



## Tyler Durden (2 January 2011)

Hey all, I've just read this thread from beginning to end, and I must say WOW! Just wanted to say thanks to everyone for all the information, and in particular Sir O, for his time in helping everyone.


----------



## spongetom (12 January 2011)

Hi all, thought I'd post this here and save making a new thread...


Ive reached a point where Im in a good IT job and want to hit the books again and look into doing another degree. I'm tempted by a degree as opposed to self learning as I like the structured approach.

Ive been searching the main uni sites here in Melb, as well as Open Uni (which had limited choices) for a degree that would help me learn about personal investing such as shares, property, etc. and some general business sense to help in my new job where I am more customer facing than I used to.

Im thinking a coursework masters would be a good bet as it is shorter than doing a Bach degree. But Im getting lost as to whether I should read up on the Business, Commerce, Finance, Economics degrees or other.

Does anyone have any advice as to any standout courses that could be for me?

Cheers!


----------



## sweetclassics (19 January 2011)

Hi, I currently have 500k in cash and was planning to invest all of it on one bluechip company, either rio or cba..however when I was trying to get hold of the basic infos regarding the sharemarket, I found one site saying that you cannot spend more than 25% of your total portfolio on one company. So instead of spending 500k on a companies shares, I would have to settle with spending 125k instead. 

Is this part of the ASX protocol, or just another rule of thumb suggested by brokers? Personally I think spending all my cash on one company would be much easier to manage as well as to make a profit from, instead of following 4 companies at the same time. 

Any help would be appreciated, thanks guys.


----------



## prawn_86 (19 January 2011)

spongetom said:


> Hi all, thought I'd post this here and save making a new thread...
> 
> 
> Ive reached a point where Im in a good IT job and want to hit the books again and look into doing another degree. I'm tempted by a degree as opposed to self learning as I like the structured approach.
> ...




A degree will only give you the theory, which with regards to financial markets, never works in practice. I spent uni telling lecturers why the theories we were being taught did not work, and most of the time they agreed.



sweetclassics said:


> Hi, I currently have 500k in cash and was planning to invest all of it on one bluechip company, either rio or cba..however when I was trying to get hold of the basic infos regarding the sharemarket, I found one site saying that you cannot spend more than 25% of your total portfolio on one company. So instead of spending 500k on a companies shares, I would have to settle with spending 125k instead.
> 
> Is this part of the ASX protocol, or just another rule of thumb suggested by brokers? Personally I think spending all my cash on one company would be much easier to manage as well as to make a profit from, instead of following 4 companies at the same time.
> 
> Any help would be appreciated, thanks guys.




You can invest 100% into one co if you want, so its probably just a rule of thumb. Bear in mind that you will have a lot of risk if you are only invested in one stock. Why do you want to buy these 2 stocks? What doyou think their price will be in the future? Why? Have you consulted financial advisors? Is 500k a large amount for you?

Most importantly: Can you afford to lose the entire amount in a worst case scenario?


----------



## sweetclassics (19 January 2011)

prawn_86 said:


> A degree will only give you the theory, which with regards to financial markets, never works in practice. I spent uni telling lecturers why the theories we were being taught did not work, and most of the time they agreed.
> 
> 
> 
> ...




well its cause I'm planning for a short term investment, maybe for a year or two. From my observation, every couple of months these companies gain or lose around 2% on their share price, which if I manage to capitalize on would easily gain me atleast 10% of my investment in a year. 

I honestly can't see how i can lose all of my money in these companies, esp rio when the demand for its products show no signs of slowing down. But that being said, I am strongly considering to hire a full service broker just to minimize the risks.

And thanks for your clarification on the 25% thing, really helped me decide whether to get into the share market or not. Cheers


----------



## burglar (19 January 2011)

sweetclassics said:


> ...I honestly can't see how i can lose all of my money in these companies, esp rio when the demand for its products show no signs of slowing down. ...




What if I bought RIO in November 2007 at $110.00?
Do you think I would be happy?


----------



## sweetclassics (19 January 2011)

burglar said:


> What if I bought RIO in November 2007 at $110.00?
> Do you think I would be happy?




well too spend 500k on a share that is at its peak in value, with the intention of selling it back not long after is kinda ignorant i think. What I mean currently, Rio's prospect is of a growing company after the economic slump and renewed contracts with the Chinese government etc, I'm fairly confident if I buy it now and sell it again in a couple of months I'll be able to pocket atleast 2% percent profit.


----------



## burglar (19 January 2011)

sweetclassics said:


> well too spend 500k on a share that is at its peak in value, with the intention of selling it back not long after is kinda ignorant i think. What I mean currently, Rio's prospect is of a growing company after the economic slump and renewed contracts with the Chinese government etc, I'm fairly confident if I buy it now and sell it again in a couple of months I'll be able to pocket atleast 2% percent profit.




See you're optimism 

My son told me to buy RIO at $30
I said "What do you know, I bin doin' this for more than a decade."


----------



## prawn_86 (19 January 2011)

sweetclassics said:


> well too spend 500k on a share that is at its peak in value, with the intention of selling it back not long after is kinda ignorant i think. What I mean currently, Rio's prospect is of a growing company after the economic slump and renewed contracts with the Chinese government etc, I'm fairly confident if I buy it now and sell it again in a couple of months I'll be able to pocket atleast 2% percent profit.




And what if you dont? Can you afford to lose a few %?

You dont know it is at a peak until you have the power of hindsight. What analysis are you relying on? What if one of thier mines is shut down due to an accident? What if Chinese raise interest rates and demand drops? What if IRan and the US, or the 2 Koreas go to war?

Point is, 500k is a massive investment for a first timer who by the sounds of it is just betting on a hunch rather than actually investing or trading with a defined plan.

You probably wont listen and if you 'win' this time you will do it all again but eventually it will come unsuck with no plan


----------



## burglar (19 January 2011)

prawn_86 said:


> And what if you dont? Can you afford to lose a few %?
> 
> You probably wont listen and if you 'win' this time you will do it all again but eventually it will come unsuck with no plan




All my life I had heard, "You can't lose money on BHP"
I was the first person in Australia to lose money on 
the "Big Australian" as BHP was known in 1980.

Not big on Blue Chips ever since!


----------



## 863 (21 January 2011)

Seeing the vast knowledge base available here and also being a new trader, can I get some opinions on the shares EXR and FAR?, both of which I bought into early on.

I believe I made two good choices at this point and spent quite some time researching both, however I would like to know:

a) how to better predict the movements/peak of a price surge
b) where are some good places to try gain more knowledge and information on companies that some might not think to look
c) where can I find information about a company owning a stake in another ie one company performs well and it means great things for another
d) Does anyone have opinions and outlooks on these shares that could help me further

I hope these questions make sense and are not to ignorant, as I will probably have more at various stages

Thank you again for all the knowledge shared here and I hope you can help


----------



## burglar (21 January 2011)

863 said:


> ... can I get some opinions on the shares EXR and FAR?, both of which I bought into early on. I believe I made two good choices at this point and spent quite some time researching both ...
> 
> ... I hope these questions make sense and are not to ignorant ...




Hi 863,
If you haven't already found them, there are threads for almost all shares.

Put EXR in search box
https://www.aussiestockforums.com/forums/showthread.php?t=865 

Put FAR in search box
Sorry - no matches. Please try some different terms. 

You can ask Joe Blow to start a thread for FAR if it is a valid, current and correctly spelt


----------



## 863 (21 January 2011)

Ah right cheers, the exr thread is abit out of date and I will have to try see what I can turn up with the other stock.
My next question however is "what is out there to trade" ie shares, futures,options,forex and so on. I was hoping someone could list these and give me a brief rundown on each one, how it works and any other info you can give 

Thanks


----------



## ChaoSI (15 February 2011)

okay.. so after 2 gruelling, mind melting weeks of working my way through this thread monster *nods at Sir O in thanks* i'm now a vegetable 

self-pity aside.

so that graph with the open close prices... what's that actually called? i'm guessing it's something REALLY simple 

okay just some questions to clarify some things,
1/ for the summaries (i use commsec too) there's a column labelled "volume" i'm guessing this means the number of shares being shifted around? either bought or sold? (if not please clarify for me)
2/  trades.... im' just going to guess this refers to the number of transactions (buy or sell) that have been made thus far today?




thanks heaps Sir O. for all your efforts and to all of the contributors on this thread you guys are a fountain of knowledge analogous to an oilrig striking black gold  =)

my brain is now much mushier than it was some weeks ago haha

happy belated Chinese New Year to you all too =)


----------



## Julia (15 February 2011)

ChaoSI said:


> okay.. so after 2 gruelling, mind melting weeks of working my way through this thread monster *nods at Sir O in thanks* i'm now a vegetable
> 
> self-pity aside.



At least you're being sensible enough to take advantage of the resources offered.  Soon it will feel like second nature.



> so that graph with the open close prices... what's that actually called? i'm guessing it's something REALLY simple



At this stage you could either buy a book like Stan Weinstein's "How to Profit in Bull and Bear Markets" to learn a bit about charting, or if you have signed on with Etrade (and I presume Comsec also offers some education), they have a reasonable Education section which gives you the basic about how to understand charts.



> okay just some questions to clarify some things,
> 1/ for the summaries (i use commsec too) there's a column labelled "volume" i'm guessing this means the number of shares being shifted around? either bought or sold? (if not please clarify for me)



Yes.  But don't think "either bought or sold".  i.e. for someone to buy a share, someone else has to sell it.    OK?



> 2/  trades.... im' just going to guess this refers to the number of transactions (buy or sell) that have been made thus far today?



Yes.



> thanks heaps Sir O. for all your efforts



Ah, it's Sir O's generous nature and overwhelming kindness.  He just can't help himself.


----------



## ChaoSI (15 February 2011)

Julia said:


> At this stage you could either buy a book like Stan Weinstein's "How to Profit in Bull and Bear Markets" to learn a bit about charting, or if you have signed on with Etrade (and I presume Comsec also offers some education), they have a reasonable Education section which gives you the basic about how to understand charts.




oh no. i understand what that graph from before (page.. 9 i think it was? with the open and close high low ones represents and the explanation was clear enough that i get the vague purpose. i was just wondering if there was an actual name for that type of graph that's all =)



Julia said:


> Ah, it's Sir O's generous nature and overwhelming kindness.  He just can't help himself.




and yours as well among a great number of others on this forum apparently  =)


----------



## Julia (15 February 2011)

ChaoSI said:


> oh no. i understand what that graph from before (page.. 9 i think it was? with the open and close high low ones represents and the explanation was clear enough that i get the vague purpose. i was just wondering if there was an actual name for that type of graph that's all =)



No fancy name ChaoSI.  Just a chart.  Different time frames will show you different trends.
The ASX has some quite good education/info sections also.
http://www.asx.com.au/resources/online-courses.htm



> and yours as well among a great number of others on this forum apparently  =)




You're very welcome.  Will send you a PM with some other stuff.


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## Sir Osisofliver (15 February 2011)

ChaoSI said:


> oh no. i understand what that graph from before (page.. 9 i think it was? with the open and close high low ones represents and the explanation was clear enough that i get the vague purpose. i was just wondering if there was an actual name for that type of graph that's all =)




I went and had a look. Its a bar chart. It's the simplest (and most common) way of representing the price action and capturing the four main data points of Open, High, Low and Close.  You could just as easily use candlesticks or some other method of representing the same data.

Oh and, now you are slightly more educated vegetable. ~

Cheers
Sir O


----------



## ENP (15 February 2011)

Sir Osisofliver said:


> OK Newbies...time for another lesson.
> 
> what's it going to be..
> 
> ...




Just looking back over the thread.

Not sure if you covered how to spot economic cycles? This is way back on page 4


----------



## ChaoSI (15 February 2011)

Sir Osisofliver said:


> I went and had a look. Its a bar chart. It's the simplest (and most common) way of representing the price action and capturing the four main data points of Open, High, Low and Close.  You could just as easily use candlesticks or some other method of representing the same data.
> 
> Oh and, now you are slightly more educated vegetable. ~
> 
> ...




candlestick is basically the same thing is it? colour denotes whether the close was higher or lower than the open? and the tails mean the high and low?

yes.. educated vegetable... still mushy on the inside tho 

open questions:

- so you have a core position of stocks (probably something 'safe') that you develop over each cycle, selling portions off in order to reinvest into the same shares at a later date
then *i'm guessing* you have non-core positions ... shares that you buy a stack of, wait (for a profit of course ) and sell... all of it?

okay so obviously the price that you sell at is totally subjective in where you think it's going to peak with the general idea being that you sell just short of the peak (as opposed to the gamblers sydrome of "just a little more.. just a little more"). 
so do you guys wait for a preset price? (which i'm told is a good way to go... get to a price and sell it unless you're SURE it'll go up..)
or do you guys wait for a percentage?

i guess my problem is that i'll always try and sell it higher than it'd probably go (or Mr Murphy sees me place a sell order and immediately sends the stock down ) so where i could've made a profit i end up holding onto the stock...

i guess i'm one of those "hold out for more" ..
any tips in this regard?


----------



## explod (15 February 2011)

ChaoSI said:


> candlestick is basically the same thing is it? colour denotes whether the close was higher or lower than the open? and the tails mean the high and low?
> 
> yes.. educated vegetable... still mushy on the inside tho
> 
> ...




You need to study Candlestick Charting very well and then it is a very valuable tool

In short, I look for strength in a stock, on the buy sell what size are the bids.   If we have 2 buyers wanting a million at $2 and 4 sellers tring to palm off 500,000 at $2.01 then you have some strength indicated, but it is just one of very many things to look at.   Volume of sales is a very imprtant indicator also but they all need to be read in tandem.   Untill you have done some serious study in charting then stay well away from it.


----------



## Sir Osisofliver (15 February 2011)

ENP said:


> Just looking back over the thread.
> 
> Not sure if you covered how to spot economic cycles? This is way back on page 4




No I never got around to it - I got crazy busy at work...I'm _still_ at work now (I love my job but I hate deadlines).  Maybe that's what I'll do next when I can summon the motivation and get some spare time.

Cheers 
Sir O


----------



## Market Depth (15 February 2011)

AHHH SELLING! this is always the 'Tricky Part'. 1001 ways to skin a cat

For me, and I've mentioned this in a recent thread. It comes down to 'What Type of Trade Did I enter'?

For an 'Intraday' trade, then it only comes down to feel and by observation of the trading tape, or 'Market Depth' information. Over time watching my favourite stocks, I know then very well, and understand the spreads between the bid and ask. I know when they are acting as they should and when there could be a short term shortage of stock (Buying pressure) or an over supply (Selling pressure)

For a short term trade, or swing trade, held for 2-5 days, then a 'High Point Reversal' bar on a bar chart, would signal a sell for me at the next open.

For a position trade or trend trade, then support and resistance lines drawn on a chart, can offer obvious exit points. A close below one of these points, would signal a sell for me on the open on the following day.

For a long term investment trade, I tend to use point and figure charting as well as a 200 day moving average, a cross below the 200 day ma, would alert my attention, I may not sell all of my holding however, just take some profit off the table.

The last example is the one I'm most flexable with. I've given my investment time to grow, and it only seems fair that I give it considerable thought and time when it comes to selling. If the stock has a major correction, and catches me out somewhat, and I can see that fundamentally it is still sound, then I may in fact buy more rather than sell.


----------



## Sir Osisofliver (15 February 2011)

ChaoSI said:


> candlestick is basically the same thing is it? colour denotes whether the close was higher or lower than the open? and the tails mean the high and low?



Do you have three days spare?  Candlestick charting is a topic all by itself and one frankly I'm probably not the best one to discuss as I don't use it often but know the theory. It suits some people who are visually orientated. Do some searching around these forums or the net, there is some good material on it.







> yes.. educated vegetable... still mushy on the inside tho
> 
> open questions:
> 
> - so you have a core position of stocks (probably something 'safe') that you develop over each cycle, selling portions off in order to reinvest into the same shares at a later date




Why would I sell?  It's a serious question because if it's a good asset I'm probably miles ahead on capital gain at the end of the cycle - BHP at $8 for EG in '02/03. There is no way in hell I'm gonna sell an asset like that so what I need to do is *protect* that share when the inevitable correction happens. If I DO sell then not only am I up for the capital gains but I just lost the cost based yield on the share. Good assets increase the size of their dividends over time - and it's money I don't have to work for - so my passive income gets bigger. These types of assets form the "core" portfolio purchased in the correct window of opportunity (IE Just after a correction). This is generally when the assets are also *positively geared*, so I can hold them indefinately whilst I wait for the economic cyle to mature.

As a very general rule (because of something that I called Value Chain Dynamics) once the market reaches the old high (In this case 6800 points) the market moves into a faster paced market that is more suitable for shorter term transactional trading. (Mind you - you can do that at *any* stage of the cycle, its just that this is the kindest market in which to short term trade IMO. This is where non-core assets with good growth profiles that are cyclical in nature come to the fore - especially in our commodity driven market.  







> then *i'm guessing* you have non-core positions ... shares that you buy a stack of, wait (for a profit of course ) and sell... all of it?




Correct - but depending upon its performance in the last two years of the cycle. If I think it classifies as a core stock or is in an area of the market that I can see significant consolidation Eg CSG area - I'll protect and hold it, particularly if it is paying me a dividend.







> okay so obviously the price that you sell at is totally subjective in where you think it's going to peak with the general idea being that you sell just short of the peak (as opposed to the gamblers sydrome of "just a little more.. just a little more").
> so do you guys wait for a preset price? (which i'm told is a good way to go... get to a price and sell it unless you're SURE it'll go up..)
> or do you guys wait for a percentage?




Define subjective.  Of course there is a significant amount of analysis that I do, both from a top-down fundamental and technical approach about my decision to "harvest" non-core stocks in a mature cycle. I don't have to be exact for it to make an enormous level of difference either. Close enough is more than good enough. 







> i guess my problem is that i'll always try and sell it higher than it'd probably go (or Mr Murphy sees me place a sell order and immediately sends the stock down ) so where i could've made a profit i end up holding onto the stock...
> 
> i guess i'm one of those "hold out for more" ..
> any tips in this regard?




I don't know what time frames or style of trading you are talking about. I also don't know what floats your boat about trading. I struggled to find something that I knew could make me money until I investigated systematic trading styles. But even systematic trading (which took me years to get a system that works for me) may not work for you. If you are....detail orientated (Which is a nice way of saying anal retentive), it may suit you a great deal, but you'll need to put the hard yards in and develop one yourself.

Cheers 
Sir O


----------



## ChaoSI (16 February 2011)

Sir Osisofliver said:


> Do you have three days spare?  Candlestick charting is a topic all by itself and one frankly I'm probably not the best one to discuss as I don't use it often but know the theory. It suits some people who are visually orientated. Do some searching around these forums or the net, there is some good material on it.




haha i'm working my way through a short term trading book, nice technical info in it. I'll get back to you on that one 



Sir Osisofliver said:


> Why would I sell?  It's a serious question because if it's a good asset I'm probably miles ahead on capital gain at the end of the cycle - BHP at $8 for EG in '02/03. There is no way in hell I'm gonna sell an asset like that so what I need to do is *protect* that share when the inevitable correction happens. If I DO sell then not only am I up for the capital gains but I just lost the cost based yield on the share. Good assets increase the size of their dividends over time - and it's money I don't have to work for - so my passive income gets bigger. These types of assets form the "core" portfolio purchased in the correct window of opportunity (IE Just after a correction). This is generally when the assets are also *positively geared*, so I can hold them indefinately whilst I wait for the economic cyle to mature.




hmm interesting, basically if you managed to get a good price on something eg CBA when it went down in... 08 was it? to  26$
you buy a large amount then and basically just sit on it and increase it when possible during the next down cycle? so in effect you're treating it like an investment account of sorts yes? using the dividends from that core stock to fund others? hmm should rethink my sell order then i think... 




Sir Osisofliver said:


> Correct - but depending upon its performance in the last two years of the cycle. If I think it classifies as a core stock or is in an area of the market that I can see significant consolidation Eg CSG area - I'll protect and hold it, particularly if it is paying me a dividend.




understood so if you're looking for 'non-core' but you keep and eye out something that you might want to place into 'core'. Basically keep an eye out for opportunities...



Sir Osisofliver said:


> Define subjective.  Of course there is a significant amount of analysis that I do, both from a top-down fundamental and technical approach about my decision to "harvest" non-core stocks in a mature cycle. I don't have to be exact for it to make an enormous level of difference either. Close enough is more than good enough.



 subjective, in the same sense that "beauty is in the eye of the beholder" a 'good' price or time to sell for one person might not be 'good' enough for another.



Sir Osisofliver said:


> I don't know what time frames or style of trading you are talking about. I also don't know what floats your boat about trading. I struggled to find something that I knew could make me money until I investigated systematic trading styles. But even systematic trading (which took me years to get a system that works for me) may not work for you. If you are....detail orientated (Which is a nice way of saying anal retentive), it may suit you a great deal, but you'll need to put the hard yards in and develop one yourself.




well i meant that independent of time frame. some stocks i've held for years others i've only had recently. regardless of the time held when comes time to consider if i would sell it i always think "oh i could get higher than this" ie. be on the greedier side which, IF the price gets that high, is fine, but if it doesn't and tanks without ever getting there, you've lost an opportunity for a gain. This is the case regardless of short or long term trading.



Sir Osisofliver said:


> Cheers
> Sir O



 no Sir O, 
cheers to *YOU*

btw i'm not to sure as to what is meant by systematic trading is specifically, but i guess that's for me to work out eventually.


As always Sir O, a pleasure.


----------



## Sir Osisofliver (16 February 2011)

ChaoSI said:


> hmm interesting, basically if you managed to get a good price on something eg CBA when it went down in... 08 was it? to  26$
> you buy a large amount then and basically just sit on it and increase it when possible during the next down cycle? so in effect you're treating it like an investment account of sorts yes? using the dividends from that core stock to fund others? hmm should rethink my sell order then i think...




Close.  Remember I mentioned Value Chain dynamics?  Value Chain dynamics are what happens after a major correction.  There is still money flowing into the market even during the worst of corrections. This money comes from savvy investors who recognized a mature market and held back funds, from continuing superannuation monies, international investors who seek more secure markets that our own etc etc.  All this cash is looking for a home, so where does this money *initially* end up? It moves *first* into these core blue chip assets. Once these stocks have recovered and are no longer perceived as good value then the money looks at slighter lower quality (and smaller capitalisation stocks). This is a very general statement of course - individual stocks have their own growth characteristics.

This movement early in the cycle means that you have the equity gain and can purchase additional quantities still relatively early in the cycle, before the market reaches the old high. Eg Buying BHP in 2005 at circa $12.50 - still a *very* good price in comparison to the price at the end of the cycle.

By doing the above you are compounding your gains rather than just sitting on the stock and getting a market level of return. 







> understood so if you're looking for 'non-core' but you keep and eye out something that you might want to place into 'core'. Basically keep an eye out for opportunities...



 Yup







> well i meant that independent of time frame. some stocks i've held for years others i've only had recently. regardless of the time held when comes time to consider if i would sell it i always think "oh i could get higher than this" ie. be on the greedier side which, IF the price gets that high, is fine, but if it doesn't and tanks without ever getting there, you've lost an opportunity for a gain. This is the case regardless of short or long term trading.
> 
> 
> no Sir O,
> ...




Hope that helps

Cheers

Sir O


----------



## zoeinthecity (18 February 2011)

Sir Osisofliver said:


> That's the second time I've done that
> 
> yes I mean PURCHASE a put option
> 
> ...






How does purchasing a put option help?


----------



## Sir Osisofliver (18 February 2011)

zoeinthecity said:


> How does purchasing a put option help?




http://www.asx.com.au/resources/options-courses.htm


----------



## zoeinthecity (18 February 2011)

Sir Osisofliver said:


> http://www.asx.com.au/resources/options-courses.htm




Hot Dog! That was quick.

So my questions are:

1. What does it mean when the news bulletin says "CBA closes up 4 points" (or something to that effect)?

2. What sort of income strategies/dividend strategies exist, and where can i find out more?

I'm more interested in creating an income that can fund further studies.. travel.. etc.

Thanks!


----------



## Sir Osisofliver (18 February 2011)

zoeinthecity said:


> Hot Dog! That was quick.
> 
> So my questions are:
> 
> 1. What does it mean when the news bulletin says "CBA closes up 4 points" (or something to that effect)?




Means the price action has moved, specifically the closing prices. EG CBA closed on Tuesday at $53.30 then closed on Wednesday at $53.84 - therefore CBA closed up 54 points.

Points gets used rather than the word price because of indices EG All Ords closed up 49 Points - rather than price...clear? 







> 2. What sort of income strategies/dividend strategies exist, and where can i find out more?
> 
> I'm more interested in creating an income that can fund further studies.. travel.. etc.
> 
> Thanks!




As many as can be thought of.  I know that is not particularly helpful, but "Income" strategies as opposed to "wealth creation" strategies are generally short-term trading strategies - and there are a multitude of ways that can be used to derive an income from the markets. The way I like to differentiate it is that you work to create an active income. So you need to *work at the process of your trading strategy* to create the income.

Wealth creation however should be designed to create a *passive income stream from dividends* as a natural consequence of building your assets over the longer term.

So are you wanting to create an active income in the short-term (which means learning how to trade consistently and effectively), or a passive income in the long-term (which means learning how to manage your equity)?

Cheers

Sir O


----------



## zoeinthecity (18 February 2011)

Sir Osisofliver said:


> So are you wanting to create an active income in the short-term (which means learning how to trade consistently and effectively), or a passive income in the long-term (which means learning how to manage your equity)?




Both? Can i have both?

I went through the options trading tutorial at ASX and am interested in the idea of options.

I'm just curious about this...

The price for CBA right now is $54.00

If I owned 1000 shares, and wrote a call option at $55.00 for 0.470

A mysterious someone is going to buy this call for (0.47*1000) =$470

Sooo... Then, the price goes up to say, $55.50... And they exercise their option. I get to keep the $470 +$1000,

Correct or not?

And if the price goes down, I'm okay with that because I'm holding the shares for the *long term*

It seems a little bit too simple  . Am I missing something glaringly obvious and dangerous?


----------



## Sir Osisofliver (18 February 2011)

zoeinthecity said:


> Both? Can i have both?




Yes you can - to the limit of your time and expertise. 







> I went through the options trading tutorial at ASX and am interested in the idea of options.




You are aware that I sent you to that location to show you how to use options as a *risk management tool* rather than as an income generating activity? If you are interested go search the threads by WayneL in the derivative sections of this forum. It will be well worth your time.







> I'm just curious about this...
> 
> The price for CBA right now is $54.00
> 
> ...




Not - When you *write* a call it is the same as *purchasing* a put. IE you only make money if the price goes down.  When they exercise their option, that means they purchase your CBA shares at the agreed strike price $55.00, at this point they are the new owner of the shares and have a profit of $500 minus the principle they paid of $470 = $30 net profit. A return of 6.4% on their funds. 

You would have sold your CBA for $55.00 and taken a premium of $470.

Clear? 







> And if the price goes down, I'm okay with that because I'm holding the shares for the *long term*
> 
> It seems a little bit too simple  . Am I missing something glaringly obvious and dangerous?




Yes you are.  If you are serious about learning options I would encourage you to learn a lot because the leverage involved will kill you quickly if you are inexperienced.

Cheers

Sir O


----------



## youngone (19 February 2011)

Hi Sir O.

Im a newbie here and i do have alot of questions.

So, what is ASX300. my understanding of it is that, companies listed in the ASX300 have huge amount of investors and are a term long stock (blue chip) eg. 

thanks for reading.


----------



## Sir Osisofliver (21 February 2011)

youngone said:


> Hi Sir O.
> 
> Im a newbie here and i do have alot of questions.
> 
> ...




The ASX300 is the 300 largest stocks in our market by capitalisation (size) as such they tend to be where the marjority of institutional investors will park money in our market. They do not meet my criteria of "blue Chip" however unless they meet certain other conditions.  There is no defination of Blue Chip - so you need to think not just about which index a stock appears in but what other characteristics they exhibit.

Regards

Sir O


----------



## youngone (28 February 2011)

Thanks Sir O.

Another silly question.

I am a student working part time, have recently saved up about $600. What is your advise on buying shares?

Should i save up till i have a little bit more  $1000+ or should i just buy the shares asap? I dont think the $600 sitting in my saving is giving me much interest and i would rather see it make a small killing in the market.

Pros and con, thanks.


----------



## Julia (28 February 2011)

Youngone, If you have your $600 in an ordinary savings a/c take a look at:
http://www.infochoice.com.au/
There are online at call accounts where you can get >6%

I'd suggest you save at least $1000.  Brokerage on $600 will make a hole in your investment.

Good on you for saving and thinking about investing.  All the best.


----------



## Sir Osisofliver (1 March 2011)

youngone said:


> Thanks Sir O.
> 
> Another silly question.
> 
> I am a student working part time, have recently saved up about $600. What is your advise on buying shares?




Hi youngone - according to the rules on this website I am not allowed to provide advice to you. I do not know your specific circumstances, ergo I do not fulfill Know Your Client obligations under the legislation.

That said, you need to decide for yourself if shares is the right asset class for you. With such a small amount of money you only have just enough for a marketable parcel of shares. I would follow Julia's lead and see if those funds can be made to work harder for you whilst you learn. I always encourage people to learn first so kudos on reading this forum and gaining more information.







> Should i save up till i have a little bit more  $1000+ or should i just buy the shares asap? I dont think the $600 sitting in my saving is giving me much interest and i would rather see it make a small killing in the market.
> 
> Pros and con, thanks.




Pro's and con's are *personal* - you would do well to research and discover the pro's and con's yourself.


Cheers

Sir O


----------



## youngone (3 March 2011)

Sir Osisofliver said:


> Hi youngone - according to the rules on this website I am not allowed to provide advice to you. I do not know your specific circumstances, ergo I do not fulfill Know Your Client obligations under the legislation.
> 
> That said, you need to decide for yourself if shares is the right asset class for you. With such a small amount of money you only have just enough for a marketable parcel of shares. I would follow Julia's lead and see if those funds can be made to work harder for you whilst you learn. I always encourage people to learn first so kudos on reading this forum and gaining more information.
> 
> ...




Thanks Sir O and Julia 

Well i have been making a killing in the market. Its not much, its been a successful snail trial. My current portfolio sized has increased by 20% giving me confidence to jump in the market with my saving.  

I recently bought SSN (.092) valued at $500, its current market value is at $1000. im so happy  100% profit!


----------



## ChaoSI (3 March 2011)

youngone said:


> Thanks Sir O.
> 
> Another silly question.
> 
> ...




just from another newbie:
some things you might want to consider:
although you want to make a killing there is also the possibility you'll lose it, so regardless of circumstance, the main question is "can you afford to lose it?"

another point that was raised earlier is that the brokerage is usually about $30 per transaction so something else to think about esp if you plan on making a number of purchase and sales...

and of course you should read all of SirO's epic of newbie information (which i warn, WILL turn your brain into mush if you plough through it ) 

good luck!! =)
lots of supportive people here!!
Sir O and Julia among many!


----------



## Sir Osisofliver (3 March 2011)

youngone said:


> Thanks Sir O and Julia
> 
> Well i have been making a killing in the market. Its not much, its been a successful snail trial. My current portfolio sized has increased by 20% giving me confidence to jump in the market with my saving.
> 
> I recently bought SSN (.092) valued at $500, its current market value is at $1000. im so happy  100% profit!




Congratulations!

I would now go read the "when do I sell thread" by Chaosi

Cheers

Sir O


----------



## luckyforteja (10 March 2011)

Hi All,

I am new to this forum and very new to shares and investments. I knew that I had to invest my hard earned money to make it work harder for me but I have been very busy for last couple of years in my professional life and didn't think I had enough time and energy to get into Investing.

Thankfully I am in not so busy phase of my work and have enough time to spend on learning. I may be about 6 months away from getting very busy again. My target is to study and do some self learning during this time and come up with a

1) My Investment Plan
2) Risk management strategy

Do you guys think that it is enough time to get fundamental understanding of various investment options?

Do you think I have a chance to make an entry into the market in this time frame? It doesn't matter how small my first investment is, it’s mainly to get my hands dirty.

My first step is to buy some books. Any suggestions on anything to add or remove?
List of Books I am planning to read.(My first investment)
=====================================
1) The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel by Jason Zweig and Benjamin Graham
2) The (Mis)behavior of Markets by Benoit Mandelbrot and Richard L. Hudson
3) Against the Gods by Peter L. Bernstein
4) The Seven Deadly Sins of Investing: How to Conquer Your Worst Impulses and Save Your Financial Future by Maury Fertig
5) Stan Weinstein's Secrets For Profiting in Bull and Bear Markets
6) Reminiscences of a Stock Operator (Wiley Investment Classics) by Edwin LefÃ¨vre
7) How I Made $2,000,000 in the Stock Market by Nicolas Darvas
8) Trading for a living by Alexander Elder
9) Trade Your Way to Financial Freedom by Van Tharp 

Thanks Sir O, Julia and other for the contribution on this thread

Cheers,
Sri


----------



## burglar (10 March 2011)

luckyforteja said:


> Do you think I have a chance to make an entry into the market in this time frame? It doesn't matter how small my first investment is, it’s mainly to get my hands dirty.




You seem to have a fine attitude, though I sense some trepidation, (else you would just do it)

Marketdepth has done some fine posts which may help you.
Post #23 on the following thread:
https://www.aussiestockforums.com/forums/showthread.php?t=22038&p=617607#post617607


----------



## luckyforteja (10 March 2011)

Thanks for your quick reply.



> You seem to have a fine attitude, though I sense some trepidation, (else you would just do it)




I would actually agree with you. I guess that's understandable when you are entering an unknown territory

Cheers
Sri


----------



## burglar (10 March 2011)

luckyforteja said:


> ... Do you think I have a chance to make an entry into the market in this time frame? ...




It takes time to get a broker, some documents need signatures, thence snail mail.
With some brokers you may need a little time to transfer funds to a trading account.

If you have already done that, you're right to buy. 
And the moment you buy they are yours to sell or to hold.

Good Luck!


----------



## 863 (11 March 2011)

Hi All,

Was hoping to get some opinions and advice about careers in economics/finance and what sort of jobs are out there. I realize this is a very broad question however apart from maybe being a broker or accountant, I am not really sure just what sort of jobs are out there and what potential career has the best opportunities to rise and earn greater rewards.
Any sort of book or perhaps somewhere I can browse further would be much appreciated in my search for a career in the financial sector or similar areas.
Thanks


----------



## Beams (13 March 2011)

863 said:


> Hi All,
> 
> Was hoping to get some opinions and advice about careers in economics/finance and what sort of jobs are out there. I realize this is a very broad question however apart from maybe being a broker or accountant, I am not really sure just what sort of jobs are out there and what potential career has the best opportunities to rise and earn greater rewards.
> Any sort of book or perhaps somewhere I can browse further would be much appreciated in my search for a career in the financial sector or similar areas.
> Thanks




Rather broad indeed. My advice is to volunteer at an accounting firm or a finance institution. See the day to day activities and the running of the place, and the stress you might encounter.

Sure you can simply ask people in the profession, but I found was that what people thought and how they really felt about their profession were sometimes two very different things.


----------



## youngone (20 April 2011)

-Newbies Question

What does "the sp is tanking" mean


----------



## dumadiscount (20 April 2011)

sp = share price
tanking = declining or slumping

the share price is going down


----------



## burglar (20 April 2011)

youngone said:


> -Newbies Question
> 
> What does "the sp is tanking" mean




The share price (sp) is reaching the bottom of the tank.


----------



## youngone (21 April 2011)

burglar said:


> The share price (sp) is reaching the bottom of the tank.




I get the picture. Obviously, somewhat referring to the notion of big fish eats small fish. Thus sinking to the bottom of the tank.


----------



## burglar (21 April 2011)

Hi youngone,
Is this in reference to PEN sp ?


----------



## youngone (22 April 2011)

burglar said:


> Hi youngone,
> Is this in reference to PEN sp ?




Possibly. I have been watching PEN forum continuously quite a bit. Its like a party in that forums, dramas, hormone level building building up, you can feel the tension, the love, jealousy, and hatred. Its like a party everyday!

I was a former PEN holder, all that racket in there is priceless and highly entertaining. Im waiting for an opportunity to get back in PEN. anyone a PEN holder here?


----------



## Sir Osisofliver (10 May 2011)

Ok Time for a long-overdue lesson.

Economic Cycles and how to spot them

Our market is cyclical. CYCLICAL. As is *every* market. Do not delude yourself that somehow *this* current market is different.  Do not listen to the crowing of a broker who spouts rubbish about supercycles and how the emergence of China will create a cycle that will last for twenty years. (I heard this at the tail end of the last cycle) Do not listen to those that say *"We are different"*. We are the same as everyone else because the things that drive us *are the same.* Therefore the market goes through periods of boom and bust. NEVER THINK OTHERWISE.

Historically our market is rising roughly 80% of the time and during this time we are all gods. It's *easy* to make money when the market is rising. It is however the 20% of time that tends to kill people. This is where the cowboys and those that have let the excitement and emotion of the bull run lead them into disaster as we approach the *inevitable correction.* Every cycle there will be someone who thinks that the conditions that we see now are going to stay around, (or that the correction won't be bad). This is where the Storm financials, the Opus Primes, the Tricoms, lose money and destroy wealth for their clients. They do NOT understand the principle of the economic cycle and how to use this to their *advantage*.

So the biggest question is How do you tell when everything is *about* to go pear shaped? What are the signals?  What do I look for to know when it's time to liquidate or protect my share market assets?

Economic Clock




If you do a search for Economic Clock you'll get images like those I have attached above (hopefully). The Economic clock dates back to the 1930's where it was proposed as a forecasting methodology by English Economists and released in the London Evening Standard as a series of articles.  The basic theory is that certain events which are:

a) Easily recognizable; and
b) highly correlated;

will allow you to ascertain at which point of the broader economic cycle we currently sit. Theoretically if you know where we are in the cycle, you know which asset class in a broad sense is the correct one to invest in for an optimal investment. Each event is related to the previous event. Each previous event *causes* the following event to occur. It's Cause and Effect, but in a cycle of events that roll around and around in a never ending cycle.

You'll note some differences in the two diagrams I attached, even though the basic principals of one event following another event in a series remains intact. This is where the theory gets subjective and it's subjective because we are dealing with a mechanism that is attempting to take a complex aggregation of factors and deliver them to you in a simple easy to understand diagram. The clock does not tell good time. The clock is an imperfect and generic indicator - but is still a valuable tool, particularly for analysing the market over the longer term.

The clock is a simple representation of a complex aggregation and there are differences between the interpretation of the theory because each cycle is an aggregate of several different cycles, with each of these individual cycles having their own characteristics in terms of length, midpoint and amplitude (depth or height). Have a look at the wave below to see what I mean. 




Imagine that the wave represents that of the interest rate cycle. This wave will be highly correlated *yet different* to the wave representing the currency cycle. It's only when these two waves move in combination with each other that the effects will be felt.  In terms of the broader economy there are *14 different cycles* that are correlated to a greater or lesser extent. It's only when *all* these cycles move in a negative aggregate direction that our economy as a whole moves into a corrective pattern. Where academics and economists differ is where this cycle of events starts and finishes. Where exactly on the circle do you point to an arbitrary position and say "this is the start of the cycle". It's a cycle...it never ends..hence the differences in the two diagrams and the differences between academics.

I like to conceptualise the 12 o'clock position as being the peak of the share market cycle, and the six o'clock position as the start of the new cycle. From 12 to 6 the market is falling, and other asset classes are more appropriate to invest in. 

Note that because it is an aggregate of a bunch of individual cycles, each time the cycle rolls around, it looks different. Some cycles are 5 years in length, some cycles have been 14 years in length with the long-term average of the cycle 7.8 years.

The important thing to remember is that the *sequence of events around the outside of the clock is always consistent.* Yes they look different each time but the major events (or the signposts if you will) stay the same every cycle. The sequence is consistent.

Now I'm going to add a layer to make the concept a little bit more complex for you. Global economies are correlated. They synchronise their clock's, but they aren't perfectly synchronised. Larger economies tend to lead and smaller economies tend to lag. Australia makes up 1.6% of world economic activity. So we are a very small player. This is GOOD FOR US. Other economies lead the way into and out of booms and busts, meaning that we have a higher level of predictability in our market that the larger economies do NOT. We get an indication of what is to come for us, by looking at larger economies.  This is the reason why I frequently rant at Australian Managed Funds because of their behaviour during the GFC. They could *see* what was about to happen in our economy and they did nothing to protect the assets in their control.

Ok I'm not finished but I have to stop here. I still need to discuss in detail the events around the outside of the clock, talk about confirming and conflicting data and what to look for at the start and finsih of the share market cycle.  I'd appreciate it if we could keep the comments to a minimum until I get a chance to write that (which will be more than a day). 

Cheers

Sir O


----------



## Sir Osisofliver (10 May 2011)

I had some time free up which is good for you as I can post a bit more...

So the clock is a general tool and it is the events on the outside of the clock that determine where you are in terms of the clock.  I'm going to focus on the events at the start (bottom) and end (peak) of the share market cycle, rather than go through a full cycle, because I think that will be the limit of the time I can give and then open it up to questions.
*
Start of the Share Market Cycle*

What is the trigger for the start of the new share cycle?  As we approach the six o'clock position we've already gone through the optimal buying window for both Residential Property and Fixed interest. Interest rates, which started high, have been lowered by the Reserve Bank under their charter to stimulate the economy.  This time around the guvmint also handed out great wads of cash in the form of stimulus packages to...you guessed it, stimulate the economy from the depths of recession.

The technical definition of a recession is two consecutive quarters of negative GDP. So this is one of the signals that you will use to determine your position on the clock...are we in a technical recesssion. (Note that the release of these figures is three months _after_ the event so the lag can catch you if you are not aware of it.)

The other main indicator of the start of the new cycle is what is happening in the unemployment cycle. (See the image attached below).




When we look at the chart above you can see how in a general sense it follows a sine wave pattern...IE it's cyclical.  You'll also hopefully note the correlation that exists between the peak of that cycle and the bottom of the share market that occured in March 2009. Yes there is a lag effect..it's not a *perfect* correlation as the unemployment cycle lags the start of the share market cycle, but the peak of the unemployment cycle is significant evidence that we are at the beginning of the new share cycle.

Let me explain what is happening and what drives our economy out of the correction.  The guvmint draws back a vast amount of our overseas reserves whith which to employ capital expediture projects (and give free money away making Kevin Rudd everyone's best friend). Reserve Bank has lowered interest rates, making it cheaper and easier for business to do business.  HOUSEHOLDERS however at this point in the cycle, are counting every penny. Businesses have been laying off staff.  They have to if they want to survive in the corrective environment.  The peak of unemployment however is when the company starts re-hiring.  All the existing employees breath a sigh of relief because they now feel more secure in their jobs.  All those expenses that they have been putting off to put some money away just in case *now* get paid. The car gets a much needed service, the kids get new school shoes, hubby takes the wife out to dinner etc etc etc and it's this activity and increase in consumer confidence that has a significant effect in driving us out of the recession.

Because these expenses build up and all occur within a very short period of time, this leads share prices to have a bounce at the immediate bottom, (the tipping point if you will) around people being fired and people being hired. See the picture of the All Ords below and note the rapid rise in share prices that occured after the tipping point.  Now look at the Unemployment cycle picture. During that initial very profitable rise in share prices, the unemployment cycle only started to improve at the end of that run. Thats the correlated yet lagging effect I was talking about. So your trigger for the start of the new bull market run, is when the unemployment cycle reaches peak, NOT, when it starts to improve.




This is golden time for long-term and savvy investors. Yields are HUGE on some really great shares that have had the **** kicked out of them. Banks with near 10% yield?  I'll have me some of that thanks. So Yields (particularly Aggregate yield or EPS) can be used as an indicator to tell whether you are near the bottom of the market. This is an expression of the cyclical market. Brokers are yammering on about great yield and technicals as if they are the be all and end of of analysis. Stochastic this, MACD that.

When the Reserve Bank starts to increase interest rates again (guess where we are in terms of the interest rate cycle), you can be assured that the beginning of the new market has occurred. If you look at one of the clock diagrams in the previous post...you'll see rising share prices as one of the indicators I was talking about.  Hey look another cycle 

A bit later and we start to see commodity prices begin to improve, because the stockpiles that were created when the market corrected, have now been eaten into by the increase in demand. Queue another indicator of improvement and the movement of the clock away from the 6 - 7 o'clock position. Good Grief yet *another* cycle within the broader cycle. 

It's at this time that the Reserve Bank starts to rebuild our overseas reserves, and will continue to raise rates in order to get good purchasing against oversea's currencies. Heaven's yet *another* cycle within the broader cycle.

It's around this time (say about 8-9 o'clock) that Banks and lending institutions start to free up the credit market. They turn the faucet off in a BIG way as we approach the recession because they can't justify lending money to any tom, dick and harry because heads have rolled because of the stupidity they had when lending to unemployed people to buy houses. (Ok this wasn't us...it was the U.S.  ) and look *another cycle.*

Mid Cycle

Mid cycle we've reached the old high of the market.  Straight away you should be looking at the All Ords and saying OK we are not yet at 9 o'clock. we are between six and nine, but probably after seven because we've had that initial rise in share prices, and an improvement in commodity prices, so we're somewhere between seven and eight.  It's this point where the clock tends to slow down. We can sit at this point for a long while whilst we wait for the Synchronisation in Global Economies to occur to lead us to those ecstatic peaks.

End of the cycle (Peak of the market)
Banks are giving credit away like's it's water with a use-by date. Commodities have razor thin stockpiles and prices are jumping like a cockroach on a hot barbeque. Share price yields are looking *THIN* and brokers are saying...Look its all about the fundamentals.

OK I have to stop again. I need to talk some more about what to look for at the end of the cycle, but I'll open this up to comments now.  Be aware I have OBVIOUSLY pitched this at a newbie level. I'm happy to go into greater detail, but don't want to derail the thread.

Cheers 

Sir O


----------



## KurwaJegoMac (10 May 2011)

Thats a really fascinating piece, thank you very much for sharing.

I'm very new to this but i'd like to hazard a guess that we are somewhere around 8-9?

Interest rates have been ever so slowly on the rise and consumption of commodities appears to be on the increase (potentially leading to stockpiles being used up as you mentioned). We didnt really see much of the 6 o'clock occur - house prices barely budged but i take it that with the clock representation a stage within the cycle can occur very rapidly and therefore can appear to 'jump' a category?

What are your thoughts? Am i on the right track?


----------



## Sir Osisofliver (10 May 2011)

KurwaJegoMac said:


> Thats a really fascinating piece, thank you very much for sharing.
> 
> I'm very new to this but i'd like to hazard a guess that we are somewhere around 8-9?
> 
> ...




Nine o'clock (or there abouts) is when the market reaches the old high, so we aren't there yet by a long stretch. I'd have to say we are closer to eight than seven at the moment.

I'm focussing on the share market rather than the broader economy itself.  If you want to look for the start of the Property market...it occurs very near the 12 o'clock position, not the six o'clock position. It also *tends* to start at the highest population density areas before moving into less populated areas. So depending on where you are looking it could have occurred (and is still occuring as it moves away from higher density areas) a couple of years ago.

Clear?

Cheers

Sir O


----------



## KurwaJegoMac (10 May 2011)

Sir Osisofliver said:


> Nine o'clock (or there abouts) is when the market reaches the old high, so we aren't there yet by a long stretch. I'd have to say we are closer to eight than seven at the moment.
> 
> I'm focussing on the share market rather than the broader economy itself.  If you want to look for the start of the Property market...it occurs very near the 12 o'clock position, not the six o'clock position. It also *tends* to start at the highest population density areas before moving into less populated areas. So depending on where you are looking it could have occurred (and is still occuring as it moves away from higher density areas) a couple of years ago.
> 
> ...




Clear  thanks.

Regarding 10 o'clock - what does it mean by rising overseas reserves? Is that reserves of precious commodities?


----------



## burglar (10 May 2011)

Sir Osisofliver said:


> Clear? ...




Did the GFC blend in with the cycles? 
i.e. was it driven or timed by the cycles.
I perceive we are in the turbulent wake of the GFC still. 
Is that perception correct?

Would you include Volatility as an indicator within cycles?

Newbies are asking where are they going wrong, 
especially those who joined the equities market after the GFC.

burglar


----------



## Sir Osisofliver (12 May 2011)

KurwaJegoMac said:


> Clear  thanks.
> 
> Regarding 10 o'clock - what does it mean by rising overseas reserves? Is that reserves of precious commodities?




No.  A more common usage that is searchable is foreign reserves. IE reserves that are external or foreign to the economy.  In the case of the cycle of reserves what we are talking about is the reserves of currency and bonds that are purchased by the Reserve Bank.

http://www.businessdictionary.com/definition/foreign-reserve.html

Obviously it is a careful balancing act for the Reserve Bank.  They want to buy these overseas reserves at rates that are beneficial (IE when our dollar is worth more than the currency we purchase), but to do so they must raise interest rates (because of the effect on our currency price), without influencing inflation too much.

Hope that helps.

Cheers

Sir O


----------



## Sir Osisofliver (12 May 2011)

burglar said:


> Did the GFC blend in with the cycles?
> i.e. was it driven or timed by the cycles.



GFC was nothing new. When the bubble burst it wasn't unique in terms of the sequence of events I spoke about. To ask whether the cycles drive the event, or the events drive the cycles is a bit of a chicken and egg question. They happen concurrently, the trick is to be aware enough about what is happening that when these events occur that you can use them as roadsigns to tell you what is going to happen *next*.







> I perceive we are in the turbulent wake of the GFC still.
> Is that perception correct?




Look, I'd have to say that for a period of time after a major correction (aside from that initial spike in prices that I have already discussed) it is quite common to see a period of corrective pricing patterns emerge. Because of the nature of these major corrections (And if I was to go into depth here I'd discuss chaos versus Standard Deviation as a measure of risk and its relationship to multi economy synchronisation), it takes a period of time for these correlations to synchronise again.  

You therefore *tend* to see a period of sideways momentum in the share market, where the economy is still heavily influenced by other economies that are yet to find their direction, before the next leg up. Anyone that purchased during the ideal buying window has the luxury of being able to hang on and get a level of comfort from the high yields that they achieved buying in that window.  Anyone that waits for significant signs of recovery tends to find themselevs having to ride around in the wishy washy period of the market at it trends sideways. Same thing happened after the '87 crash and it is history repeating itself... an expression of the cyclical nature of the economy.







> Would you include Volatility as an indicator within cycles?




No, but if you find a high correlation and it works for you don't let that stop you. 







> Newbies are asking where are they going wrong,
> especially those who joined the equities market after the GFC.
> 
> burglar




It's too broad a statement Burglar. We're prior to the next leg up (back to the old high of the market) at this stage, but it's coming fairly shortly.  Old high of the market is where we usually see a mid cycle corrective pattern and then leg up to new highs, as resistance changes to support.

For anyone *trading* right now, the same rules apply as trading in any other environment, it's just been a little more challenging of late.

Cheers

Sir O


----------



## KurwaJegoMac (12 May 2011)

Sir Osisofliver said:


> No.  A more common usage that is searchable is foreign reserves. IE reserves that are external or foreign to the economy.  In the case of the cycle of reserves what we are talking about is the reserves of currency and bonds that are purchased by the Reserve Bank.
> 
> http://www.businessdictionary.com/definition/foreign-reserve.html
> 
> ...




Thanks Sir O.

Are there any books you might recommend on general economics? You write quite well in a way easy for a beginner to understand - i'd love to hear/read more whether it be from yourself or from material you've found to be helpful in your own understanding.


----------



## Sir Osisofliver (12 May 2011)

KurwaJegoMac said:


> Thanks Sir O.
> 
> Are there any books you might recommend on general economics? You write quite well in a way easy for a beginner to understand - i'd love to hear/read more whether it be from yourself or from material you've found to be helpful in your own understanding.




Unfortunately there isn't a lot of text around the subject of cycle analysis, synchronisation and the like.  The reasons for this is that much of the academia is driven out of Wall Street and the major economies...and they tend to be very self orientated. It also tends to be very centered around a specific asset class. eg share market *or* property, not both. I've seen some research reports around cycle analysis specifically to do with the commercial property asset class, but nothing that takes a more holistic view.

Any general macro-economics text will give you a grounding about the mechanisms involved between interest rates/inflation/currency cycles but I haven't seen any that incorporate the other correlated cycles of Unemployment, commodity, property, shares etc and unify a theory around it.

Feel free to search though and let me know if you find anything interesting.

Cheers

Sir O


----------



## burglar (12 May 2011)

Sir Osisofliver said:


> ...  it's just been a little more challenging of late.
> 
> Cheers
> 
> Sir O




Really appreciate your essay! 
And your reply!

Challenging, yes, I found it to be so!

You should publish, call it:
"The Golden Toilet Seat"

Milk in the fridge, ...
petrol in the car, ...
I'm doin' alright in this country!!


----------



## Sir Osisofliver (13 May 2011)

End of the cycle (Peak of the market)
Banks are giving credit away like's it's water with a use-by date. Commodities have razor thin stockpiles and prices are jumping like a cockroach on a hot barbeque. Share price yields are looking THIN and brokers are saying...Look its all about the fundamentals.

OK so what do I look for to tell me that the peak of the market is approaching?  What we need in this situation are indicators that are devoid of spin.  Looking at the majority of media commentary tends to be next to useless as the media is reactive not proactive, and it can be challenging to wade through all the misinformation that abounds at that point of the cycle.

*Yield curves*
I hope everyone knows what a yield curve is.  This is a simple yet great habit to get into to look at the yield curves that exist at various points of the cycle. It's great because it *isn't* subject to misinformation and relatively easy to understand. Essentially what a yield curve is, is an expression of the control mechanism used by the Reserve Bank by setting interest rates, combined with a perception of the market.

All the information that you need to build a Yield Curve is available from the RBA website (the statistics area). What you need is the Reserve Bank Cash Rate (Currently 4.75%), and then a selection of Bond Rates (A simple yield curve would just use 3 and 10 yr bond rates) The three year bond rate at present is 5.05% and ten 5.33%




and this is what it looks like.  This is referred to as a normal or positive yield curve. What occurs however *prior to* a market correction is that the yield curve becomes an INVERSE or NEGATIVE yield curve.

(I attempted to laod up the RBA excel spreadsheets which contain this data but you'll have to trust me and/or go look for them yourselves.

If you look at the data around August 2007 this what you get...




and as you can see the inverse yield curve is telling us that the market was in for some very difficult times ahead.

The important thing to remember with yiled curves is *the steeper the angle of the curve, the more severe the correction, or the more bouyant the recovery.*

If you want to learn more about the theory behind yield curves you can look online for the following:-

1. The *"expectations theory"* states that expectations of rising short-term interest rates are what create a positive yield curve (and vice versa).

2. The *"liquidity preference hypothesis*" states that investors always prefer the higher liquidity of short-term debt and therefore any deviance from a positive yield curve will only prove to be a temporary phenomenon.

3. The *"segmented market hypothesis"* states that different investors confine themselves to certain maturity segments, making the yield curve a reflection of prevailing investment policies.

In the 1990s, Duke University professor Campbell Harvey found that inverted yield curves have preceded the last five U.S. recessions... and look, with all of the above you don't have someone yammering at you about the supercycle that China will create, that the Market is the strongest asset class, that its time *in* the market, not timing in the market and all that waffle.  So on the face of it yield curves seem easy to understand and use right?


*HOMEWORK*

Go to the RBA website and locate the spreadsheets I was talking about.

Go create yield curve graphs for the following dates.

1 May 1995
1 July 1998
18th September 2001
17th of June 2002
30th May 2005
21st September 2006
19th January 2007

Can you find a negative yield curve in the 2002-2003 financial year?

The reason why I want you to do this is so that you can seet hat yield curves whilst useful need a) experience to interpret what you are looking at, and b) need other confirming indicators....

Which will be next lesson.


Cheers

Sir O


----------



## kingcarmleo (14 May 2011)

Awesome work Sir O, keep em coming mate


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## ferretbiter (15 May 2011)

Thanks for all the bullet proof newbie advice Sir.o, this thread is a godsend for any beginner investor.


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## Sir Osisofliver (17 May 2011)

Hi All,

Time pressures are starting to impact me. I was hoping to get time to add some more confirming factors to recognise the end of the cycle but won't have time to devote to a large piece.

Ergo....you get to choose the next piece...

Dividend yields as a confirming factor

or

Fractal Intercepts and Market Geometry?


Cheers

Sir O


----------



## jaystar86 (17 May 2011)

I vote dividend yields... mainy because the other option reminds me more of drawing then actual market activity...


----------



## jaystar86 (17 May 2011)

wow... just finished pouring through this thread.  

I am really really impressed. I absolutely agree with the bit about the cycles.  As I am a (strongly) left brained individual are you aware of any resources that can back up/justify the argument you have made? (Definately not disagreeing with it, in fact experience and common sense suggests it is spot on. Would just like to deepen my own knowledge about the issue)

regards,

J


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## Sir Osisofliver (18 May 2011)

jaystar86 said:


> wow... just finished pouring through this thread.
> 
> I am really really impressed. I absolutely agree with the bit about the cycles.  As I am a (strongly) left brained individual are you aware of any resources that can back up/justify the argument you have made? (Definately not disagreeing with it, in fact experience and common sense suggests it is spot on. Would just like to deepen my own knowledge about the issue)
> 
> ...




Hi Jaystar,

I did put some hints in the thread about where you can locate supporting information.  You can look for Investment clock or economic clock to get a bit of history in the theory.  You can also look at the market itself for confirmation. Amongst my postings on this forum you may also see a table I've put together which shows the start and finish of the economic cycles occuring since 1937 in the Australian Market. It's around somewhere, I'd attach it again but I think it was on my old comp and I'll have to rebuild it. 

As I said any economic textbook will give you the linkages and mechanisms between interest rates, inflation, exchange rates, but there is no text I have seen that details out the correlation between the other components to the economic cycle. Probably because the cycles are not nice, neat and discrete.  They are chaotic in nature and what I've highlighted is a general trend that occurs when these cycles align. It's going to require an academic with mad skillz in chaotic math to identify the chaotic influences and correlations of all these cycles.

You can look at the RBA website if you want more information around the effect of raising or lowering interest rates with regards to the RBA's charter.  Bottom line is that  actual data (the actions of the market) have proven to me time and again that this is what is happening.  If you want to research it, use past corrections and bull runs in the market and compare it to what I have said.

Cheers

Sir O

P.S. Does everyone want Dividend yields as confirming factors rather than fractal intercepts?


----------



## KurwaJegoMac (18 May 2011)

Sir Osisofliver said:


> P.S. Does everyone want Dividend yields as confirming factors rather than fractal intercepts?




I'd like to second Dividend yields please.



			
				Jaystar86 said:
			
		

> wow... just finished pouring through this thread.
> 
> I am really really impressed. I absolutely agree with the bit about the cycles. As I am a (strongly) left brained individual are you aware of any resources that can back up/justify the argument you have made? (Definately not disagreeing with it, in fact experience and common sense suggests it is spot on. Would just like to deepen my own knowledge about the issue)
> 
> ...




I've picked up a book about the economic cycle that deals with the concepts that Sir O has presented. I haven't had a chance to read through it yet - but at a quick glance it's on par with what he's written. I'll have a read of it and post up on here if it's worth getting.


----------



## jaystar86 (18 May 2011)

Sounds good, Kurwa.

And thanks, Sir O.  I'l research those hints/tips.  Thought it might be the way you suggested that it is... Academia rarely focusses on the important things...

J


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## burglar (18 May 2011)

If it's on the sellers side its called an "overhang"


> Sizable block of securities or commodities contracts that, if released on the market, would put downward pressure on prices; prohibits buying activity that would otherwise translate into upward price movement.,




But what is the correct term if it is on the buyers' side?


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## Jerm (18 May 2011)

Hi Sir O, you have an amazing amount of information and are very kind to be sharing it with us.

I wonder how Property cycles relate to Share cycles. Could you explain that for me? Where would you say we are in regards to that cycle too?

Thanks for all of your generosity.


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## Sir Osisofliver (18 May 2011)

Jerm said:


> Hi Sir O, you have an amazing amount of information and are very kind to be sharing it with us.
> 
> I wonder how Property cycles relate to Share cycles. Could you explain that for me? Where would you say we are in regards to that cycle too?
> 
> Thanks for all of your generosity.




HI Jerm,

Sorry to dissapoint, but I said I was only going through share cycles because that was the limit of the time I could give.  You'll also note if you have a look around the forum that Joe has limited the property discussion to a single thread. Property discussions around here tend to get a bit messy, so I've been staying away from them.  My view of property is that unlike the share market, it's not a homogenous market. It is also a weak efficiency market, and a lot of people do not understand the drivers behind property price movements (not that I am an expert in this field). If I get time, (no promises), I'll run by Joe what I think should be covered in terms of the Property cycle and he can give me the thumbs up or down. Don't hold your breath for this though.

Cheers

Sir O


----------



## KurwaJegoMac (7 June 2011)

KurwaJegoMac said:


> I
> I've picked up a book about the economic cycle that deals with the concepts that Sir O has presented. I haven't had a chance to read through it yet - but at a quick glance it's on par with what he's written. I'll have a read of it and post up on here if it's worth getting.




I didn't glean anything useful from the book - it was largely a 'long winded' version of what Sir O posted. Moving onto the next book...

Might see if I can tackle the yield curve homework over the next few days


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## Sir Osisofliver (9 June 2011)

Hi All,

As you can probably tell I kinda got extremely busy and have reneged on my promise to do a segment on Dividend Yields as they approach the end of the cycle. I also need to do some prep work in this area. It's easy enough to put this information together and I did have it on my old comp, but I need to rebuild it and it will take me a couple of hours to collate the data....a couple of hours that I just don't have to spare as we approach the end of the financial year.

I'll try and get back to this when things are a bit more normal for me but the next few months are shaping up to be fairly busy.

Alternatively if someone else wants to do the groundwork and post it here we can discuss the implications.

What is required is a data sample of the top stocks by market capitalisation over the recent cycle (mid '03 to end '07). ASX50 would be good ASX100 is better. What you are looking for is the actual dividends paid during this period of time for the constituents of the index, compared to the share price. (To give you the Dividend yields). Alternatively you can use the EPS (earnings per share) figures.  Monthly figures are fine for this purpose.

You'll then need to create several things...

1) A chart showing the fluctuations across the whole index
2) A chart showing the fluctuations across industry sectors (Use the GICS clasification)

The reason for the two is that changes in the sectors reveal things that you cannot see when you look at the index as a whole. For example, you'll see interesting things happening to the yields on Utility companies because of the correlation with the Credit cycle and interest rate cycle, and this is expressed in the dividend yield information.

I'll check back in a week or so to see if someone has posted the info. Feel free to discuss it of course if I am not around about what you think is happening across the various sectors. (and perhaps some of the old salts around here can give us their opinions as well).

Cheers

Sir o


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## davede (11 June 2011)

Sir Osisofliver said:


> HI Jerm,
> 
> Sorry to dissapoint, but I said I was only going through share cycles because that was the limit of the time I could give.  You'll also note if you have a look around the forum that Joe has limited the property discussion to a single thread. Property discussions around here tend to get a bit messy, so I've been staying away from them.  My view of property is that unlike the share market, it's not a homogenous market. It is also a weak efficiency market, and a lot of people do not understand the drivers behind property price movements (not that I am an expert in this field). If I get time, (no promises), I'll run by Joe what I think should be covered in terms of the Property cycle and he can give me the thumbs up or down. Don't hold your breath for this though.
> 
> ...





Joe also runs a dedicated property investment forum here:

Aussie Property Forums

Wasn't sure if you were aware. If you were at least it may benefit some other members.

As for the property market it certainly is less efficient. Large transaction costs and the fact that as you eloquently stated it is not homogenous (referring to the mix of investors and owner occupiers yes?). There are huge gaps between price information data points making property prices something of a pandora's box that crash advocates and raging bulls love to try and speculate on until the next batch of figures is released.

Regards,

Dave


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## Monkeyzu (15 June 2011)

Hi all. 

Thanks for all the info Sir O. You've already saved me money just by making me realise i've got alot to learn before I start putting my money on the line!

I've collecting info over the last couple of days, trying to get my mind around it all. One google search that's reaped a few gems that I recommend to other newbies:

http://www.google.com.au/m/search?s...tradersystem.com/library/&hl=en&start=30&sa=N

I'm not promoting or affiliated with "supertradersystem" (although 12months to millionaire does sound tempting) this just a search of their pdf library which is collection of various other ebooks floating around the interwebs. Some i've seen referred to on this very forum...


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## kid hustlr (30 June 2011)

Fantastic thread guys, I stumbled across this forum a couple of weeks ago and I'm doing as much reading as I can but this thread is by far the most informative.

Ok, Random questions.

Sir O, you talked about a line of credit and also pre-approval, how long does pre-approval last? For example could you have established a long term fixed interest line of credit a couple of years ago just post GFC and be using those funds (and paying a very low IR) to this day? Further, when establishing a line of credit is there an up front cost? or so long as the bank views you as a safe customer you can just have a line of credit sitting in your account charge free and then use the funds at some random time period down the track when you see a strong investment opportunity?

Secondly, I was looking at MQG warrants on ASX:

http://www.asx.com.au/asx/markets/warrantPrices.do?by=underlyingAsxCode&underlyingCode=MQG

MQGKZD confuses me, 

It expires in some 20 years time, yet the exercise price + ask price is roughly equal to the shares current market value. I could understand this if the option expired tomorrow but why isn't their a huge time value factored in to the cost of buying this? Is their a feature or something of that nature I'm not aware of?

Finally, Sir O, you fixed interest strategy made bonds look really appealing to purchase, although everything is easy in hindsight, that said, where does one purchase bonds? Is it through a standard broker like equities/derivatives or is slightly more complex?

Cheers in advance guys, great thread.


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## Sir Osisofliver (4 July 2011)

Really busy Kid Hustlr - here's my answers in brief.



kid hustlr said:


> Fantastic thread guys, I stumbled across this forum a couple of weeks ago and I'm doing as much reading as I can but this thread is by far the most informative.
> 
> Ok, Random questions.
> 
> Sir O, you talked about a line of credit and also pre-approval, how long does pre-approval last? For example could you have established a long term fixed interest line of credit a couple of years ago just post GFC and be using those funds (and paying a very low IR) to this day? Further, when establishing a line of credit is there an up front cost? or so long as the bank views you as a safe customer you can just have a line of credit sitting in your account charge free and then use the funds at some random time period down the track when you see a strong investment opportunity?




Pre-approval lasts until you use it.
Yes you could have gone for pre-approval in August '07 and be using the funds now. 
Fixing an interest rate incurs a cost.  I don't think that any banks offer a fixed LOC.  But that doesn't stop you fixing a portion through a standard loan structure and leaving the remaining variable to give yourself flexibility.
Most loans have admin fees. Some LOC (RABO bank for eg) will charge for unused loan funds in a LOC - but most do not, and then yes you will then have capacity to purchase when many others do not. 







> Secondly, I was looking at MQG warrants on ASX:
> 
> http://www.asx.com.au/asx/markets/warrantPrices.do?by=underlyingAsxCode&underlyingCode=MQG
> 
> ...




I don't do much in warrants. Each warrant can be different so you have to look at the PDS pretty carefully.  The only thing I saw through the link you provided was that it was a call warrant...know what this means?

With warrants you are borrowing money (the leveraging effect) and either having to pay interest, or having the interest paid via the dividends produced by the underlying security. (In many cases...as I said there is a great deal of variation within warrants). You should clearly understand what the features of the warrant are and what will drive the price and/or yield considerations you have for purchasing them.







> Finally, Sir O, you fixed interest strategy made bonds look really appealing to purchase, although everything is easy in hindsight, that said, where does one purchase bonds? Is it through a standard broker like equities/derivatives or is slightly more complex?
> 
> Cheers in advance guys, great thread.




I've mentioned cycles recently in this thread.  Since Bonds increase in capital value in a *falling* interest rate environment, where do you think that occurs in terms of the broader economic cycle?  The answer to that question is when times are bad and the RBA and Guvmint are trying to stimulate the economy....the ideal window of opportunity for bonds IMO has been and gone...if your purpose is capital gain.  You can still use a bond ladder or similar strategy for yield (not great yield but very secure). 

Cheers 
Sir O


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## kid hustlr (4 July 2011)

No rush to reply sir O, I'm not going anywhere.



Sir Osisofliver said:


> Fixing an interest rate incurs a cost.  I don't think that any banks offer a fixed LOC.  *But that doesn't stop you fixing a portion through a standard loan structure and leaving the remaining variable to give yourself flexibility.*
> 
> Cheers
> Sir O




Could you expand on the bolded section?

Re warrants: A poster sent me a pm explaining that specific series. That said it's clear I need to do some more reading in relation to warrants in general.

Keep the articles coming when possible!


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## Sir Osisofliver (5 July 2011)

*that doesn't stop you fixing a portion through a standard loan structure and leaving the remaining variable to give yourself flexibility.*


Lets say you have an asset that you had valued in August 2007 at $500,000. You have an existing liability on this asset of $150,000.00. The bank (because they are giving money away like it's water with a use by date), agree to lend to you 90% of the value of the asset, or $450,000 minus your existing liability, a further $300,000 of capacity.

You decide that the market is mature and you will not use your capacity until such time as the market has corrected.

It's now March 2009 and you feel that the market has reached it's bottom and decide to invest your unused capacity.

*After making sure you have a risk buffer of unused capacity,* you decide to invest $200,000 into the share market, meaning that you have a loan in a LOC facility that is now $350,000 against a $500,000 asset.

Interest rates are really, really low, so you decide to take advantage of these low rates and fix a portion of your loan for five years, using a Principal and Interest Loan. Hence you fix $300,000 of your loan, leaving the LOC with $50,000, and a further $100,000 of unused capacity for risk protection and/or further purchases into the future.

Clear?

Cheers 

Sir O


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## kid hustlr (6 July 2011)

Cheers Sir O, will read up and report back here with another bundle of questions.


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## alexc2005 (6 July 2011)

What does it mean if a share just doesn't open?

I'm watching one at the moment and it has 0 as its open price?

I could understand this if there was a trading halt, but there isnt?

The share is AXT.


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## againsthegrain (6 July 2011)

The 0 is the amount of trades done today,

Looks like there is a stale mate at the moment with the bid being 9.5 and ask being 10c which means nobody is willing to sell it below 10c but there is no takers at anything higher then 9.5 until either side is willing to accept the others offer no trades will be done


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## alexc2005 (6 July 2011)

againsthegrain said:


> The 0 is the amount of trades done today,
> 
> Looks like there is a stale mate at the moment with the bid being 9.5 and ask being 10c which means nobody is willing to sell it below 10c but there is no takers at anything higher then 9.5 until either side is willing to accept the others offer no trades will be done




Hmm i did think that might be the case.

But why does it show $0 as an open?

Do sales have to be established before it can properly open?

http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=AXT


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## againsthegrain (6 July 2011)

Well it shows 0 as open because there was no trades done today so its open as nil, the last trade done was at 9.5 but was not today.

The status is normal so the share is not in a halt or suspension. As soon as a trade is done it will open at that price, until then then open will be nil/0


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## alexc2005 (6 July 2011)

againsthegrain said:


> Well it shows 0 as open because there was no trades done today so its open as nil, the last trade done was at 9.5 but was not today.
> 
> The status is normal so the share is not in a halt or suspension. As soon as a trade is done it will open at that price, until then then open will be nil/0




ok awesome!

Thanks!


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## economictrader (8 July 2011)

Hi Guys,
 Just a quick question from a newbie.

When is tax deducted after you sell shares (at a profit)?
Does it get deducted at some pre-set rate (kinda like PAYG I guess) ?
Or do you keep all profit and declare it at tax time?


----------



## Garpal Gumnut (8 July 2011)

economictrader said:


> Hi Guys,
> Just a quick question from a newbie.
> 
> When is tax deducted after you sell shares (at a profit)?
> ...




It's a capital gain usually, declared at end of year tax.

Occasionally a "company buyback" will advantage you if the company structures it to minimise your capital gain by offering a dividend in lieu of the capital fully franked, i.e. some tax paid on that already.

Generally though it's tax time.

gg


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## avexdevil (9 July 2011)

Sir Osisofliver, I've been following your posts at the beginning of this thread, slowly progressing all the way to the end. What started of as light and digestable reading evolved into lessons structured on technical jargon that became sorta difficult to understand or follow. I appreciate your efforts though and am curious as to whether you actually did economics back in your tertiary education days, or was it all founded on personal interest? (i.e. you were an accountant and decided that looking at the 'bigger picture' was more your thing?)


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## Sir Osisofliver (11 July 2011)

avexdevil said:


> Sir Osisofliver, I've been following your posts at the beginning of this thread, slowly progressing all the way to the end. What started of as light and digestable reading evolved into lessons structured on technical jargon that became sorta difficult to understand or follow. I appreciate your efforts though and am curious as to whether you actually did economics back in your tertiary education days, or was it all founded on personal interest? (i.e. you were an accountant and decided that looking at the 'bigger picture' was more your thing?)




The problem with Jargon is that 1) is second nature to those that use it all the time, and 2) It's hard to get away from.  It's jargon for a reason - its the language that is used to explain concepts that are largely unique to that particular field of learning.  Let me know what was difficult and I'll try to explain it another way.

As for your question, yes I did economics...and business finance...and accountancy... and a whole bunch of other relevant topics when I did my university degree. Personal experience however forms the greater part of my knowledge...I don't remember much of my uni days when I did my Bachelor.

Cheers

Sir O


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## leyy (11 July 2011)

Hi Sir O,

Just wanted to thank you for all the time and wealth of knowledge you have invested with us.

I have learnt so much reading this thread and I am sure everyone else has also.

You are an asset to the ASF community.

Albert


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## kid hustlr (14 July 2011)

Sir Osisofliver said:


> * As a general guideline I’ve found it takes about 5 years for a quality property to move from negative to positive gearing.
> 
> *



*

Could you expand on this? Is this through timing the economic cycle? Increasing rent payments? Other?

Also you mentioned a positively geared share investment account, I assume this is quite difficult to achieve and relies on a combination of super low I/R and excellent dividend returns??

Secondly and this questions may seem obvious,

I have an IB account, how do you guys get up to the minute prices? For example I was looking to buy an option and the only way to find a price list was to go to the search feature within the web trader application, search the stock and then it gave me a listing of the closing prices from the previous day. Is this an ok method or is their an easier way I should use.

Also, with a reg t-margin account is every purchase bought on margin? If I wished to just buy something with cash is that possible?*


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## Julia (14 July 2011)

kid hustlr said:


> Also you mentioned a positively geared share investment account, I assume this is quite difficult to achieve



Why would you make this assumption?


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## kid hustlr (15 July 2011)

Julia said:


> Why would you make this assumption?




I'm not sure, I guess intuition? Looking at margin rates on CBA right now, interest costs are at 9.6%. Obtaining a portfolio of dividends achieving a greater return than that seems difficult?? (unless im missing something??)


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## kid hustlr (15 July 2011)

Quick question relating to options:

what does the multiplier mean?

example:

in regards to index options on the asx 200 they have a  multiplier of 10.

i understand that for every 1 point change in the index, this results in a 10 dollar movement but does the multiplier also relate to the premium? for example if the premium's last sale price was 1.0 does this mean someone paid 10$ for this contract or only $1 ?


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## KurwaJegoMac (15 July 2011)

kid hustlr said:


> I'm not sure, I guess intuition? Looking at margin rates on CBA right now, interest costs are at 9.6%. Obtaining a portfolio of dividends achieving a greater return than that seems difficult?? (unless im missing something??)




If you have equity you get a Line of Credit against that, giving you a loan at a 7-7.5% interest rate. In addition, you could invest a portion of your own capital to bring the LVR down on the stocks you buy to make the purchase positively geared overall.


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## kid hustlr (15 July 2011)

KurwaJegoMac said:


> *If you have equity you get a Line of Credit against that, giving you a loan at a 7-7.5% interest rate.* In addition, you could invest a portion of your own capital to bring the LVR down on the stocks you buy to make the purchase positively geared overall.




Wow, interesting.

Could you expand on the bolded?

Does a bank look more favorably on someone who already has a large sum of equity with them?


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## KurwaJegoMac (15 July 2011)

A bank will look favourably on someone with equity because it gives them a security (a property) to which they can loan against, and use as collateral in the event of you being unable to pay your debts.

Let's say you own your house, and it's worth $500,000. You want some credit and go to the bank for a Line Of Credit. Say you need want to borrow $200,000. The bank lends you $200,000 against your house which is worth $500,000. So they hold a $500,000 asset for a $200,000 credit - as the asset is worth so much more than your loan, they're willing to give you a nice low rate to entice you to take the line of credit with them. They're not scared about you not paying back your debt because they can always just sell your $500,000 house to pay off your $200,000 debt. So the bank's position is more secure.

A credit card works much in the same way except that it's unsecured (i.e. no asset is held as collateral) therefore the bank charges you a much higher interest rate (17-20%) due to the heightened risk for the bank (they don't have a house to sell to pay off your debt).

---------

Regarding the comment in the bottom of your post - you can 'bombard' this thread all that you want, it was raised by Sir O to help raise financial literacy. If you have any questions, keep em coming!


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## Julia (15 July 2011)

kid hustlr, 'intuition' is probably not the best way to approach any aspect of the market.
It sounds as though you're fairly inexperienced.  If that's the case, why would you be considering a margin loan which - as I'm sure you know - can magnify your losses as well as your gains.

What paper trading have you done thus far, and what is your success rate like?


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## kid hustlr (15 July 2011)

Julia said:


> kid hustlr, 'intuition' is probably not the best way to approach any aspect of the market.
> It sounds as though you're fairly inexperienced.  If that's the case, why would you be considering a margin loan which - as I'm sure you know - can magnify your losses as well as your gains.
> 
> What paper trading have you done thus far, and what is your success rate like?




I have a basic commsec account with a small balanced portfolio of blue chips which I have developed over a number of years. I'm not looking to make any changes, nor take on much risk, moreso gather information as i can and learn so i can 'pull the trigger' so to speak on opportunities which might come down the road when i have more knowledge and understanding of the markets.


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## YouAgainstMe (22 July 2011)

Hey all,

I am just wondering what sort of strategy people use when buying their shares. For example if you want to invest X amount a year do you save that entire amount and then spread it across a bunch of shares or do you buy shares in a company each time you get to a percent of X amount. So maybe 10% and buy shares 10 times a year or each time you save 20% and buy 5 times a year. I hope that makes sense!


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## Tysonboss1 (22 July 2011)

YouAgainstMe said:


> Hey all,
> 
> I am just wondering what sort of strategy people use when buying their shares. For example if you want to invest X amount a year do you save that entire amount and then spread it across a bunch of shares or do you buy shares in a company each time you get to a percent of X amount. So maybe 10% and buy shares 10 times a year or each time you save 20% and buy 5 times a year. I hope that makes sense!




I generally spend less than I earn so am always building up capital, I then deploy it when I have the opportunity to buy assets at prices that will make them good investments over time.


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## Jerm (22 July 2011)

Sir Osisofliver said:


> HI Jerm,
> 
> Sorry to dissapoint, but I said I was only going through share cycles because that was the limit of the time I could give.  You'll also note if you have a look around the forum that Joe has limited the property discussion to a single thread. Property discussions around here tend to get a bit messy, so I've been staying away from them.  My view of property is that unlike the share market, it's not a homogenous market. It is also a weak efficiency market, and a lot of people do not understand the drivers behind property price movements (not that I am an expert in this field). If I get time, (no promises), I'll run by Joe what I think should be covered in terms of the Property cycle and he can give me the thumbs up or down. Don't hold your breath for this though.
> 
> ...




Thanks so much Sir O. I only bring it up  because you suggest earlier in the thread that starting out with 2 Investment Properties would be a good idea before buying your own home.

Also I will check out that property forum, thanks very much guys.


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## addison (23 July 2011)

is there a thread or subforum in asf specifically for discussion of IPOs ??? thanks


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## YouAgainstMe (23 July 2011)

Tysonboss1 said:


> I generally spend less than I earn so am always building up capital, I then deploy it when I have the opportunity to buy assets at prices that will make them good investments over time.




So for example you save $10k/year. Do you buy shares every time you get to $2k? or wait til you save the full $10k and then spread that across 5 different shares? or some other variation?

Cheers,


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## Tysonboss1 (23 July 2011)

YouAgainstMe said:


> So for example you save $10k/year. Do you buy shares every time you get to $2k? or wait til you save the full $10k and then spread that across 5 different shares? or some other variation?
> 
> Cheers,




When I first started I did it that way, but there is not always bargain issues to be had. So now I invest only when there are bargins


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## Starcraftmazter (26 July 2011)

Finished reading "Shares made simple" by Roger Kinsky. Really didn't like it  It's more for people who want to put the least humanly possible amount of effort into investing and expect to magically get a lot out of it.

I am wondering if anyone can suggest any books which satisfy any (the more the better) of these points;

 - For people who want to take a very active role and spend considerable time analysing local and global economic circumstances, and do extensive research on companies
 - For investing in tough and/or volatile economic conditions
 - More for short-term investments (trying to pick a winner for the next one year or less)
 - Doesn't centre around the modern portfolio theory (are there any books which reject it?)


Currently the only thing on my shortlist is "Stan Weinstein's Secrets For Profiting in Bull and Bear Markets", though I've noted down some others from various threads, but I'm not sure how well they satisfy the above criteria.


Thanks


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## jun1031 (2 August 2011)

Hi all,

I dont know if im suppose to ask this question here, but it says newbies and i am a newbie. I am planning to do CPA and take rg 146 before i do cpa. Would that be useful??? i dont really know what you can do with both CPA and rg 146??? is there a job that requires accountant on investment side???

Regards,

Jun


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## Coops82 (8 August 2011)

Big thanks to Sir O and all the other contributors to this thread. Learned a whole lot in 48 hours. Can't stop reading!


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## FelixLazard7 (14 August 2011)

Hello Sir O. I have a question regarding property strategies 

Say Mr. X bought 2 investment properties. take into account that he has no PPR.

Is it legal for him to live in one of his own investment properties and use " negative gearing" strategy for taxation purpose?


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## Sir Osisofliver (15 August 2011)

FelixLazard7 said:


> Hello Sir O. I have a question regarding property strategies
> 
> Say Mr. X bought 2 investment properties. take into account that he has no PPR.
> 
> Is it legal for him to live in one of his own investment properties and use " negative gearing" strategy for taxation purpose?




*How* Mr X purchased those properties makes a huge difference. Did Mx X purchase them under a trust structure with a corporate trustee?

If so then the answer could be that yes he might live in one of his investment properties and pay rent to the company that owns the assets.  (You'll find a proviso that he needs to pay a market rate of rent).

If he owns them in his own name....then my understanding is that no it would then cease to be an investment property and become his PPR for taxation purposes. 

Seek specialist advice from a tax lawyer for more details.

Cheers

Sir O


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## FelixLazard7 (15 August 2011)

Thanks Sir O for the info.


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## TMC93 (23 August 2011)

Hi, Toby here, I'm 18 years old and have always had a head for money, been investing in the stock market for about 6 months after I had paper traded successfully after a year. I would be lying to say I have made money but that's to be expected in this market I guess, I'm just breaking even. My main question was, for someone as young as I am and inexperienced, is such a volatile market a good place to start? My dad always told me when the going gets tough the tough gets going and I wondered if it's the same with shares. I currently only have $5000 in the market and 80% in small caps and heavy in resources. I have $10,000 in a term deposit which matures with another $1000 interest in September. I have $6000 in cash sitting in a high interest account and am considering adding it on the my term deposit. Currently I use E*trade which I find is suitable and stock market eye for non web based program. I use bloomberg for my iPad. Any help/suggestion would be appreciated, have only been reading this forum for about a week and have already doubled my watch list for future picks.

Cheers, Toby


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## KurwaJegoMac (23 August 2011)

TMC93 said:


> Hi, Toby here, I'm 18 years old and have always had a head for money, been investing in the stock market for about 6 months after I had paper traded successfully after a year. I would be lying to say I have made money but that's to be expected in this market I guess, I'm just breaking even. My main question was, for someone as young as I am and inexperienced, is such a volatile market a good place to start? My dad always told me when the going gets tough the tough gets going and I wondered if it's the same with shares. I currently only have $5000 in the market and 80% in small caps and heavy in resources. I have $10,000 in a term deposit which matures with another $1000 interest in September. I have $6000 in cash sitting in a high interest account and am considering adding it on the my term deposit. Currently I use E*trade which I find is suitable and stock market eye for non web based program. I use bloomberg for my iPad. Any help/suggestion would be appreciated, have only been reading this forum for about a week and have already doubled my watch list for future picks.
> 
> Cheers, Toby




I started live trading about 3 months into the start of the GFC stockmarket plunge. The volatility was phenomenal, with wild erratic swings every day. It was a difficult period to start in but I'm glad I started then - it really tested my emotions and discipline and punished me hard and fast whenever I made a mistake. When you start as a noob and lose $2500 in one day (20% of total capital at the time) it teaches you many valuable (and expensive!) lessons.

Of course it would be best not to lose that money in the first place, but that event and many others, refined my trading and risk management considerably. Perhaps the best piece of advice I can give you is to ensure you review each of your trades and determine whether you stuck to your plan, didn't sell/buy on emotion and that you had appropriate risk strategies in place. Ask yourself what should you have done differently and identify any gaps in your knowledge and then go out and learn more.

Never stop learning!


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## Sir Osisofliver (23 August 2011)

TMC93 said:


> Hi, Toby here, I'm 18 years old and have always had a head for money, been investing in the stock market for about 6 months after I had paper traded successfully after a year. I would be lying to say I have made money but that's to be expected in this market I guess, I'm just breaking even. My main question was, for someone as young as I am and inexperienced, is such a volatile market a good place to start? My dad always told me when the going gets tough the tough gets going and I wondered if it's the same with shares. I currently only have $5000 in the market and 80% in small caps and heavy in resources. I have $10,000 in a term deposit which matures with another $1000 interest in September. I have $6000 in cash sitting in a high interest account and am considering adding it on the my term deposit. Currently I use E*trade which I find is suitable and stock market eye for non web based program. I use bloomberg for my iPad. Any help/suggestion would be appreciated, have only been reading this forum for about a week and have already doubled my watch list for future picks.
> 
> Cheers, Toby




Hi Toby, 

I consider the current environment an excellent one in which to learn.  I run a number of different systems with which I trade. I find that these trading systems perform better or worse in certain market conditions and need to be tailored to what kind of prevailing market exists at the time.  This kind of market will expose you to numerous types of up/down and neutral trends in a short period of time...giving you a great opportunity to learn how to structure a system with which to tack money from the market.

I would personally always recommend that you paper trade before starting a new system, but appreciate that some people don't learn when there isn't real money on the table.

Cheers

Sir O


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## TMC93 (23 August 2011)

Sir Osisofliver said:


> Hi Toby,
> 
> I consider the current environment an excellent one in which to learn.  I run a number of different systems with which I trade. I find that these trading systems perform better or worse in certain market conditions and need to be tailored to what kind of prevailing market exists at the time.  This kind of market will expose you to numerous types of up/down and neutral trends in a short period of time...giving you a great opportunity to learn how to structure a system with which to tack money from the market.
> 
> ...




I confess, when I was paper trading I did less research compared to when I started trading with real money. Thanks for the advice, and this thread is great for someone like myself. I am still young so I can afford to lose a bit of money taking risks and I understand that buying small caps are risky but the rewards a high. My biggest mistake was buying FMS @ $0.20 as they are now down to 0.12 but am sticking with that one. 

My main strategy has been if value falls 15% I sell and likewise on the rise. If I feel the stock is still good I buy back in with my initial capital and bank the difference for future trades. Not the best strategy In a yoyo market so I'm trying not to worry too much about the red I see daily. Was thinking about buying a few blue chips to diversify but after seeing blue chips can fall just as sharply I am now unsure.


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## MrMomentum (23 August 2011)

For me, the challenge is to find the right strategy for the market in front of me.

It gives me more confidence if I’ve paper traded the strategy before hand and drawn up some rules for myself.

Whether it be gaps, trend trading, pattern trading or news trading, if I’ve had some practice paper trading it first then I feel more confidence choosing the strategy I want.


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## tech/a (23 August 2011)

MrMomentum said:


> For me, the challenge is to find the right strategy for the market in front of me.
> 
> It gives me more confidence if I’ve paper traded the strategy before hand and drawn up some rules for myself.
> 
> Whether it be gaps, trend trading, pattern trading or news trading, if I’ve had some practice paper trading it first then I feel more confidence choosing the strategy I want.




As Ive said before Paper trading is not worth the paper its written on.

To be *statistically significant* I would argue that you need at least 500- 1000 trades over a wide range of market conditions.

Hardly practical if "Paper trading"

Just having a trading "plan" doesn't guarantee a positive expectancy trading methodology.

There is no easy or cheap way to develop a *PROVEN* trading method.

You need the software--the skill and the acumen to design and test systems.


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## MrMomentum (23 August 2011)

I believe that everyone approaches trading differently.

I also believe everyone approaches paper trading differently.

When I paper trade, I’m not at all interested in the “statistics” behind it.

I’m interested in the “experience” of applying a set of rules to the market.

I want to test my rules but also test my reactions in a safe environment free of risk due to having no money down.

The way I approach it is to set myself a paper trading dollar target.

I want to see if I can reach this target by applying my rules in a reasonable amount of time. This may be rules I’ve made up or rules I’ve read about from someone else.

If my rules aren’t working or if it is taking forever to reach my paper target then I can abandon the system quickly without any fuss or issue.

I feel I don’t have to do 500-1000 trades to work all this out.

Paper trading to me is about experiencing things for myself.


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## tech/a (23 August 2011)

A pointless exercise then
If you make a loss you have no idea if your throwing out a perfectly good method because you traded it in conditions that result in the method drawing down.

Or worse you pull a profit in market conditions which occur rarely and over long term you'll fail dismally.

*You simply DON'T KNOW*

To ignore statistics or choose not to record them means your just a " player" in the serious business of trading.

Still players have their place
They supply a lot of capital the those who run serious business


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## MrMomentum (23 August 2011)

Yes it is pointless....To think you might accept a different point of view to your own.


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## tech/a (23 August 2011)

MrMomentum said:


> Yes it is pointless....To think you might accept a different point of view to your own.




Sorry I dont understand.
*Explain to me how *and why trading a theory (Or plan) you have no idea whether it will return a profit is of any benefit.
It really is pointless.

I post here to show to people that theory such as yours is plain crazy.
Being comfortable and feeling warm and fuzzy because a couple of trades turn a profit or a couple of trades turn a loss and you discard the theory is just a waste of time.

*SURE*

If you have a* RIGOROUSLY TESTED* System (Plan) which you have run over as much data and time as you can *AND* it shows positive expectancy--*THEN* paper trade it to death and see if it performs as it has in testing!!
Its called Forward testing in Real-time.


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## TMC93 (24 August 2011)

When i was paper trading, if something didnt work i wouldn't simply throw it out like you said i would keep it incase it suited different market conditions. I can see that an experienced trader may not use paper trading but this is a beginners post and i sure know it helped me understand the market better.


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## Sir Osisofliver (26 August 2011)

TMC93 said:


> I confess, when I was paper trading I did less research compared to when I started trading with real money. Thanks for the advice, and this thread is great for someone like myself. I am still young so I can afford to lose a bit of money taking risks and I understand that buying small caps are risky but the rewards a high. My biggest mistake was buying FMS @ $0.20 as they are now down to 0.12 but am sticking with that one.
> 
> *My main strategy has been if value falls 15% I sell and likewise on the rise.* If I feel the stock is still good I buy back in with my initial capital and bank the difference for future trades. Not the best strategy In a yoyo market so I'm trying not to worry too much about the red I see daily. Was thinking about buying a few blue chips to diversify but after seeing blue chips can fall just as sharply I am now unsure.




HI TMC - Been busy hence the lateness of my response.

I refer to the bolded bit...I hope you realize that what you have effectively done is the following.

Limited your downside risk and *limited your upside potential.*

If you have a 50% win loss ratio (you get half of your choices correct) theoretically you will just break even. (In practice you won't because the expense of brokerage will mean you go backwards).

Can you see why this could create a problem?

Cheers

Sir O


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## Sir Osisofliver (26 August 2011)

tech/a said:


> As Ive said before Paper trading is not worth the paper its written on.
> 
> To be *statistically significant* I would argue that you need at least 500- 1000 trades over a wide range of market conditions.
> 
> ...




Hi Tech,

You and I have had a discussion before about paper trading and my opinion is that I do find value in it. Of course I also do a statistically relevent number of test trades when paper trading.

One thing I have found useful which you may want to consider when paper trading (and I'm talking to everyone here not just Tech), in the last six months I've experienced a slight flattening of my equity curve, predomininantly caused by real world implications of scale and slippage. (Remember I wouldn't class any of my systems as High Intensity trading and I don't watch the market constantly, instead relying on contingency orders to automatically trigger in and out of my selected targets).

I'm in the process now of researching yet *another* system (I'm a glutton for punishment) and as part of the process I use I did around 100 test trades. In addition to the ordinary transaction costs I imposed a 5% discount to my exit price (to better reflect the slippage effect). It very quickly became obvious that the system still retained positive expectancy, despite the millstone I placed around it's neck.

I find this valuable...and relevant.  But don't use me for an example everyone, unless you are like me...I will spend ~9 months in validating and finetuning a system before I live test it with minimal funds. Once validated (after a small sample and comparative to test data), I will then move appropriate funds to the system.

Cheers

Sir O


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## TMC93 (27 August 2011)

Sir Osisofliver said:


> HI TMC - Been busy hence the lateness of my response.
> 
> I refer to the bolded bit...I hope you realize that what you have effectively done is the following.
> 
> ...




I see, maybe if i increase my selling point to 30+% that might work better. I suppose my strategy only worked because i was lucky enough to pick the right shares at the right time but i have not been following it lately as everything is up and down, just the other day COK went up 25% and i didnt sell. Trying to diversify my portfolio as im nearly all resources and i dont want to be caught with all my eggs in one basket but am unsure about retail with the strong $. Energy and agriculture look ok to me for the longer term 5-10 years however agriculture shows very limited growth from what i can see.


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## tech/a (27 August 2011)

*Sir O*

Have you the facilities to systems test with software?

My view is one which has been set in stone due to the luxury of being able to test 
Years of data and unlimited variants in a matter of minutes.
I can walk forward test unlimited markets in any set of market conditions in minutes.
I don't have to wait weeks and heave forbid months!

In the time it takes to gain statistical significance from paper trading I'll have tested 100s of variants over huge data sets.

*The point I'm making is this*

It's worth the time and effort.
You'll won't even come close to sound software produced systems testing.
You just don't have the flexibility to add or subtract conditions in "what if" senario's

If anyone is serious in this business they will learn more testing 1000s of ideas and creating 100s of conditions and parameters over a wide variety of markets and market conditions than you EVER will paper trading.
Most never come close to months of paper trading I'd say 50 trades would be massive to most and 20 considered significant.

*One suprising thing WILL happen*

You'll learn why a method will be profitable
You'll change your thinking and be able to knock up a profitable method quickly as you'll soon discover what works and why!

The amount of feed back your software--- if it's good will give you is priceless.
Not the sort of feed back you'll get with paper trading.

* Paper trading----- it's not worth the paper it's written on! *


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## JayCutler (27 August 2011)

Hi guys, newby here

Lets say someone had a $200k equity loan and put that into a 10 blue chips. The borrower can easily meet the interest repayments and has enough left over for other expenditures etc. When is the best time for that person to pay off the principal of the loan?(if ever). 

Thanks


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## Tyler Durden (29 August 2011)

Hi all, just wanted to ask a really really basic question.

Let's say I place a sell order of 500 shares at $1 each. Five minutes later, someone else places a sell order of 500 shares at $1 each. So in total, there are 1000 shares offered to be sold at $1.

Then someone places a buy order of 500 shares at $1 each. Do my shares get sold, or the other person's shares?

A slightly related question (or it may be the same question) is, when I buy shares, I am surprised that the transaction always goes through. What I mean is, if I buy 500 shares, then it always goes through (at the right price). But what if there is only one person selling 1000 shares? Does that mean he has only sold half?


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## tech/a (30 August 2011)

Yes to both questions


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## Sir Osisofliver (30 August 2011)

tech/a said:


> *Sir O*
> 
> Have you the facilities to systems test with software?
> 
> ...




Hi Tech,

I have the capacity to software test any number of technical *strategies*, but the sort of things I do I would not classify as a purely technical *strategy*. A technical strategy to me is using different indicators in meaningful ways to find potential triggers or targets, and potential exits and profit points. This is easily capable of being replicated and tested across thousands of data points to find statistical relevance as you so aptly described. It's also firmly in the realm of pure technical analysis, only using the price and volume data as inputs into whatever methodology or strategy is being used.

What I'm doing is slightly _different_ (I don't want to give away what I'm doing because then others would do it and I might lose my edge), but many of the systems I use don't incorporate standard technical indicators. Some of these conditions that I am testing against are more fundamental rather than technical in nature. Meaning that attempting to perform the same kind of scan that is based on price or volume data isn't possible.

For example....(not something I use in my system) how would you scan to determine the ratio of institutional to retail investors on the company register?

So why do I do it if it's so time consuming to test the validity of using both technical and fundamental data?   Because if it's hard...not many people will do it. It's much easier to do the kind of system testing you are describing and much harder to do things outside the box.  Outside the box however I'm not competing with a bunch of other people who have all been triggered in at the same point because they are all using the same data (and suffering the slippage results).

Trust me...I wouldn't go to all that effort if it wasn't worth it.  Make sense?

Cheers 

Sir O


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## tech/a (30 August 2011)

Complete sence.

I have a few which I cannot test myself.
The difference is *Through* Rigorous testing of systems that* can *be tested
I know how to structure methods which cant be tested to skew the results toward a positive expectancy.I know how to apply analysis.

The risk I see all the time with those who have no idea is they revert to the mantra of paper trading.

EG:-Testing by way of paper trading say a method which rates a buy by P/E ratio and a cross above/below an M/A is nothing more than theory.50 trades may end up a profit in a bullish market and a loss in a bearish market---what have you learnt---would one trade it?

If people have no idea how to skew a trading method toward positive expectancy then *ANY* trading Plan they come up with is nothing more than a *GAMBLE.*

If that makes sence.


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## Sir Osisofliver (30 August 2011)

tech/a said:


> Complete sence.
> 
> I have a few which I cannot test myself.
> The difference is *Through* Rigorous testing of systems that* can *be tested
> ...




No disagreement here. I find it mind-boggling that people will put actual money towards a strategy that they have no idea whether will make them a profit or not. But then I realize that there are people out there who are kinesthetic, who learn by doing, who no amount of analysis or testing is going to be a learning experience for them until real money is at risk.

I find it interesting though in your above example that you mention bearish and bullish markets for the same system however. My experience is that of my systems, they work to a greater or lessor efficiency depending upon the overall trend and position of the market. One system will return a profit in *any* market but the rate of return varies wildly depending on the overall trend of the market. I run this one all the time because hey I'm making money right, even though it may be piddling levels of return when the conditions aren't right. One (which is in mothballs at the moment) works *extremely* well in a late cycle environment (which I can't see happening until 2013-2014). 

I'll use *that* system over my others because the level of return will vastly outstrip my other systems. Do you run different systems at different times, or do you try and maintain one system that gives a consistent return in all market conditions?

Cheers

Sir O


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## tech/a (30 August 2011)

Sir Osisofliver said:


> No disagreement here. I find it mind-boggling that people will put actual money towards a strategy that they have no idea whether will make them a profit or not. But then I realize that there are people out there who are kinesthetic, who learn by doing, who no amount of analysis or testing is going to be a learning experience for them until real money is at risk.




true and most of these dont have a financial plan to wealth throught trading.Most expect and want 500% return on every trade (No different to me really! (sic)).



> I find it interesting though in your above example that you mention bearish and bullish markets for the same system however. My experience is that of my systems, they work to a greater or lessor efficiency depending upon the overall trend and position of the market. One system will return a profit in *any* market but the rate of return varies wildly depending on the overall trend of the market. I run this one all the time because hey I'm making money right, even though it may be piddling levels of return when the conditions aren't right. One (which is in mothballs at the moment) works *extremely* well in a late cycle environment (which I can't see happening until 2013-2014).




I have switches for my portfolio methods.
Futures are VSA discretionary trading. (tested with Algo's but traded with algo basic combined with discretionary M/M).



> I'll use *that* system over my others because the level of return will vastly outstrip my other systems. Do you run different systems at different times, or do you try and maintain one system that gives a consistent return in all market conditions?
> 
> Cheers
> 
> Sir O




I only one a few Long Portfolio methods --- none now.
I trade futures Discretionary as mentioned above.


Rocket scientist Son and I are working on a number of Systems and accepted trueisms.
Our research will be of interest to many---if you see what Im getting at.

I supply the Technical analysis he supplies the Maths.---algo's


----------



## PinguPingu (6 September 2011)

I sometimes see in Market Depth (Order detail) many many order for very small parcels. One example is HIL today. What's the point of this other than to give the illusion of many buyers/sellers?


----------



## marioland (15 September 2011)

Is there a website where you can see companies that plan to issue more shares? I know you can see them on the news regarding a company, but maybe there is a website that has all the data in one place?


----------



## VSntchr (16 September 2011)

Hey guys, just wondering where I can find credit ratings for ASX listed companies...I need to include it for a report I am writing on ARB for a uni assignment...


----------



## hunterh (16 September 2011)

Hi guys my first visit to your site . but I seem to have run into a bit of trouble trying to view the latest posts on some code threads..By that I mean Is there anyway of viewing the latest posts at the start of the thread ,instead of having to navigate to the last page ..IE if the thread On eg WBC has 25 pages the latest post (todays) seem to be on the very last page .?? IE page 25.

Sorry for the the question ...

   regards Hunterh


----------



## Joe Blow (16 September 2011)

hunterh said:


> Hi guys my first visit to your site . but I seem to have run into a bit of trouble trying to view the latest posts on some code threads..By that I mean Is there anyway of viewing the latest posts at the start of the thread ,instead of having to navigate to the last page ..IE if the thread On eg WBC has 25 pages the latest post (todays) seem to be on the very last page .?? IE page 25.
> 
> Sorry for the the question ...
> 
> regards Hunterh




Hi Hunter, welcome to ASF! 

Yes, you can change the order of posts in a thread so that the most recent post is displayed first. Just follow these steps:

1. Click on the "Settings" link at the top, right hand side of the website.
2. On the far left you will see a section titled "My Settings". Click on the "General Settings" link located in the "My Account" subsection.
3. Scroll down until you come to a section titled, "Thread Display Options". Where it says, "Thread Display Mode" select "Linear - Newest First" from the drop down menu.
4. Scroll down to the bottom of the page and click "Save Changes" and you're done!

It might be worth exploring some of the options in this section as there may be other preferences that you wish to customise.

Hope that helps.


----------



## davede (19 September 2011)

VSntchr said:


> Hey guys, just wondering where I can find credit ratings for ASX listed companies...I need to include it for a report I am writing on ARB for a uni assignment...




Hi VSntchr,

I think the ratings agencies should provide them on their websites (S&P, Moody's, Fitch).


----------



## Tyler Durden (24 September 2011)

With DRPs, do companies buy the shares from the market to give back to the shareholders, or do they just issue new shares for the DRP? If it's the latter case, I would assume this dilutes the shares of existing share holders?


----------



## Woroni (27 September 2011)

Hi,

Just looking for help with charts. I'm looking for a FREE chart that tracks the oil (WTI) price over 1+ yrs. Now I've come across this: http://stockcharts.com/freecharts/perf.html?$WTIC

I like it, but unfortunately, it maps performance, I want the actual price rather than performance changes. Can anyone provide me with a link to any such chart online? If you can get one based on daily candlestick format, even better! Thanks in advance.


----------



## davede (27 September 2011)

Woroni said:


> Hi,
> 
> Just looking for help with charts. I'm looking for a FREE chart that tracks the oil (WTI) price over 1+ yrs. Now I've come across this: http://stockcharts.com/freecharts/perf.html?$WTIC
> 
> I like it, but unfortunately, it maps performance, I want the actual price rather than performance changes. Can anyone provide me with a link to any such chart online? If you can get one based on daily candlestick format, even better! Thanks in advance.




Stock charts also provides a price chart for WTIC with candle sticks. type $WTIC in the symbol lookup.

http://stockcharts.com/h-sc/ui?s=%24WTIC

Is that what you're after?


----------



## Woroni (27 September 2011)

davede said:


> Stock charts also provides a price chart for WTIC with candle sticks. type $WTIC in the symbol lookup.
> 
> http://stockcharts.com/h-sc/ui?s=%24WTIC
> 
> Is that what you're after?




Unfortunately that doesn't go past 12 months. And there is a lot of junk as well. I don't need all that and it just clutters things up. There must be a simple yr+ oil chart out there....


----------



## davede (27 September 2011)

Woroni said:


> Unfortunately that doesn't go past 12 months. And there is a lot of junk as well. I don't need all that and it just clutters things up. There must be a simple yr+ oil chart out there....




For the record at stockcharts.com you can adjust the range under the 'range' box to up to 3 years and remove all the indicators under overlays and indicators.

There are numerous other sources that provide oil price data.

Here you can find oil prices back to the late 80s. I believe you can download .xls files with the prices too.

Is that more what you're after?


----------



## kid hustlr (30 September 2011)

Tyler Durden said:


> With DRPs, do companies buy the shares from the market to give back to the shareholders, or do they just issue new shares for the DRP? If it's the latter case, I would assume this dilutes the shares of existing share holders?




This could be wrong but this is my understanding:

They issue new shares. Yes it dilutes existing share holders (lowers the SP) but no more so than if those investors had taken the dividend in cash.

Effectively if you own a share a share worth $100 which pays a 2 dollar dividend, and I also own one of the same share, regardless of whether I choose to take the cash dividend or a DRP you're share value should (in theory) drop to $98 regardless of my action.

Hope that makes sense, someone step in and assist if its wrong!


----------



## KurwaJegoMac (30 September 2011)

kid hustlr said:


> This could be wrong but this is my understanding:
> 
> They issue new shares. Yes it dilutes existing share holders (lowers the SP) but no more so than if those investors had taken the dividend in cash.
> 
> ...




Pretty much right, but there are some technicalities involved that may change the outcome.

If the DRIP is company issued, then it comes from the company's own reserve of shares. When you sell these DRIP shares they go back into the company pool - hence no impact to the company's share price directly.

If the DRIP is operated via a brokerage account then the shares will come from the market (and need to be purchased on the market) and therefore will impact the share price directly.


----------



## Woroni (4 October 2011)

davede said:


> For the record at stockcharts.com you can adjust the range under the 'range' box to up to 3 years and remove all the indicators under overlays and indicators.




Thanks for that! Execellent. Didn't know how to get rid of the other stuff and that the ange could be customized. Cool.


----------



## marioland (20 October 2011)

I was watching a stock today and I noticed about 10 trades of just 1 share on a stock that has an average of 20-30 trades a day. Surely, this wouldn't be from regular traders, so what are these 1 share trades?


----------



## carlos169 (24 October 2011)

May I please convey my appreciation and thanks to Sir O and everybody else who is contributing to this thread.

Absolutely fantastic for a newb like me to start gaining some traction, research and develop my wealth plan.

Cheers!!!!


----------



## Des P (16 November 2011)

Hi all the term Breakout, i am on the understanding this is when the shares increase at very fast rates. Is this same term used when shares go down at a very fast rate
may seem a strange question
But i need a clear answer
cheers
Des


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## boofis (16 November 2011)

Correct. As far as I'm aware it's just a breakout from the general trends of a stock. And hopefully with due time people like you and I will be on the right breakouts


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## tminus (28 November 2011)

I am wondering why is it different values for Market capitalisation is used in the ASX SP 200 for Rio Tinto ?

Google's website has them @ 120Billion
http://www.google.com/finance?q=ASX:RIO

while the 
Fact Sheet link in the top left, they only have it at 31 billion
http://www.standardandpoors.com/indices/sp-asx-200/en/au/?indexId=spausta200audff--p-au----

http://www.standardandpoors.com/indices/articles/en/au/?articleType=PDF&assetID=1245177426604


----------



## skyQuake (28 November 2011)

tminus said:


> I am wondering why is it different values for Market capitalisation is used in the ASX SP 200 for Rio Tinto ?
> 
> Google's website has them @ 120Billion
> http://www.google.com/finance?q=ASX:RIO
> ...




Short answer: RIO is dual listed, half+ is in London. Also look up investable weight factor (IWF) for even more details


----------



## tezzdoggy (29 November 2011)

hey just wanting to know what people think of central petroleum and blue energy i am a beginner at all this but bought into both companies just wondering if u see an upside to these companies? thanks


----------



## KurwaJegoMac (30 November 2011)

tezzdoggy said:


> hey just wanting to know what people think of central petroleum and blue energy i am a beginner at all this but bought into both companies just wondering if u see an upside to these companies? thanks




Hello,

If seeking opinions/research on companies please visit that companies thread on the ASF. We dont discuss opinions on companies in this thread. 

Cheers.


----------



## Danneman (4 December 2011)

Hi there, Does anyone know what the tax implications are for shares acquired by dollar cost averaging.

i.e. I buy a XYZ at $10 in year 1, it drops to $5 during year 2 and I then sell them at $20 6 months after the bottom, that I so "skillfully" picked.
Let's say that my average cost is $6 when I sell the lot at $20. What tax am I going to pay (assume 30% tax rate).

Will the tax man calculate an average ownership time, and thus only charge me 15% or will he charge me 30%, based on last purchase?

Cheers
Daniel


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## Julia (4 December 2011)

There are several threads covering this.

If you decide to sell shares, you are free to choose which shares to offset that sale against.

Obviously, you're going to choose the most tax advantaged way of doing it.

Example:
You buy 100 XYZ at $1.00
A few months later you buy a further 100 XYZ at $1.50

A few months later again you decide to sell 100XYZ.

Clearly you will do the calculation using the second parcel of shares purchased because your profit is going to be less and therefore you will pay less tax.

More to consider, of course, about how long the shares are held, but the above is the basic answer to your question.


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## Danneman (4 December 2011)

Julia said:


> There are several threads covering this.
> 
> If you decide to sell shares, you are free to choose which shares to offset that sale against.
> 
> ...




Thanks for your response. Yes I realize that's how I would control the sum the tax is calculated on.

However, I was referring to what the rate would be 15 or 30 %.
The basis of this is that I've been led to believe that 1) you can't chose which parcel you sell, you only have the average price and the total amount of shares.
2) if you own the shares for longer than 1 year you would only pay 15 %

Of course, this premise all falls if you can actually choose which parcel to sell.
In the case of E*trade, they would report to the ATO automatically, so I can't really control this myself (or maybe I can), but I only see one parcel of XYZ no matter how many times I've DCA:ed it down.

Anyway, not to bog this thread Dow, I'll scour through the other threads 

Cheers 
D


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## Julia (4 December 2011)

Dannemann, I have sent you a PM.


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## TMC93 (13 December 2011)

Just a question regarding stop losses, i have been using 10% loss conditional orders and am really glad i have done this (bought FMG at $6.5). In such a volatile market though, do people change their profit/loss limits according to each share, or do you try and keep it the same through-out your portfolio?


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## pixel (8 January 2012)

TMC93 said:


> Just a question regarding stop losses, i have been using 10% loss conditional orders and am really glad i have done this (bought FMG at $6.5). In such a volatile market though, do people change their profit/loss limits according to each share, or do you try and keep it the same through-out your portfolio?



 fwiw - as I can only speak for myself:
I never apply a stop that's based on my entry price or the size of my portfolio. The Market doesn't care one iota about my finances; to the Market I'm completely invisible.

My *stops only depend on market activity wrt each particular stock*. I expect a share price to rise, which should be the only valid reason I've been buying it in the first place; as long as it does, I stay; once it stops rising, I let my computer calculate the risk of a sizable reduction of the best value I might realise selling it. The size of the reduction is not only stock-specific, but also depends on the way it's being traded at every moment in time. Some stocks rise and fall by huge percentages in a day: Do I really want to run the risk of losing 50% of my profit? Or would I do better selling near the day's top if I observe a change of behaviour for 4 or 5 consecutive periods of 15 or 30 minutes?
Other stocks maintain momentum for days at a time, changing less than 1% on an average day. In that case, why worry if the rise pauses for a couple of days?

That observation led me to a firm conviction that one size never fits all, and it's individual settings applied to each trade that help maximise the overall return.

As regards my personal Capital Management, I control the risk by *position sizing even before I place the buy order:*
My chart tells me the risk point, where I'd have to admit I shouldn't have bought. Subtract that price from the buy price I'm going to place my bid, and I have the amount per share I'd put at risk by buying at the set time and price. If I'm prepared to risk, say, $400 (plus two lots of brokerage) in this trade, all it takes is dividing those $400 by the amount at risk *per share*, and I know how many shares I can buy.

Let me explain on a (random) example: ABU, the chart of which I just happen to have on display: 




5.4c stop taken off 5.8c entry, divided into $400, allows me to buy 100,000 ABU; my position is therefore 100,000 ABU costing $5,800. As the *stop level will only rise *and* must be exercised with discipline*, it's the most I'll lose (well, if I can ignore the slim chance that ABU will go into a trading halt and call in the receivers just after I bought.)
Another quick calculation I do before I order: I have a guess at the potential target price that I may expect to sell at. I'm not going into the details how I achieve that; suffice it to say there are a number of ways which can come up with a statistically satisfactory hint. Let's assume for this exercise the target is 7.5c, which gives me a *Risk-Reward Ratio* (or RRR) of 4.25 (1.7c over 0.4c).

PS: Once ABU has risen to bring the stop level to above 5.8c, my trade is in the profit zone. If the move appears strong enough, I might decide to do a complete revaluation and risk part of the (paper) profit to buy some more ABU. But that's left for another lesson.


----------



## tech/a (8 January 2012)

TMC has described fixed % stop
Pixel fixed fractional position sizing
Both valid


----------



## pixel (8 January 2012)

tech/a said:


> In such a *volatile *market though, *do people change* their profit/loss  limits according to each share, or do you try and keep it the same  through-out your portfolio?



 Which approach do you use? And why?


----------



## tech/a (8 January 2012)

pixel said:


> Which approach do you use? And why?




Both
Why
Because both are valid and preferable at different times.

Discretionary trading I use F/F with a twist.
Systems Fixed Dollar and F/F depending on test results


----------



## Boggo (8 January 2012)

pixel said:


> My chart tells me the risk point, where I'd have to admit I shouldn't have bought. Subtract that price from the buy price I'm going to place my bid, and I have the amount per share I'd put at risk by buying at the set time and price. If I'm prepared to risk, say, $400 (plus two lots of brokerage) in this trade, all it takes is dividing those $400 by the amount at risk *per share*, and I know how many shares I can buy.




pixel, another pictorial view of the concept on this weekly chart of GOLD.ASX.
I am using a max of $1000 risk per trade including brokerage in the auto setup.
The chart shows the entry, stop and potential target which are the three items required.

(click to expand)


----------



## tminus (7 February 2012)

I was looking into trading the FTSE, and I was looking at it's constituents, what I found remarkable were the share prices for the stocks, like BG. at 1430 pounds a share and there closing day volumes are so large I am getting arithmetic overflow exception in my code. 

What doesn't make sense is that the volume in pounds traded seems too be to large, their top 20 stocks are greater than the US top 20 stocks, is this correct.


----------



## skyQuake (7 February 2012)

tminus said:


> I was looking into trading the FTSE, and I was looking at it's constituents, what I found remarkable were the share prices for the stocks, like BG. at 1430 pounds a share and there closing day volumes are so large I am getting arithmetic overflow exception in my code.
> 
> What doesn't make sense is that the volume in pounds traded seems too be to large, their top 20 stocks are greater than the US top 20 stocks, is this correct.




Ln stocks are generally quoted in pence, so thats actually $14.30 pounds.

eg. BHP in London is 2200p not 2200P


----------



## tminus (7 February 2012)

skyQuake said:


> Ln stocks are generally quoted in pence, so thats actually $14.30 pounds.
> 
> eg. BHP in London is 2200p not 2200P



 wow thanks now it all makes sense


----------



## jonafern (8 February 2012)

Does anyone happen to know where I can start paper trading futures?


----------



## Trembling Hand (8 February 2012)

jonafern said:


> Does anyone happen to know where I can start paper trading futures?




Over what time frame?


----------



## jonafern (8 February 2012)

Trembling Hand said:


> Over what time frame?




Intraday/daily. I've recently tried to apply for some proprietary trading firms but got turned down. Part of the reason was because I've yet to shown an active interest trading (including paper trading) futures. Any other advice is much appreciated.

Thanks


----------



## Trembling Hand (8 February 2012)

jonafern said:


> Intraday/daily. I've recently tried to apply for some proprietary trading firms but got turned down. Part of the reason was because I've yet to shown an active interest trading (including paper trading) futures. Any other advice is much appreciated.
> 
> Thanks




So you haven't traded anything before?

If you are wanting to trade prop or more to the point_ want to trade in a fashion that will get you a job at a prop shop_ then that means active intraday. For that you need a live intraday data feed from esignals.com (will be $$$$) and connect it to something like NinjaTrader (Free) for your sim (paper trading) and charting and performance data.

You could open an account with a broker like Interactive Brokers and pay for their data which is much cheaper. But you will need $10,000 to open an account.

The cheapest option is open a CFD account and trade tiny amounts with Index CFDs but if you're wanting to trade prop I would strongly suggest you don't go down that line.


----------



## jonafern (8 February 2012)

Trembling Hand said:


> So you haven't traded anything before?
> 
> If you are wanting to trade prop or more to the point_ want to trade in a fashion that will get you a job at a prop shop_ then that means active intraday. For that you need a live intraday data feed from esignals.com (will be $$$$) and connect it to something like NinjaTrader (Free) for your sim (paper trading) and charting and performance data.




I'm yet to to start trading. Recently I've been reading up and researching to start trading on a buy-hold strategy (long-term) to get started on something. Now also looking to paper trade futures intraday to gain experience and improve my chances of getting a job. 

Esignal.com is about $130~/month, that's abit too much for paper trading, but I could still do their 30-day trial. Interactive Brokers price is $40~/month I think, still going through the website. 

Well looks like I'll need to spend some money to paper trade. Appreciate the help.


----------



## serg87 (9 February 2012)

Hi all,

This is my first time trading, my grandad has always been big into share trading and has passed me on some of his shares as an investment for me to hold. I am not looking to get involved in some short term trading in order to supplement my very modest salary at the age of 24 .

An advice that you can give me as to where to start would be great. Im looking at setting up an online trading account with either Westpac or Commsec, any suggesstions?

Ta


----------



## matthewdean (9 February 2012)

serg87 said:


> Hi all,
> 
> This is my first time trading, my grandad has always been big into share trading and has passed me on some of his shares as an investment for me to hold. I am not looking to get involved in some short term trading in order to supplement my very modest salary at the age of 24 .
> 
> ...




Have you looked at setting up an account with Bell Direct or Interactive Brokers (IB)?

They offer much cheaper brokerage, easy to set up an account and great user interfaces. I used to trade through commsec but I found the brokerage was starting to add up. Bell directs brokerage is about half the cost of Commsec.

Good luck.


----------



## serg87 (9 February 2012)

matthewdean said:


> Have you looked at setting up an account with Bell Direct or Interactive Brokers (IB)?
> 
> They offer much cheaper brokerage, easy to set up an account and great user interfaces. I used to trade through commsec but I found the brokerage was starting to add up. Bell directs brokerage is about half the cost of Commsec.
> 
> Good luck.




Thanks for that i will have a look at them now


----------



## matthewdean (9 February 2012)

jonafern said:


> I'm yet to to start trading. Recently I've been reading up and researching to start trading on a buy-hold strategy (long-term) to get started on something. Now also looking to paper trade futures intraday to gain experience and improve my chances of getting a job.
> 
> Esignal.com is about $130~/month, that's abit too much for paper trading, but I could still do their 30-day trial. Interactive Brokers price is $40~/month I think, still going through the website.
> 
> Well looks like I'll need to spend some money to paper trade. Appreciate the help.




You can't just use a free system for paper trading? I used to use Trade Interceptor to paper trade Forex. I know its not futures but I'm sure there are similar platforms out there available for free. I was able put together a system in 3 months and spent no money at all.

I definitely wouldn't be spending $30/Month to paper trade.

Have you tried setting an account up with IG Markets? They have a decent web platform for futures I believe. I don't know how strict they are taking on new clients.


----------



## Trembling Hand (9 February 2012)

matthewdean said:


> I definitely wouldn't be spending $30/Month to paper trade.
> 
> Have you tried setting an account up with IG Markets? They have a decent web platform for futures I believe. I don't know how strict they are taking on new clients.




I doubt you will ever get the skills to trade prop while learning with CFDs.


----------



## Wysiwyg (9 February 2012)

matthewdean said:


> Have you tried setting an account up with IG Markets? They have a decent web platform for futures I believe.



 No they don't offer 'futures' trading.


----------



## matthewdean (9 February 2012)

Wysiwyg said:


> No they don't offer 'futures' trading.




My mistake


----------



## ProverbialPaul (29 February 2012)

Wow!

SO much information to take in.

I keep seeing useful bits of info everywhere but then forgetting where it all is!

Nevermind, I'll get there.

Thank you Osisofliver!


----------



## jimd78 (1 March 2012)

Ok just spent 3 days on the bus to and from work reading this cheers to all especially sir o! Now to attempt making some cash...


----------



## Jerm (20 March 2012)

Hi Sir Osis,

Assuming you still post here, has your recommendation of two investment properties before shares changed given the current economic outlook? The housing market looks to be slowly deleveraging.


----------



## kid hustlr (29 March 2012)

Sir Osisofliver said:


> Hi All,
> 
> As you can probably tell I kinda got extremely busy and have reneged on my promise to do a segment on Dividend Yields as they approach the end of the cycle. I also need to do some prep work in this area. It's easy enough to put this information together and I did have it on my old comp, but I need to rebuild it and it will take me a couple of hours to collate the data....a couple of hours that I just don't have to spare as we approach the end of the financial year.
> 
> ...




Sir O, Is this what you area after?

There's a couple of sheets there and I havent pulled any diagrams but I THINK that's what you were looking for? I've pasted everything as value's as I was having trouble moving the data around my terminal sessions but all the information should be correct. 

It's the top 100 as of today however and not back in 2003 so I hope that doesn't influence things too much. 

There seemd to be a couple of outliers or weird data results so I pulled them out. 

I also took out any stock which doesn't pay dividends (see sheet 1 vs sheet 2) and thinking about it now this may influence the results. Let me know if you want me to add these back in and I will.

Edit: the close prices are as at 31/Dec that year.


----------



## Sir Osisofliver (29 March 2012)

Jerm said:


> Hi Sir Osis,
> 
> Assuming you still post here, has your recommendation of two investment properties before shares changed given the current economic outlook? The housing market looks to be slowly deleveraging.




Jerm - I believe I said two investment properties before PPR (Principle place of residence), not shares.

As for the current deleveraging of the housing market... I look at data from across the country. Some places are deleveraging and some are not. I managed to purchase a place in NSW six months ago at a 6.4% yield. Doing a comparative market analysis...and I estimate it has increased in value by 2% during that time. It's important to make sure that when you purchase your IP's that you do so in any area which gives you the greatest possible chance of success and risk reduction...why would you expect to find those characteristics in your local neighbourhood?

Cheers

Sir O


----------



## Sir Osisofliver (29 March 2012)

@kid hustler

Thanks for that - I'll see if I get some time to look at it and make some commentary

Cheers

Sir O


----------



## Iro (1 April 2012)

Trembling Hand said:


> I doubt you will ever get the skills to trade prop while learning with CFDs.




How come? Aren't CFDs just like mini futures? If a system works in CFDs shouldnt it work in futures too?


----------



## Trembling Hand (1 April 2012)

Iro said:


> How come? Aren't CFDs just like mini futures?



No. With CFDs you just hit a button and get given a price. With Futures you execute into an exchange mostly one thats offshore. 



Iro said:


> If a system works in CFDs shouldnt it work in futures too?



Nope. You learn very little hitting a at market button of a CFD entry screen trading a couple of dollars a tick two or three times a day compared to getting a fill in an exchange at $250 to $2500 a tick and doing 10 to 100 round trips a day like you would trading prop.

Prop shops from what I've seen don't think a great deal about the skills people have picked up trading CFDs. You would be 1000 times better off learning the real thing right from the start.


----------



## Jerm (2 April 2012)

Sir Osisofliver said:


> Jerm - I believe I said two investment properties before PPR (Principle place of residence), not shares.
> Cheers
> 
> Sir O



 Thanks for that answer. You're right I misquoted but I suppose I was asking for your opinion on the housing market and I've got it, thank you.

It was a round-about way of asking if you change your investment plan to suit the economic situation. It seems that you don't really have to as long as you are doing your due diligence and picking the right areas/assets.

I hate all this doom and gloom surrounding everything. It colours my ability to objectively evaluate the situation. Anyway, thanks again Sir O.


----------



## Iro (4 April 2012)

Trembling Hand said:


> No. With CFDs you just hit a button and get given a price. With Futures you execute into an exchange mostly one thats offshore.
> 
> 
> Nope. You learn very little hitting a at market button of a CFD entry screen trading a couple of dollars a tick two or three times a day compared to getting a fill in an exchange at $250 to $2500 a tick and doing 10 to 100 round trips a day like you would trading prop.
> ...




You'd recommend trading futures for someone starting out then? I was under the impression futures have a pretty high minimum capitol requirement. So that's why I was thinking of trading CFDs to start off.

As for skills I'd assume you mean reading market depth and spreads right? Aside from those, I can't think of anything different between CFDs and futures if all you're doing is reading charts to get your entry and exit points.


----------



## Trembling Hand (4 April 2012)

Iro said:


> You'd recommend trading futures for someone starting out then? I was under the impression futures have a pretty high minimum capitol requirement. So that's why I was thinking of trading CFDs to start off.




Well the capital is a problem for a newbie sure. But thats the point of CFDs, forcing under capitalised, under skilled, hopefuls into the hands of the sharks. Probably better off in that case siming on a DOM like NT or zeroline.



Iro said:


> As for skills I'd assume you mean reading market depth and spreads right? Aside from those, I can't think of anything different between CFDs and futures if all you're doing is reading charts to get your entry and exit points.




Like I said just hitting a "at market" button at $5 tick is a million miles away from executing into a offshore exchange trying to get fills @ $250 a tick or more. If all you are doing is "reading charts to get your entry and exit points" we are back where we started. That is, IMO, you are unlikely to get the skills required to trade Prop while wasting time with CFDs.


----------



## CanOz (4 April 2012)

The only decent reason i can see for trading CFD's is to have the ability to short Australian stocks. The leverage can be used to get exposure to a higher number of open positions and in theory to a big winner, providing you still use reasonable position sizing. From there its a matter of portfolio heat, or how much of your overall account is at risk from your total open positions. 

My biggest 'lesson learned' was from CFD's. I was using the leverage in the wrong way and i lost over 17k AUD in less than two months. In a way i was lucky in that this was money that had made trading mining stocks when it was easy to confuse brains with a bull market!



CanOz


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## Iro (4 April 2012)

Trembling Hand said:


> Well the capital is a problem for a newbie sure. But thats the point of CFDs, forcing under capitalised, under skilled, hopefuls into the hands of the sharks. Probably better off in that case siming on a DOM like NT or zeroline.




I havn't started trading CFD yet, I'm was planning to paper trade with it until I get the hang of it. The reason I was asking is bc I'm wondering if its better to practice on CFDs or futures. If there's a big difference in skillsets required between those two and futures is the more profitable of the two, obviously I would trade in futures instead. This is what you're recommending right? Also if you're recommending futures, how much capitol exactly would you need to start off?



Trembling Hand said:


> Like I said just hitting a "at market" button at $5 tick is a million miles away from executing into a offshore exchange trying to get fills @ $250 a tick or more. If all you are doing is "reading charts to get your entry and exit points" we are back where we started. That is, IMO, you are unlikely to get the skills required to trade Prop while wasting time with CFDs.




I'm confused about what you're saying in this paragraph. Are you saying the two are very different because the futures have much larger swings per tick? Technical indicators that work shouldn't change much if the only difference is the swing sizes.

I'm also not clear on what you mean by "If all you are doing is reading charts to get your entry and exit points we are back where we started". Many people have developed systems that made them millions by using just indicators on charts. Are you saying this isn't good enough? 

I'm trying to learn more about trading, I currently got a few Bill Williams and Larry Williams books on my read list too. Would be good though if I got some recommendations from experts like you on where to start and try out some of the theory in action.


----------



## Iro (4 April 2012)

CanOz said:


> The only decent reason i can see for trading CFD's is to have the ability to short Australian stocks. The leverage can be used to get exposure to a higher number of open positions and in theory to a big winner, providing you still use reasonable position sizing. From there its a matter of portfolio heat, or how much of your overall account is at risk from your total open positions.
> 
> My biggest 'lesson learned' was from CFD's. I was using the leverage in the wrong way and i lost over 17k AUD in less than two months. In a way i was lucky in that this was money that had made trading mining stocks when it was easy to confuse brains with a bull market!
> 
> CanOz




Aye, that's what I thought about CFDs too. Its practically the only way you can short aus stocks. 

Also obviously with any leveraged instruments if it goes against you, you get hit in a big way, but if it goes right you can make big profits as well. =D

BTW CanOz what do you trade with mostly?


----------



## Trembling Hand (4 April 2012)

Iro said:


> I'm trying to learn more about trading, I currently got a few Bill Williams and Larry Williams books on my read list too. Would be good though if I got some recommendations from experts like you on where to start and try out some of the theory in action.




What are you trying to achieve? Learning to trade or learning to trade to "hopefully" get a prop shop gig one day/soon?

If its trading to trade - knock yourself out trading CFDs with a small amount of capital. And remember enjoy the journey.

If you want to get a gig trading at a prop shop then thats a different game altogether. Which one you want?


----------



## Trembling Hand (4 April 2012)

Iro said:


> Aye, that's what I thought about CFDs too. Its practically the only way you can short aus stocks. Obviously with any leveraged instruments if it goes against you, you get hit in a big way, but if it goes right you can make big profits as well.
> 
> BTW CanOz what do you trade with mostly?




Mate that is not true. If you use CFDs or straight stocks you still lose the same amount because you do not position size with leverage as the deciding factor.


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## Iro (4 April 2012)

Trembling Hand said:


> What are you trying to achieve? Learning to trade or learning to trade to "hopefully" get a prop shop gig one day/soon?
> 
> If its trading to trade - knock yourself out trading CFDs with a small amount of capital. And remember enjoy the journey.
> 
> If you want to get a gig trading at a prop shop then thats a different game altogether. Which one you want?




Trying to make some money?  I doubt I'll be trying to getting a gig at a prop shop unless I'm wildly successfully and turn out to be a trading genius.

But in the meantime I'm just trying to learn and see how it goes, hence the questions.

PS wow you respond quick!



Trembling Hand said:


> Mate that is not true. If you use CFDs or straight stocks you still lose the same amount because you do not position size with leverage as the deciding factor. ?




Huh? Eg normal share $5, buy $1000 worth of shares = $1000
CFD leveraged share @ 95% $1000 worth of CFDs = $20000

Share price goes down $1
Shares = lose $200
CFD = lose $4000

???


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## Trembling Hand (4 April 2012)

Iro said:


> Trying to make some money?  I doubt I'll be trying to getting a gig at a prop shop unless I'm wildly successfully and turn out to be a trading genius.
> 
> But in the meantime I'm just trying to learn and see how it goes, hence the questions.




Ok no props in that case paper trade/sim your brains out. When you're profitable with that move up to the real thing in whatever interests you Stocks, FX, CFDs futs etc.


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## CanOz (4 April 2012)

Iro said:


> Aye, that's what I thought about CFDs too. Its practically the only way you can short aus stocks.
> 
> Also obviously with any leveraged instruments if it goes against you, you get hit in a big way, but if it goes right you can make big profits as well. =D
> 
> BTW CanOz what do you trade with mostly?




On my live account i only trade index futs. 

Cheaper, better fills, all of what TH says is true.

CanOz


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## CanOz (4 April 2012)

Trembling Hand said:


> Ok no props in that case paper trade/sim your brains out. When you're profitable with that move up to the real thing in whatever interests you Stocks, FX, CFDs futs etc.




It just doesn't get any better than this....simple = *if you cannot be profitable on a simulator you have no hope of making it with real coin*....even then...if you are a discretionary trader then i would doubt that one could move from the sim to a real account seamlessly without some pain, unless you are an exceptionally talented trader.

CanOz

PS - if you still want to join a prop shop, check out *SMB Capital*. They'll take you on for 10k USD for a few weeks/months. If you truly have talent they'd probably hire you too. Its US stocks, mostly order flow stuff, hunt orders etc....There's a good book out too, One Good Trade, tells there story and how they do some of it.


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## Iro (4 April 2012)

Can you please clarify some of the questions on #544 though? Eg Fut or cfds, capitol req, confusing paragraph etc. Still interested in getting your opinion. 

Also I have no preference.


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## Trembling Hand (4 April 2012)

Iro said:


> Can you please clarify some of the questions on #544 though? Eg Fut or cfds, capitol req, confusing paragraph etc. Still interested in getting your opinion.
> 
> Also I have no preference.



The only reason you would use CFDs is due to a low capital base. To trade futures depending on the timeframe you are going to need $25,000 (shorter term daytrading on some of the small contracts) out to $100,000 or more if your trading EOD or some of the more crazy markets, HSI, DAX, Oil, Gold, Grains etc.

Trading CFDs to some degree and MM Fx is easier than futs or ECN FX because you just hit a button and get a price from your market maker. With futs and ECN and OS equities you have lag and a fast market which adds an added problem of getting fills and slippage. Then if you move up to trading real size on short term time frame you will find CFD execution skills are next to useless. This is of course talking on a shorter term time frame 10-100 trades a day. If your trading EOD or 1-3 times a day probably none of what I have said matters. :


----------



## Iro (4 April 2012)

Trembling Hand said:


> The only reason you would use CFDs is due to a low capital base. To trade futures depending on the timeframe you are going to need $25,000 (shorter term daytrading on some of the small contracts) out to $100,000 or more if your trading EOD or some of the more crazy markets, HSI, DAX, Oil, Gold, Grains etc.
> 
> Trading CFDs to some degree and MM Fx is easier than futs or ECN FX because you just hit a button and get a price from your market maker. With futs and ECN and OS equities you have lag and a fast market which adds an added problem of getting fills and slippage. Then if you move up to trading real size on short term time frame you will find CFD execution skills are next to useless. This is of course talking on a shorter term time frame 10-100 trades a day. If your trading EOD or 1-3 times a day probably none of what I have said matters. :



I'm trading shares right now 1-3 times day, but I would like to trade more with bigger instruments when I get more experienced so what you've said matters alot! Though the way you say it can be a bit confusing to a newbie like me. 

Like ECN? I googled it and according to "http://www.investopedia.com/articles/forex/06/ECNmarketmaker.asp" its like DMA cfds cept for forex. But apparently there are "fake" ECN operators out there? No sure what OS equities are. Google turns up mac stuff. I'm guessing EOD means end of day, but donno why you say it requires more capitol than periods with less volume.



Trembling Hand said:


> Then if you move up to trading real size on short term time frame you will find CFD execution skills are next to useless." .



Again not sure what you mean by this, CFD execution skills? Like putting the quantity, limit order and stop loss targets? Don't think you need skill for that. Just type the numbers in. If you're referring to finding a software to do the above quickly then its more a function of the software. And yes I would like to find a program where I can set default lot sizes, set different prices with a mouse click, switch from buy position to short quickly, have good charting functions etc. (any recommendations?)

In regards to capitol I did a bit of searching around the forum and it seems you trade on HSI futures? There's a HK mini index @ 10hk$/index point, 20000ish index point, aud-> hkd 1:8 so around $AUD25000 per contract. This is where you got the $25,000 number right? However I thought since its a leveraged instrument so you can trade like with a 95% margin like CFDs (correct me if I'm wrong) and therefore not foot up the entire 25k?

Finally I'm still trying to work out what you mean earlier by 


Trembling Hand said:


> "Like I said just hitting a "at market" button at $5 tick is a million miles away from executing into a offshore exchange trying to get fills @ $250 a tick or more. If all you are doing is "reading charts to get your entry and exit points" we are back where we started. That is, IMO, you are unlikely to get the skills required to trade Prop while wasting time with CFDs."



when you refer to "skill".


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## Trembling Hand (4 April 2012)

OS equities means Overseas Equities.

Mate I would just go about learning the market and finding out what makes a system/approach profitable. You are at the very beginning and you know next to nothing. Thats fine that is where we all started. Worrying about trading @$250 a ticks probably not going to concern you for a few years yet. 

For example although I've said it a few time you still haven't got the grasp of what I'm saying. When you start trading real volume you cannot just hit a button and get a "good" fill. You need skill to execute at a favourable entry/exit. Nothing to do with filling a order ticket lol! Otherwise a good edge can just disappear when going from $5 a tick on MM CFDs to a few contracts on the futures market. but really this is all way way down the track. And this started in response to my comment about trading prop. Not taking your first steps.

Though one thing you do have to get your head around right now is position sizing. You seem to no idea about it. You ask me about required capital but you would know that better than me if you understood position sizing and what type of trading you are looking at. I would start there before you even stated paper trading.


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## tech/a (4 April 2012)

IRO

Clearly you have no idea how to leverage a position correctly.
You have no idea how a spread will affect your trading.

You appear stuck in beliefs and those who actually have come out on the other side seem to you --- antagonistic.

They know the stupidity in many accepted trueims.

Unfortunately its not possible to show truths to those who cannot see them.
You ave a way to go before a meaningful discussion with traders like T/H.


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## Iro (4 April 2012)

I thought this is the newbie lessons thread? Or is this the newbie insulting thread? 

Its not hard to answer my questions and give a proper explanation but all you two guys seems to be interested in is avoid everything I ask and hell bent on proving you're superior like some ego maniac.

If you don't wanna answer my questions fine then don't post. You dont have to be an asshole about it jez.


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## Starcraftmazter (4 April 2012)

Iro said:


> I thought this is the newbie lessons thread? Or is this the newbie insulting thread?
> 
> Its not hard to answer my questions and give a proper explanation but all you two guys seems to be interested in is avoid everything I ask and hell bent on proving you're superior like some ego maniac.
> 
> If you don't wanna answer my questions fine then don't post. You dont have an asshole about it jez.




Yeh mate, unfortunately you get a lot of that here - but don't worry, some people are nice 

There's also a lot of people here hating on CFDs. Personally I use them without issue, and reputable brokers can even give you direct market access. Of course it's not to say they are the best for all situations, as already pointed out. Everything will have a trade-off, it's just a matter of understanding them and choosing what's best for you. But of course to do that you need experience with all instruments.


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## tech/a (4 April 2012)

Iro said:


> I thought this is the newbie lessons thread? Or is this the newbie insulting thread?
> 
> Its not hard to answer my questions and give a proper explanation but all you two guys seems to be interested in is avoid everything I ask and hell bent on proving you're superior like some ego maniac.
> 
> If you don't wanna answer my questions fine then don't post. You dont have an asshole about it jez.





Well you have successfully alienated any help from this poster.

Enjoy your stay here.


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## Julia (4 April 2012)

Starcraftmazter said:


> Yeh mate, unfortunately you get a lot of that here - but don't worry, some people are nice



Oh, the irony.


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## tech/a (4 April 2012)

Julia said:


> Oh, the irony.




My ignore list grows.
My time here shrinks.
I'm sure others will follow.

Better to remain silent and be thought a fool than speak up and remove all doubt!


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## Joe Blow (4 April 2012)

A few observations:

1. Please keep this thread on topic. I don't want to see it degenerate into insults and off topic posts. 
2. This is a thread for newbies to ask questions so please take it easy on them. Everyone has to start somewhere and it takes time to gain knowledge and experience. Encourage those who are just starting their stock market journey, don't tear strips off them.
3. Let's keep this thread positive and constructive. That was the way it was conceived initially by Sir O, and that's the way I'd like to see it continue.


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## barney (4 April 2012)

Trembling Hand said:


> Mate that is not true. If you use CFDs or straight stocks you still lose the same amount because you do not position size with leverage as the deciding factor.






Iro said:


> Huh? Eg normal share $5, buy $1000 worth of shares = $1000
> CFD leveraged share @ 95% $1000 worth of CFDs = $20000
> 
> Share price goes down $1
> ...






Howdy Iro,  and welcome to ASF.  

Regarding the above,  if you trade $1000 of stock xyz at $5, you will hold 200 shares.

What TH is referring to is, if you are trading CFD's, you should still only be trading 200 CFD's (shares) .....  

The  95% margin means you will only need to put down 5% ie $50 to take the trade .... but you are then taking on the *same risk profile*.

ie. Using CFD's to take on *too* much leverage can be a risky game .....  

ps. My knowledge of trading Prop is zilch, but at the very least it would require an intricate understanding of order flow in the DOM (Depth of Market) ..... I'd guess that less than 5% of traders here at ASF would have that ... myself included  ...... but the fact that you are asking these types of questions indicates you are probably on the right track ..... good luck with it.


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## Lone Wolf (5 April 2012)

Iro said:


> Its not hard to answer my questions and give a proper explanation but all you two guys seems to be interested in is avoid everything I ask and hell bent on proving you're superior like some ego maniac.




Maybe we can still salvage this... Going back to the beginning of all this, a poster commented that they wanted to ultimately get a job trading futures. Another poster responded suggesting they try IG markets (who only do CFD's, not futures). T/H stepped in and pointed out that if you want a job trading futures you should practice on real futures. Then you asked why.

Since then T/H has given you some good info and has gone over the same point a number of times trying to clarify it for you. In the end he realized that most of what he was saying is too advanced for your current level. He then gave you a suggestion on where you should start. I don't think the "ego maniac" comment was necessary.

He wasn't saying that you specifically need to be trading futures, he didn't even know what your goals were at the time. He was just saying that if someone wanted to get a job trading futures then trading CFD's won't be much help.

Think of futures and CFD's as being two different ways of trading the same instrument. Futures being the real market and CFD's being a made up market that is based on the real market. If you were to trade CFD's you would probably trade small, making or losing less than $10 for every point the market moves. At this size, the CFD provider will generally accept the price you attempt to trade at. So when you hit the buy button you immediately get filled at that price. Now, lets imagine you develop skills reading the market and become successful trading for $1 a point CFD's. Could you take this same strategy to the real futures market and still make a profit? No, maybe not. In the real market you don't get your buy order filled unless there are enough sellers at that price to fill your buy order. Add to that the fact that the exchange may be in another country, so there will be some lag in your order being submitted to market. Also add the fact that if you're trading futures you'll be trading much larger size. If trading as a professional working for a prop shop then you could be trading $250 a tick rather than the less than $10 you were in CFD's. This all means that you may get filled at a different price to what you expected, or maybe not filled at all. This "slippage" can drastically change the profitability of your system.

So as T/H says, if you want a job trading futures, you need to practice trading futures. If you just want to make some money on your own personal account, then maybe (just maybe) CFD's are ok for you. But all this is irrelevant in the very beginning. Before you even think about trading you need to know that you have a method that will work. Once you have that you can then learn all about futures vs CFD's and decide for yourself what suits your method best. The fact that you are currently trading shares makes the whole futures vs CFD debate even less relevant.

The conversation quickly changed to position sizing when it became obvious that you haven't learned about it yet. Risk management should be the fist thing you learn. I see Barny has cleared up the leverage issue for you.


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## Trembling Hand (5 April 2012)

Thanks Lone Wolf thats a nice summery of how we got here. 

Iro I wasn't being insulting or not trying to be, just trying to point you to where you need to start.


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## tech/a (5 April 2012)

Trembling Hand said:


> Thanks Lone Wolf thats a nice summery of how we got here.
> 
> Iro I wasn't being insulting or not trying to be, just trying to point you to where you need to start.




Well I didn't take my Valium for breakfast.

Sick of newbs asking for guidance 
Getting it 
Discarding it
Then attacking those who don't
Fall in line with their pre conceived ideas 
Of " how it is "

Why put in the effort( I ask myself ) in the first place?

Egg shells/rice paper/wax on wax off.


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## burglar (5 April 2012)

tech/a said:


> Well I didn't take my Valium for breakfast. ...
> Why put in the effort( I ask myself ) in the first place? ...




Because some of us are on the sidelines, reading (perhaps bemused,...)
and learning.


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## basilio (5 April 2012)

burglar said:


> Because some of us are on the sidelines, reading (perhaps bemused,...)
> and learning.




Spot on Burglar. A question asked by one person is often relevant to many others.


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## peter2 (5 April 2012)

Asking the question about what type of instrument to trade shows how little that person understands about trading. It's difficult to reply sensibly because we know nothing about the prospective trader's resources (knowledge, capital and available time to trade). At times this difficulty leads to frustrated replies. Prospective traders need to evaluate their own position first. 

A common example:  I work full time so the only available time to trade is in the evenings (Aust). I have $3000 starting capital and I am prepared to use this to start trading and if I lose most of it I will not be in any financial difficulty. I have read a few trading books by Bedford, Guppy, Van Tharp, Weinstein, Williams (Larry and Tom). Where do I start? What do I do next? What sort of account should I open? 

My reply: You may trade ASX shares using EOD data but $3000 is not enough to start doing this as the brokerage costs as a % of each trade is too high and you don't have enough to open an account with a wholesale broker (like IB). You only develop trading skills by trading and you will not complete many trades in a year trading ASX stocks using EOD data. The leverage of cfds will allow you to complete many more trades with your low starting capital. Cfds are also available in a range of other markets like indicies, currencies, commodities. Many of these cfd markets are linked to markets that are open in the Aust evenings. Trading these markets will provide many more opportunities and this will help develop your trading skills quicker if you keep good records of each trade. IMO you don't have enough capital to start trading futures as the exchanges require a margin to open a trade. Some brokers offer reduced day trading margins but your starting capital may be too small to open an account. 

You first goal is to learn as much as you can about the markets you prefer to trade. Your second goal is to formulate a trading plan that will allow you to trade consistently and more importantly to keep your starting capital intact for as long as it takes for you to develop the skills to trade profitably. Most people never develop these skills. You will have to work hardest on yourself to improve. Thirdly, find a market type (indicies, currencies, commodities, equities) that you prefer and a robust strategy and learn to master it. Once you have doubled your starting account three times you will understand that you do have an edge and know how you created it. (Be prepared for this stage to take 1 - 3 years. You are starting a new career).


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## Sir Osisofliver (15 April 2012)

Joe Blow said:


> A few observations:
> 
> 1. Please keep this thread on topic. I don't want to see it degenerate into insults and off topic posts.
> 2. This is a thread for newbies to ask questions so please take it easy on them. Everyone has to start somewhere and it takes time to gain knowledge and experience. Encourage those who are just starting their stock market journey, don't tear strips off them.
> 3. Let's keep this thread positive and constructive. That was the way it was conceived initially by Sir O, and that's the way I'd like to see it continue.




Gee you go on holidays.... 

Iro I hope that your questions were answered. I'd have to agree that an understanding of positional sizing methods would be mandatory if you would like to trade professionally.

It might be worthwhile if I detailed out an example of a positional sizing method.  Would all the newbies like this?

Sir O


----------



## matth1 (17 April 2012)

Sir Osisofliver said:


> It might be worthwhile if I detailed out an example of a positional sizing method.  Would all the newbies like this?
> 
> Sir O




Definite yes from me. It is a topic I have been reading up on for a bit but would love to see how you would summarise.

Also, thanks for your continued support to this thread. It has been extremely helpful so far.


----------



## AlanGreenspan (18 April 2012)

Guys, feel free to call me stupid (i am a noob) but if the share price for a stock is the bare minimum at 0.001 and goes upto 0.002 your investment has been doubled? or is it multiplied by whatever when it gets to 1 cent (0.010)?


----------



## barney (18 April 2012)

AlanGreenspan said:


> Guys, feel free to call me stupid (i am a noob) but if the share price for a stock is the bare minimum at 0.001 and goes upto 0.002 your investment has been doubled? or is it multiplied by whatever when it gets to 1 cent (0.010)?




AG,  If you were able to buy at 1 cent and sell at 2, you would indeed double your money (less brokerage costs)

The theory is fine but the practice is not so straight forward ..... The stock below is a 1 cent stock. For you to buy the stock at 1 cent, you must place your order in the queue. 
ie. You will get only get your order filled after the orders controlling the 129 million shares in front of you are filled ....... could take a while, and bear in mind orders are purged from the queue after a month, so you would have to go to the back of the queue.

Even you were able to purchase the stock at 1 cent, you would then need to place your sell order in the queue behind the 146 million other sellers at 2 cents .... same problems as above!

There are times when you can "jump the queue" in the opening and closing auctions, but you will need to be both nimble and "lucky" to get your orders filled at a premium to market. Cheers


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## tech/a (18 April 2012)

Got it Barney
Decimal point has moved in your chart!


----------



## barney (18 April 2012)

tech/a said:


> Got it Barney
> Decimal point has moved in your chart!




Ah yes ...... Value of TNR is one tenth of a cent not one cent .... sorry for any confusion.

So AG, my explanation still works, but when I said 1 cent and 2 cents I meant the 0.001 and 0.002 cents you were asking about. 

I blame sleep deprivation ... forex is murder on my sleeping habits


----------



## burglar (19 April 2012)

AlanGreenspan said:


> Guys, feel free to call me stupid (i am a noob) but if the share price for a stock is the bare minimum at 0.001 and goes upto 0.002 your investment has been doubled? or is it multiplied by whatever when it gets to 1 cent (0.010)?




Hi AG,

Your investment has doubled in gross value. But then subtract brokerage, subtract tax and any other miscellaneous costs (Internet, newspapers, magazines, ...etc.)

You may well want .010 after taking all that into account!


----------



## burglar (29 April 2012)

Sir Osisofliver said:


> ... positional sizing method.  Would all the newbies like this?
> 
> Sir O



Thankyou Sir O,

burglar would like to know more about this!


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## AlanGreenspan (1 May 2012)

barney said:


> Ah yes ...... Value of TNR is one tenth of a cent not one cent .... sorry for any confusion.
> 
> So AG, my explanation still works, but when I said 1 cent and 2 cents I meant the 0.001 and 0.002 cents you were asking about.
> 
> I blame sleep deprivation ... forex is murder on my sleeping habits




bit of late reply but many thanks for the explanation barney! 

Love your work 



burglar said:


> Hi AG,
> 
> Your investment has doubled in gross value. But then subtract brokerage, subtract tax and any other miscellaneous costs (Internet, newspapers, magazines, ...etc.)
> 
> You may well want .010 after taking all that into account!




yeah, thats a good point, still gotta get my head around the tax part too, as complicated as the taxation system is. When taking into account all the material ive been buying and researching with i think ill need a 10 bagger to break even.


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## Sir Osisofliver (2 May 2012)

OK Time for a lesson on.... 
*Position Sizing Methods*

Just what the hell is this thing called positional sizing and why is it so important?  On numerous occasions I've seen posters on here state "Go learn about position sizing, stop losses and money management" to newbies. It's a bit lazy to say that and in fact I'm guilty of it myself. The reason being is that there are several methods of position sizing...and depending upon what you are trying to do in your investments, some are better than others. Hopefully this will help you get your head around some of the types of position sizing and the issues involved.

Investopedia definition....  
_"The dollar value being invested into a particular security by an investor. An investor's account size and risk tolerance should be taken into account when determining appropriate position sizing."_ 

So basically how much of my account am I going to be putting into any investment? As you can see position sizing is one of the methods of how we manage and minimise our investing risk...in other words how we skew the numbers in our favour to give us the "best" risk/reward profile.

The first step to determine what kind of position sizing to use is somewhat of a negative question. It is, *How much am I prepared to lose if I get it wrong?* This will be a very personal question and one also correlated to the kind of investing instrument we are using. This is the risk part of the risk/reward profile of the investment.

An ordinary equity position, in say BHP, perhaps we are prepared to lose 10% of our investment. So in a $100,000 investment we've stated the dollar figure of the risk we are prepared to take, $10,000. What's the potential reward? This is always a difficult question to put a number around as the correct response for any investor is "as much as the investment will allow me to make". If we took our hundred thousand dollar BHP investment purchased on the 18th of July 2003, we would have paid $9.25 for our BHP and still be in it at $36.30. If we'd made our investment on 16th of May 2008, we would have paid $50.00 a share and incurred our stated 10% loss on the 30th of May, 11 trade days later and still be down by 27.4% on our investment had we held. We'd have effectively taken a smaller loss that we would otherwise have made, limiting our downside risk. We have executed a stop loss by exiting the trade on the 30th of May. We have limited our downside potential and structured a way in which we can let our correct decision have significant benefits.

This is the heart of any kind of position sizing, minimise the risk associated with losing investments and allow the successful investments to build wealth and/or income. The method above is the simplest type of position sizing. For the majority of long-term and new investors this is as complex as it gets. Obviously diversification comes into play here. Depending on your risk profile you might be comfortable in a single large investment, or the idea may be very uncomfortable for you. It's an established part of finance that diversification lowers specific types of risk, so instead of $100,000 into BHP, the investment is spread across a number of equity positions to lower the specific stock risk and achieve a level of return in line with the market. The stop loss principle applies across all the equity positions.

Now take the same investment but use a CFD (Contract for Difference) where we have only put 5% of the entire investment out of our own equity. This investment exposes us to significant leveraging risk and the risk of a call on the position. Our risk of ruin (losing the entire portion of equity contributed to the investment) is significantly greater, but our overall level of return is also significantly greater. This investment has a significantly higher risk/reward profile. Is the same kind of position sizing appropriate? Hopefully you can see that a simple approach might not be the most suitable when dealing with a different risk/reward profile. Lets now take a look at some of the methods that can be used when dealing with risk/reward profiles.

*Fixed Fractional Position Sizing*

The idea behind fixed fractional position sizing is that you base the number of contracts or shares on the risk of the trade. IE the risk you are prepared to take. Fixed fractional position sizing is also known as fixed risk position sizing because it risks the same percentage or fraction of account equity on each trade. Note the use of the word equity here, not investment. This is a method that is employed when using leverage. For example, you might risk 2% of your account equity on each trade. 2% is chosen because of the "2% rule". It means that if you only risk 2% of your equity on any one position, you need to get 50 losing trades in a row to blow your entire account. Statistically even if you randomly selected 50 shares in the market the chances of getting 50 wrong in a row is a highly unlikely.

The risk of a trade is defined as the dollar amount that the trade would lose per contract if it were a loss. Commonly, the trade risk is taken as the size of the money management stop applied, if any, to each trade. IE the 10% used in the exmple above.  
The equation for the number of contracts in fixed fractional position sizing is as follows: 

N = f * Equity/| Trade Risk | 

where N is the number of contracts, f is the fixed fraction (a number between 0% and 100%), Equity is the current value of account equity, and Trade Risk is the risk of the trade for which the number of contracts is being computed. 

Fixed fractional position sizing has been written about extensively by Ralph Vince. See, for example, his book "Portfolio Management Formulas."

Fixed Fractional isn't the only type of position sizing method, but I'm going to pause here because I almost lost this entire post and want to make sure I don't lose it.  More to come on the topic.

Cheers

Sir O


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## Boggo (2 May 2012)

Excellent Sir O


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## Sir Osisofliver (2 May 2012)

Yay! I didn't lose the post!.

Ok so lets work through the formula for fixed fractional.

N = f * Equity/| Trade Risk | 

So N is what we are looking for. If we use the 2% rule this then becomes our fixed fraction. Equity from our original premise is $100,000, and trade risk is the size of the stop. I usually use a 5% stop loss, but in my example above I gave 10% so lets use that.

N = 2% * $100,000/ 0.925 (10% of $9.25 in the above example)

N = $2,000/0.925

N = 2,162 shares (a trade value of ~ $20K)

Obviously as the position size is five times smaller than our original example, the potential loss is also five times smaller, $2,000 rather than $10,000. We've also limited our *potential* upside (we only purchased $20,000 worth instead of $100,000), but this is a function of any kind of risk management. *We limited the potential gain to increase the certainty involved with the investing activity.* That last bit is so important that I bolded it. We have increased the probability of success by managing the risk involved. Cannot be stressed enough how important this is. In my experience investing of any kind, be it trading or investing, is all about managing the risk involved and achieving consistency. Consistency and compounding result in *exponential* returns over time.

Ok so that is the basic principle behind fixed fractional. If you want more information or greater depth go read Ralph Vince's work I mentioned in the previous post.

*Percent volatility position sizing*

Percent volatility position sizing came from Van K. Tharp's book "Trade your way to financial freedom" - for the full monty on the subject go get the book, this will be a flyover. The theory is that the percent volatility position sizing method adjusts the risk according to the stock's volatility. Here's the formula.

PositionSize = (CE * %PE) / SV 

Where CE is the current account equity (size of portfolio) 
%PE is the percentage of portfolio equity to risk per trade.
SV is the stock's volatility (10-day EMA of the true range).

Lets do another example. 
(CE) is $100,000, 
the percent of portfolio equity we want to risk (%PE) is 2%, 
BHP's true range volatility on our original date is....$0.57, then the result is: 

($100,000 * 2%) / $0.57 = 3508 shares (a position size of $32,449)

The trap of both of the methods described is that if your portfolio is $100,000 and you are not using any form of leverage, then the number of trades you can have open at any one time is severely reduced. Three stocks with the percent volatility and five with the fixed fractional. In this circumstance the use of a leveraged instrument such as a CFD enables a more efficient use of the position sizing methods, because the calculation is based on your equity, not the size of the portfolio with margin included.

If you hate the concept of leverage then you can avoid the concentrated portfolio problem by dividing the $100,000 of your own equity into allotments. You would use the same formula to determine the position size. Using the percent volatility example and a $10,000 allotment: ($10,000 x 2%) / 0.57 = 350 BHP Shares.

*Optimal F position sizing*

Optimal F is a step beyond fixed fractional. It uses a classic formula called Kelly's formula, which provides the fixed fraction that maximizes the geometric growth rate for a series of trades where all the losses are one size and all the wins are another size. How often do you think that this occurs when dealing with the market? Here's Kelly's formula:

f = ((B + 1) * P - 1)/B 

where B is the win/loss ratio, and P is the percentage of winning trades. 

Optimal f position sizing simply extends the Kelly formula so that the wins and losses can be different sizes. Optimal f calculates the fixed fraction that maximizes the rate of return for a given series of trades. It's important to actually *have* a system that has a positive win/loss ratio before using an Optimal F or Kelly position sizing method.

The trap for Kelly's formula and Optimal f is that no two trade series are the same (where the risk/reward profile remains constant). This can result in a significant drawdown on the account size when a series of losses occurs. The formula is based on win or lose and no intermediate or Gaussian outcome. Don't get me wrong, Kelly and Optimal F have their place in a well designed system, it's just that fat tail events and market corrections tend to kick sand in their faces (as most chaotic events will do).

*Sir O's fully sick position sizing method*

Ok this is something I do, this will not be for everyone, nor will it work with everything and in all markets. Like Optimal f or Kelly this position sizing will bitch slap you in times of chaos. It's a sort of a combined approach that formed after reading a whole bunch of what others do. It applies to a specific kind of equity investment and works best in the mid tier space. I also use this in a leveraged environment where I don't have to be concerned about portfolio concentration.

*Step 1*
I use a Fixed Fractional to determine the base number of shares. In the BHP example above that would be 2162 shares.

*Step 2*
The fixed fractional calculation gives me a trade risk value. I then seek to adjust the number of shares in the position taking into account the variance of the stock to the market. IE. Share price volatility compared to market volatility. Share Price volatility is the daily change of the stock over the last 24 periods which is exponentially averaged. Market volatility is the daily change of the XAO over the last 24 periods exponentially averaged. Essentially what I'm doing is replicating a beta coefficient comparison over a short-term time frame with the nearer term data set given preference.

*Step 3*
Where the Beta is positive and the position is long, the above beta comparison expressed as a percentage will be applied to the position as an addition. IE Share has a positive beta to market of +0.124 BHP position would then be... (2162 shares * 12.4%) = 2430 shares. (position size increased from $19,998.50 to $22,477.5)

Where the Beta is positive and the position is short, the beta will be applied as a subtraction. IE 2162 - 268 = 1894 share (position size now 17519.50)

Where the Beta is negative and the position is short, once again the beta is an addition.

Where the beta is positive and the position is short, once again the beta is a subtraction.

The reason I do this is so that when I'm trading in a strongly positive or negative position I'm aligned to the overall market's direction. The model is just pants trying to trade neutral trends.

What does everyone else use?

Cheers

Sir O


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## Sir Osisofliver (2 May 2012)

No offence Boggo.

Joe would you please remove post #580 (boggo's post on the previous page between parts 1 and two) so that the two posts appear on the same page and straight after each other.

Cheers

Sir O


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## skc (2 May 2012)

Sir Osisofliver said:


> *Step 2*
> The fixed fractional calculation gives me a trade risk value. I then seek to adjust the number of shares in the position taking into account the variance of the stock to the market. IE. Share price volatility compared to market volatility. Share Price volatility is the daily change of the stock over the last 24 periods which is exponentially averaged. Market volatility is the daily change of the XAO over the last 24 periods exponentially averaged. Essentially what I'm doing is replicating a beta coefficient comparison over a short-term time frame with the nearer term data set given preference.
> 
> *Step 3*
> ...




Not sure I fully understand the benefit or application of this beta adjustment.

If it is not too much trouble, can you explain using a couple of examples?

E.g. Say go long on MAH today (this has vastly underperformed the market of late), vs say going short on CBA (which has outperformed the market)?

Thanks.


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## Boggo (2 May 2012)

Sir Osisofliver said:


> No offence Boggo.
> 
> *Joe would you please remove post #580 (boggo's post on the previous page between parts 1 and two)* so that the two posts appear on the same page and straight after each other.
> 
> ...




Good idea, it would flow on then.


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## Sir Osisofliver (2 May 2012)

skc said:


> Not sure I fully understand the benefit or application of this beta adjustment.
> 
> If it is not too much trouble, can you explain using a couple of examples?
> 
> ...




Thanks SKC I wondered how long till someone popped up with a question about this. I kinda skipped a lot of detail in step two. I don't want to give *everything* away. Remember this is mid tier space, so that's a no on the CBA and MAH would only possibly squeak in (I'd have to check the Mcap). The reason why it's mid tier is that the actions of the institutions on the top market capitalisation stocks (where they have the liquidity to play around) tends to bring these stocks much closer to a market level of performance. They tend to follow the market pretty closely because they make up the majority of the market by capitalisation. It's pointless in doing such a position method, you're better off just sticking to fixed frac or optimal f. It's not worth the additional computing time. I merely used BHP because I wanted to extend the example all the way through for illustrative purposes. Remember that essentially it's just a fixed frac that's been tweaked a bit. All the analysis that goes into the selection process is happening.

What I'm doing is not technically using a Beta coefficient like would be displayed on Google Finance or the like. It's a proxy, and it's core is volatility just like Beta. It's also a directional proxy because I'm the one that is doing the calculations for it. I didn't want to get into too much detail, more give the newbies the hints of the things that were possible to tweak things. But here's Sir O's fully sick position method in a *bit* more detail.

Bit more detail

Beta is calculated using regression analysis, and it measures how a stock moves in relation to swings in the market. A beta of 1 indicates that the security's price will move with the market. Most of the ASX20 stocks vary insignificantly from a beta of 1. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market. 

This beta comparison theory is all well and good but it has a major flaw...that of correlation. It's assuming that one day is independent of the next and has no relationship to the previous day. Frankly I think that is just plain bulldust. When I look at the data thrown up by my system scans in this area (IE I don't want to look at 300+ shares only a few a day) I'm only dealing with a months worth of data or 22 trade days. A beta coefficient is usually built over much longer term timeframes.

By selecting a months worth of data and making it exponentially weighted, I'm working out the near term correlation of the share price to the market. If it was a beta coefficient my positional sizing would be backwards. IE a beta of 1.124 would have indicated that BHP is *more* volatile than the market by 12.4% and this has no hint of directionality. More volatile, up or down. see?

What I want to know is whether the ups (positives in my system) are different from the downs (negatives in my system). I am kinda skipping things here deliberately but you should get the idea. I just call it beta comparison in my system because that is easier to write than comparative uni-directionality and neutral-volitility tester... and the abbreviation is rude. When the share market is up I want to see (for a long position) a positive number (confirmation). If I see a negative number the system will restrict the position sizing. Similar in reverse. The overall effect however is relatively minor and only of interest as how much more I can squeeze out of a system.

Clear?

Cheers

Sir O


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## tech/a (2 May 2012)

I've used Fixed capital amounts to great effect.
EG
$10000 parcels with X% initial stop risk.
So with a $100k account and a 10% stop on purchase price that's effectively 1% of capital.
But each trade is fixed at that or some other x value.


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## skc (2 May 2012)

Sir Osisofliver said:


> What I want to know is whether the ups (positives in my system) are different from the downs (negatives in my system). I am kinda skipping things here deliberately but you should get the idea. I just call it beta comparison in my system because that is easier to write than comparative uni-directionality and neutral-volitility tester... and the abbreviation is rude. *When the share market is up I want to see (for a long position) a positive number (confirmation). If I see a negative number the system will restrict the position sizing. *Similar in reverse. The overall effect however is relatively minor and only of interest as how much more I can squeeze out of a system.




Thanks for the response. I am not after the exact formula of the adjustment factor, but more the theory why you'd use one. 

You are basically saying, if a stock is going strong, and in fact stronger than the overall market, you put on a somewhat larger position size to capitalise on the opportunity. Is that correct?

I don't disagree with the method, althoguh I would offer an opposite perspective - i.e. those stocks that have run hard are more likely to retrace, while those laggards (esp in the same sector) may actually have a delayed run. But this just comes from me trading pairs a lot.

Anyway, will leave you to your thread.


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## matth1 (2 May 2012)

Thanks for the post Sir O.

A question: What do you consider to be an optimal portfolio size to begin trading with? Obviously if the portfolio is too small and you apply sound position sizing you run the risk of your gains being eaten up by brokerage...

Also, if we are risking 2% of our capital in the market, even if a stop-loss is in place, there must still be some risk of complete ruin. If the market completely tanks the price could fall below our stop-loss value and hence lose more than our inital 2%... How do we "position size" the number of trades we're in at any one time to limit this risk?


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## burglar (2 May 2012)

matth1 said:


> Thanks for the post Sir O.
> 
> A question: What do you consider to be an optimal portfolio size to begin trading with? Obviously if the portfolio is too small and you apply sound position sizing you run the risk of your gains being eaten up by brokerage...
> 
> Also, if we are risking 2% of our capital in the market, even if a stop-loss is in place, there must still be some risk of complete ruin. If the market completely tanks the price could fall below our stop-loss value and hence lose more than our inital 2%... How do we "position size" the number of trades we're in at any one time to limit this risk?



Hi matth1,

The portfolio size is dependant on your financial situation and your appetite for risk.
No-one can tell you (I believe)!

There is an excellent thread by nioka "Investing my first $1500"
https://www.aussiestockforums.com/forums/showthread.php?t=19955

With regard to your fear of the market tanking:
The probability that all your open trades would fall through your stops simultaneously, is small.


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## skc (3 May 2012)

burglar said:


> With regard to your fear of the market tanking:
> The probability that all your open trades would fall through your stops simultaneously, is small.




Small, but real. Size your portfolio so that if it is realised you are not screwed.


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## Sir Osisofliver (3 May 2012)

skc said:


> Thanks for the response. I am not after the exact formula of the adjustment factor, but more the theory why you'd use one.
> 
> You are basically saying, if a stock is going strong, and in fact stronger than the overall market, you put on a somewhat larger position size to capitalise on the opportunity. Is that correct?
> 
> ...




Close but not quite right. If the market is going strong as you put it then the near term nature of the data set will indicate a larger position size. It is built on a system that try's to capture breakout movements in mid tier stocks the initial break is highlighted in the market scan and I just jump on the newly formed trend.

Clear?

Cheers 

Sir O


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## Sir Osisofliver (3 May 2012)

matth1 said:


> Thanks for the post Sir O.
> 
> A question: What do you consider to be an optimal portfolio size to begin trading with? Obviously if the portfolio is too small and you apply sound position sizing you run the risk of your gains being eaten up by brokerage...
> 
> Also, if we are risking 2% of our capital in the market, even if a stop-loss is in place, there must still be some risk of complete ruin. If the market completely tanks the price could fall below our stop-loss value and hence lose more than our inital 2%... How do we "position size" the number of trades we're in at any one time to limit this risk?




That's somewhat of a personal decision as burglar indicated Matt. I have known traders who started with 10k in a system and used a positional sizing method to increase their success rate. Personally? When I test a system I do so starting with paper trading on historic data, then paper trade with no funds and finally live trade with a small dollar figure before putting real funds into it. My live testing accounts are normally the 25k mark if I am using leverage so I would go with the amount.

In terms of risk of ruin if the market tanks, sure gaps past the stop happen. Chaos comes along every now and then and kicks our careful plans and strategies in the balls. What position sizing is intended to do is increase our probability of success. Control is an illusion so it could happen. ( although the probability is fairly low)

This is where asset allocation comes in. It is a bit of a generalization but most traders I know don't trade with everything they have, only a portion. I tend to keep the allocation of funds a mix of passive assets like blue chip shares and property with a small portion allocated to trading. Once again I have limited my return to increase the certainty of my outcomes.

Cheers

Sir O


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## matth1 (3 May 2012)

burglar said:


> The portfolio size is dependant on your financial situation and your appetite for risk.
> No-one can tell you (I believe)!






Sir Osisofliver said:


> That's somewhat of a personal decision as burglar indicated Matt.




Fair enough.



burglar said:


> With regard to your fear of the market tanking:
> The probability that all your open trades would fall through your stops simultaneously, is small.




I wouldn't say fear, but if it is a possibility we should at least consider the risk and try to plan for it accordingly (if it's small, maybe we can accept it).



Sir Osisofliver said:


> In terms of risk of ruin if the market tanks, sure gaps past the stop happen. Chaos comes along every now and then and kicks our careful plans and strategies in the balls. What position sizing is intended to do is increase our probability of success. Control is an illusion so it could happen. ( although the probability is fairly low)
> 
> This is where asset allocation comes in. It is a bit of a generalization but most traders I know don't trade with everything they have, only a portion. I tend to keep the allocation of funds a mix of passive assets like blue chip shares and property with a small portion allocated to trading. Once again I have limited my return to increase the certainty of my outcomes.
> 
> ...




Not putting all the eggs in one basket seems fairly logical. Are there any "rules of thumb", such as never having more than a third of your capital at risk at any one time?

Or is this overly risk-averse? (I guess this again comes back to an individuals risk profile)


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## Sir Osisofliver (4 May 2012)

matth1 said:


> Fair enough.
> 
> 
> 
> ...




Once again it's a bit personal Matt and I would hate to be seen to giving you advice without knowing your risk profile. The mentor I learnt a lot of this stuff from had a very strange asset allocation as far as I was concerned at the time. He was making a killing in the futures markets. The was his preferred method of trading and he was damn good at it. Eight months out of twelve he'd pull 60% return and the other four months he'd drawdown about 20% of his account. His account had the potential to compound enormously. Yet every quarter he'd take funds from his trading account and restore the account to about 150k. He'd go buy houses or blue chips or classic sports cars. As you can imagine 150k was a drop in the bucket for this guy. When I asked him why he did that it's because he'd had to declare bankruptcy after the 87 crash wiped him out. He'd had too much leverage and had needed to start again. He was happy he could put his head to the pillow at night with only a relatively small amount at risk. 

That's an extreme example but it does highlight the issues around the personal nature of risk. It's also what fin planners do. Attempt to marry a clients risk profile with an asset allocation. (problem is that many of them only stick to the share market)

Cheers

Sir O


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## matth1 (4 May 2012)

Sir Osisofliver said:


> Once again it's a bit personal Matt and I would hate to be seen to giving you advice without knowing your risk profile.




No probs, merely wondering is all.  I've not yet thought much about this area so just trying to get a feel for what I need to learn about.

Thanks again.


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## NewbAndy (28 May 2012)

EDIT: Thanks for all the useful information so far!!

In a related, but off the current topic, question; could someone please explain how to calculate ownership delta in regard to getting franking credits?

I know that in order to get the franking credits you have to hold the shares for a minimum of 45 days with a minimum delta of 0.3 on those days, but how do I calculate this?

Could you use an example with say a share for $15, buying a put option at $13 and/or selling a call option at $16?

Many thanks
Andy


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## Sir Osisofliver (28 May 2012)

NewbAndy said:


> EDIT: Thanks for all the useful information so far!!
> 
> In a related, but off the current topic, question; could someone please explain how to calculate ownership delta in regard to getting franking credits?
> 
> ...




Hi Andy and welcome.

That's kind of a specific question for the newbie thread and I don't play around much with options. http://www.ato.gov.au/businesses/content.aspx?doc=/content/18898.

In terms of risk of ownership you need a minimum 30% as defined in the above link. I assume that you don't meet the small investor requirements and will accrue greater than 5k of franking credits over 12 months.

If you are controlling your risk with an option strategy as you describe I could work out the formula but don't have one to hand. (and I'm posting using the phone) I'd ask the question in the derivatives section of the forum.

Cheers

Sir O


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## NewbAndy (29 May 2012)

Sir Osisofliver said:


> Hi Andy and welcome.
> 
> That's kind of a specific question for the newbie thread and I don't play around much with options. http://www.ato.gov.au/businesses/content.aspx?doc=/content/18898.
> 
> ...




Hi Sir O,

Thanks for your reply. I'll go ask the same question over in the derivatives section and post back with the answer for those interested.

That link to the ATO didnt work, what was it pointing to?

Also, I wont be accruing more than 5k worth of franking credits this (or probably next financial year), want to get my understanding of it under control before I get in that deep. How does that change my situation?

Thanks
Andy


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## Sir Osisofliver (29 May 2012)

Huh?

Lets try it again

http://www.ato.gov.au/businesses/content.aspx?doc=/content/18898.htm

Cheers

Sir O

Working now



> Also, I wont be accruing more than 5k worth of franking credits this (or probably next financial year), want to get my understanding of it under control before I get in that deep. How does that change my situation?




Then neither the 45 day holding rule, nor the ownership rules associated with using derivatives to limit your risk apply to you.


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## NewbAndy (29 May 2012)

Sir Osisofliver said:


> Huh?
> 
> Lets try it again
> 
> ...




Ah, perfect. Thats good news!

Link works now, thanks again for your help and time.

Cheers
Andy


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## Sir Osisofliver (4 June 2012)

Ok it's time for a lesson.

*Turning an Idea into Profit*

Many posters on this forum will talk about a system or strategy. I want to lead those interested down the process of how you go from an idea...into actually making money from that idea. This will be a simple process or idea I'm going to take you down.  This won't be new territory for many traders, but what I'm trying to show the newbs is the *process*. This means it will require some input from the newbs though...I'm not just going to hand over a system, I expect others to think their way through the process. You won't value what you learn if you are simply given it. So unlike most of my lessons where I just vomit up information...with this lesson I *want* commentary, questions, flames na-uhs and lively discussion and will be pausing every so often to seek it. 

Disclaimer: This is NOT ADVICE. DYOR stands for DO YOUR OWN RESEARCH. You heard me. Don't make me break out the legalese. This is also a system I have used but currently don't have the time/inclination to operate. So I'm not ramping anything. I will not be speaking about any specific stocks, only the characteristics that a *system* will look for. If I mention a stock it will be for example purposes only and most likely involve past price action. Feel free amongst yourselves in the thread to comment, but any questions along the lines of what do you think of XYZ stock in the strategy should be *ignored*. Anybody feeling the need to respond to that kind of question please remember the forum rules about stock ramping. I want this to be clean and I DON'T want to get Joe in trouble. If I see a post that skirts the grey area I *will* ask a mod to remove it. Clear?

So what is a *system* as opposed to a *strategy*?

In my definition a strategy is the indictors, both technical or fundamental, that are used to identify trading targets to achieve a high probability of a successful outcome. It's easily able to be tested on a large amount of data and across multiple market conditions. Ideally it also allows the market to be scanned for opportunities.

Ok so what's a System? A system takes a strategy to the next level and through a process of *preselection* increases the probability associated prior to the application of indicators. To me the system is the *idea*, what you are going to use to preselect those high priority targets.

*So lets start with an idea...*

Have you ever noticed that something will tank down over a relatively long period of time and then when it seems it cannot go any further down, it explodes out of the blocks?  It moves *very* rapidly, like a rubber band being pulled to full extension and then let go. What is happening? Why the very quick movement? That stock is a dog isn't it? Look how far down it's come? What the?

Link 

If you have a look at the above link this might explain what is going on with the price action. It's from the ASIC website and is a list of declared short positions on stocks. Here in Australia you can short a stock using a synthetic instrument via an equity CFD or in limited circumstances short the stock itself if you have a friendly full service broker.  The amount of shorts as a percentage of issued capital is an interesting idea, because what happens when the share price *starts* to rise? All those people who are short in the stock need to close out their positions (which means purchasing the stock at market price). This can cause a *rapid* movement of the share price as the short positions are unwound. It's like the reverse of a stock *overhang*. It's a defined quantity of stock *that needs to be purchased.* In-built demand! With a number I can measure!!

Ok so now we have the germination of an idea, we've got a potential theory to explain some market action and we've found some data.

*The next step...*

...is to kick the sh!te out of the idea. We're *stress testing the thought process*. 

1) What are the Pro's and what are the Con's? 
2) *Rank* the Pro's and Con's in order of importance


I'll be over there with a scotch and dry while you guys and girls talk it over.

Cheers

Sir O


----------



## stu192 (4 June 2012)

So SirO, you seem to be suggesting that a stock with a large short position is ripe to buy. This is because it has a large amount of inbuilt demand. I can see the logic.

However, my thinking would be that there are alot of people shorting....thus most people think it's falling.....hence it should fall further because no-one wants to buy it.

So why is my thinking flawed?


----------



## Sir Osisofliver (4 June 2012)

stu192 said:


> So SirO, you seem to be suggesting that a stock with a large short position is ripe to buy. This is because it has a large amount of inbuilt demand. I can see the logic.
> 
> However, my thinking would be that there are alot of people shorting....thus most people think it's falling.....hence it should fall further because no-one wants to buy it.
> 
> So why is my thinking flawed?




Hi Stu. Okay so have you identified a Pro or Con? It's good that you are questioning the idea.  That's what a stress test is for after all. Always be happy to question *the basis of the idea*. What I want you to think about though is how you justify the validity or lack thereof the idea.

Con - Is this idea valid? I have to take the time to test it out and I might be wasting my time.

Con - Can stocks be shorted into nonexistance? How frequently does it happen?

Question for Stu - Is this just a *visible* aspect of potential future demand?

Questions for everyone - Stu's identified that timing appears to be a critical component. *As it is in every system or strategy* Would you want to buy whilst the share price is still falling? Or would you want to buy when the share price is rising and you are seeing confirmation by a reduction in the number of short positions? On one hand I have greater certainty of outcome. One the other hand I give up some potential profit by allowing a confirmation to occur. Is the greater certainty worth more than the risk?


Cheers

Sir O


----------



## burglar (4 June 2012)

Sir Osisofliver said:


> ... Is the greater certainty worth more than the risk?
> 
> 
> Cheers
> ...




If we are talking about bottom pickers 
(and I think we are) 
we all agree that you can't pick tops and bottoms!

But from here the the camp is decisely split.
Those who say you should at least try and those who wait for confirmation.

I am more than happy to hear some more on this topic!


----------



## Sir Osisofliver (4 June 2012)

burglar said:


> If we are talking about bottom pickers
> (and I think we are)
> we all agree that you can't pick tops and bottoms!
> 
> ...




But for *you* burglar whats the answer? Confirmation or no confirmation? The process we go through here is an individual one, because it's *your risk tolerance.*  The same basic idea may have many slightly different *applications* based upon what you thinkis an acceptable risk and others do not.

Want to contribute any other pro's and cons that you can identify with the idea?



Cheers

Sir O


----------



## burglar (4 June 2012)

Sir Osisofliver said:


> But for *you* burglar whats the answer? Confirmation or no confirmation? ... Cheers
> 
> Sir O




If I may ... I have a story!

I know a person in the confirmation camp.
He was always asking for tips.
There was always something wrong with those I offered.

So, tongue in cheek, I recommended a particular stock pick.
He replies that as it had charged through 50% gain on the back of a good report he had bought some.
This was the confirmation he was seeking
Gulp!
He was caught on a local high. 
THE STORY GETS WORSE! 
He claimed to know how to Stop Loss.
He didn't!!

I don't do tips anymore, ...
And I am a bottom picker.


----------



## stu192 (4 June 2012)

thanks for the response.

So


Con - Is this idea valid? I have to take the time to test it out and I might be wasting my time.

true. Need to put the time in. and in theory I would expect to have more systems fail than succeed when testing.

Con - Can stocks be shorted into nonexistance? How frequently does it happen?

Yes - onetel, babcock and brown etc. Doesn't happen very often.

Question for Stu - Is this just a visible aspect of potential future demand?

True. It is one aspect - and a measurable one (which is pretty rare).

In terms of your next question regarding timing.
As with everything you need to assess risk. I think you want a bit of both (ie some confirmation....and still a high enough level of movement to make it worthwhile).  How can you quantify the risk?


----------



## burglar (4 June 2012)

stu192 said:


> ... enough level of movement ...




Not just movement, but also momentum.


----------



## Sir Osisofliver (4 June 2012)

burglar said:


> If I may ... I have a story!
> 
> *snip for relevance*
> 
> ...




Burglar...focus.

Try not to derail the flow of what I am trying to do here. I don't care about other situations. I want to show how to build a system and that comment is just distracting. The Newbs will just get lost. You've said you are a bottom picker..as in NO confirmation. This says you would be perfectly happy buying in on the way down, confident that the unwinding short positions would eventually see you in the black. Is this correct? If it is...justify it. If it is not correct, you're sitting in a grey area. You require some kind of confirmation. What KIND of confirmation would you be looking for? Technical indicators? Fundamental details? News announcement? Price and volume trigger?

Can you see where I am going with this? By our process of testing the idea and listing the pro's and con's we are starting to define the characteristics of the *indicators* that we will use in our system. It gives us something to SCAN with. We are also considering a number of *variables* and assigning a relative importance to them  (This is why I want of list of Pro's and Con's and why I want them *ranked*).

Burglar, give me your number one advantage and disadvantage with this idea.

Cheers

Sir O


----------



## burglar (4 June 2012)

Too much confirmation is bad ...
Bottom picking is equally bad ...
I see that now.

Therefore a system will hopefully show a pivot.
A scan will separate optimum candidates from the background.

Your idea revolves around finding a company that is heavily shorted.
(measurable)
The *advantage* is fewer companies to research.
The *disadvantage* is that some of these are heavily shorted for a reason.


----------



## Sir Osisofliver (4 June 2012)

stu192 said:


> thanks for the response.
> 
> So
> 
> ...




Excellent response Stu.  I was responding to burglar and I think I answered this question.  By listing and ranking the pro's and con's we automatically begin thinking in terms of risk and more importantly risk mitigation. Quantification of the risk is only revealed once we begin testing. So Stu. Give me a different answer from Burglar. What's the number one advantage and number one disadvantage with the idea?

Cheers

Sir O


----------



## Sir Osisofliver (4 June 2012)

burglar said:


> Too much confirmation is bad ...
> Bottom picking is equally bad ...
> I see that now.
> 
> ...




So what reasons for shorting am I looking for? More importantly what reasons am I looking to avoid? Can I build either of these into a scan? Is it worth my time in doing that or will that be part of my research process once identification has occurred?

Define "Heavily" in the above statement.
Is 1% of the issued capital heavily shorted?
is 20% of the issued capital heavily shorted?

In relation to the above.  The target company has 45% of issued capital held in the hands of management. Does this change where you have drawn the line in the sand of "heavily"? Why or why not?

Burglar, you've stated you want to see a pivot. What sort of pivot are you looking for? A Hard pivot, a soft pivot, a confirmed change in trend by the break of the previous lower high?

Can you see what I'm leading you towards?  We're getting things we can *test* for validity.

Keep going, Pro's an con's.

Rank them.

Cheers

Sir O


----------



## stu192 (4 June 2012)

Really gets you thinking doesn't it. Hopefully I am answering the correct question - and my answers aren't too simple!

The idea is: Use the % shorts as a starting point to go long. The higher the % shorts, the more hidden demand.

Advantages in no order:
 - Measurable. You have a value you can measure against (% of shorts). 
 - Timing. As the shorts start disappearing, you can better time when to get in - and get out
 - Confirmation. Hopefully as the shorts disappear the share price rises, thus constantly confirming you are on the right side of the ledger.
 - Shorting is normally a short-term venture. Thus higher likelihood of people buy back their shorts. 

Disadvantages.
  - other influence. Is the equity linked to some other factor (ie gold, copper etc) - and the short is really against that item, and the equity is infact a derivative?
 - I would expect that people/companies that short, are more experienced than those that just go long. So essentially more experienced people are betting against you (me).
 - shorting a company can just be a way of shorting the market. Thus market falls = share falls. Does our timing need to including looking at the XJO rising also.

Stu


----------



## Sir Osisofliver (4 June 2012)

stu192 said:


> Really gets you thinking doesn't it. Hopefully I am answering the correct question - and my answers aren't too simple!




But equally we don't want to make it too complex either. Most of my systems are a lot of work to set up, and then require relatively little time to apply. This is due to the fact that one of the advantages that I look for in a system is being able to use small amounts of time to execute it. As you can see the system needs to work for you as an individual trader. If you can't be chained to a computer, don't build a system that requires you to be.







> The idea is: Use the % shorts as a starting point to go long. The higher the % shorts, the more hidden demand.



 that's our hypothesis and what we need to test for statistical significance.







> Advantages in no order:
> - Measurable. You have a value you can measure against (% of shorts).



 I would also add to this we have data that goes back to June 2010.  Is this sufficient data/time for a working hypothesis?







> - Timing. As the shorts start disappearing, you can better time when to get in - and get out
> - Confirmation. Hopefully as the shorts disappear the share price rises, thus constantly confirming you are on the right side of the ledger.
> - Shorting is normally a short-term venture. Thus higher likelihood of people buy back their shorts.
> 
> ...



 Would you then want to classify types of markets to get an appreciation of when this system may have optimal efficiency? 

Great Start Stu and Burglar...remember to rank them.

What else can you think of? Anyone want to add to Advanatges or Disadvantages?

I'll give you one you may not have thought of.

Con - The data released by ASIC is up to 5 days after it happened. There is therefore a weeks lag and potential slippage associated with waiting for confirmation.

Cheers

Sir O


----------



## stu192 (5 June 2012)

Lets get come ranking talk started. here's my initial rankings. Change as you see fit (or add to it).

Pro
1. Measureable short value %
2. Have latent demand (can see this through volume increase when it unwinds)
3. Cuts down on list of companies to research
4. you can see confirmation (% shorts decreasing)


Con
1. The data released by ASIC is up to 5 days after it happened.
2. Company heavily shorted for a reason
3. Data only goes back 1 year. is it enough
4. is the short a function of the market


----------



## burglar (5 June 2012)

Pro a). Maybe an edge over other traders


----------



## Sir Osisofliver (7 June 2012)

Anyone else want to pitch in on this or am I just playing with Stu and Burglar?

Cheers

Sir O


----------



## tech/a (7 June 2012)

Sir Osisofliver said:


> Anyone else want to pitch in on this or am I just playing with Stu and Burglar?
> 
> Cheers
> 
> Sir O




When I get sometime.!!


----------



## kid hustlr (7 June 2012)

Sir O, 

Is it easy to determine what % of a company's shares are held by the board/directos/internally? Is this concept *measurable?*

At first glance the *% of winning trades* may be quite low and as such may not suit all traders/investors.

I can only see data onthe ASIC website for short %'s held back to June 2010. Is this enough data to perform the required *backtesting?*


----------



## matth1 (7 June 2012)

Pro:
- Unique approach (limited competition?)
- Inherent demand as mentioned earlier

Con:
- Only 2 years data to back-test with
- Limited to markets that can be shorted?
- Requires buying into a falling stock (not everyones 'cup of tea')

How do we pick the point to buy in? Where is the tipping point?


----------



## Sir Osisofliver (8 June 2012)

kid hustlr said:


> Sir O,
> 
> Is it easy to determine what % of a company's shares are held by the board/directos/internally? Is this concept *measurable?*



Appendix 4b material announcement 







> At first glance the *% of winning trades* may be quite low and as such may not suit all traders/investors.



What do you base that on?







> I can only see data onthe ASIC website for short %'s held back to June 2010. Is this enough data to perform the required *backtesting?*




I had the system before I had the data. Looking for other conditions in the market. The data merely adds to confirmation. However you are correct if you just used the data set at ASIC it wouldn't be statistically relevant

Cheers

Sir O


----------



## Sir Osisofliver (8 June 2012)

tech/a said:


> When I get sometime.!!




That would be great Tech. I won't be doing any current examples.....but you could.  JBH is looking like a target at present. ~24% of the issued capital is in short's. I'm sure that the newbies and myself would appreciate your technical analysis of the stock at this time.

Cheers

Sir O


----------



## kid hustlr (8 June 2012)

Nice discussion as always Sir O.

I will have a discussion about "other conditions in the market" and report back.


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## NewbAndy (8 June 2012)

stu192 said:


> Lets get come ranking talk started. here's my initial rankings. Change as you see fit (or add to it).
> 
> Pro
> 1. Measureable short value %
> ...




Hi Everyone,

As has been mentioned- is there a way of getting ASIC data more recent? (I'm guessing not) Perhaps there's a way of estimating this?

In the very brief look I've had, surely the #4 con above could be rated higher? Wouldn’t interference from the XJO play a bigger part in confusing the reason behind rises in stock price?

Cheers
Andy


----------



## kid hustlr (8 June 2012)

Taking a stab,

*I think the overall index will act as an indicator*. If the market rallies up then a heavily shorted stock is likely to rally even harder. My reasons for this are:

- Those shorting are most likely more active traders and will look to close there positions, leading to the in built demand you discussed earlier.
- A level of computer buying would occur due to the links to the SPI and this would again squeeze out shorters.
- Market sentiment may begin to change and investors may adjust their opinion/outlook/models and recognise this stock is now a buy.

As an aside, JBH is very close to a strong support level back in Nov 2008. Whether this is coincidence or not I'm not sure.


----------



## burglar (9 June 2012)

kid hustlr said:


> Taking a stab,
> 
> *I think the overall index will act as an indicator*. If the market rallies up then a heavily shorted stock is likely to rally even harder. My reasons for this are:
> 
> ...




So you're saying that market shorts will unwind when the index pivots upwards.
And the index is available in real time!!

So how do you find out if JBH is shorted in order to short the market?
I'll take a stab and say we should look for a correlation of JBH shareprice against the index.
Or an earlier breakout!


----------



## Sir Osisofliver (12 June 2012)

*The next step.... Measurement Tools.*

So we've stress tested the idea and identified the pro's and con's.  We've also ranked them in importance.

(I'm using what's been stated)

Pro
1. Measureable short value %
2. Have latent demand (can see this through volume increase when it unwinds)
3. Cuts down on list of companies to research
4. You can see confirmation (% shorts decreasing)


Con
1. The data released by ASIC is up to 5 days after it happened.
2. Company heavily shorted for a reason
3. Data only goes back 1 year. is it enough
4. is the short a function of the market

What we need to now determine is what we will *measure* these pro's and con's against.  We need to identify the possible indicators that we can use against each of these.  Some of these will be easy..and some will require some thought.  I ususally spitball or brainstorm several idea's to try and refine the kind of data requirements that the system will use. (I am going to use JBH for this - THIS IS NOT A RECOMMENDATION)

Pro
1. Measureable short value % From here I can download the daily aggregate short positions JBH is currently sitting (with 5 days delay) at an indicated level of 24.01% of the issued capital in short positions. At current price of of $8.60 this is 23,734,597 shares or $204,117,534 worth of shares to purchase to close out the "short overhang". (my terminology) 

*Question:* What indicators can I construct from this data (knowing that the con is that it will have a 5 day delay?)

*Question:* Is it sufficient to use only this data? Do I want to determine the amount of inactive stock (IE that held by directors) to alter my percentage?


2. Have latent demand (can see this through volume increase when it unwinds)
To determine a volume increase (which does not suffer from latency like number one above), I need access to volume data. With a daily in the above I'm going to want to look at Daily data, with weekly data for longer term confirmation. Our hypothesis is that the shorts (being a shorter term instrument) will unwind rapidly, causing a volume increase.

*Question:* What volume indicators can I construct from this data?

Possible indicators are:
Moving Average based indicators using volume, (SMA, EMA)
Bollinger Band - Using a 2 standard deviation
*Anything else? If so why? And why would I use the above?*

3. Cuts down on list of companies to research

We need to construct a watchlist of the potential targets.

*Question:* At what point do targets enter the system? (IE how much is *Heavily* shorted?)

5% of issued capital (same as a significant holder)
(We'll use this as a working figure for now and know it may be subject to adjustment).

4. You can see confirmation (% shorts decreasing)

*Question:* What percentage move in the short position counts as confirmation?

For this we are using weekly data (as mentioned above). A temporary indicator would be 0.5% movement (10%).

*Question:* Why do you think I used this figure? If you  want to use something else...why?

With the con's I'm looking at *mitigation*. How can I offset these factors? What might I use?

Con
1. The data released by ASIC is up to 5 days after it happened.

Some of the indicators above are real time, (Volume for example, Price movement will also be real time). Does the real time nature of some of the system inputs offset the time delay in this indicator?

2. Company heavily shorted for a reason.

The determination of whether the target has been *oversold* will be a judgement call against a research process.  To me this is where the Fundamental aspects of the System come into play. What fundamental questions do I want to answer? Here's a few....what else would *you want?*

PE      Historic
PE      Peer
PEG    Peer
Quick
Acid
Director Holdings as percentage
top 10 Holdings as percentage
Recent news

3. Data only goes back 1 year. is it enough?

This con will only be answered once we have some test data.

4. is the short a function of the market?

As pointed out by Burglar and Kid Hustlr...it's proposed that this system will *have greater efficiency* in different market conditions. That the unwinding of shorts will *happen at the fastest pace* during an uptrending market, or at *the change in trend of the market*. We could use a correlation of the target JBH, against an index, to refine our system and give us a greater probability of success.

*Question:* Which is the best index to use?

XAO
XTO
XJO
XKO
XDJ

A combination?


Sir O pours himself a scotch and dry and waits in the corner again for discussions to happen.


Cheers

Sir O

P.S.

I won't be giving any technical analysis on JBH. I'd appreciate if someone else could give it a shot though. (I've removed a lot of stuff to give you a relatively simply chart with price and volume). ONCE MORE WITH FEELING. AGAIN - NOT A RECOMMENDATION


----------



## Trembling Hand (12 June 2012)

Sir Osisofliver said:


> I won't be giving any technical analysis on JBH. I'd appreciate if someone else could give it a shot though. (I've removed a lot of stuff to give you a relatively simply chart with price and volume). ONCE MORE WITH FEELING. AGAIN - NOT A RECOMMENDATION
> View attachment 47403




Yeah looks to be going to sleep. Nothing here, next opportunity for me.


----------



## Sir Osisofliver (12 June 2012)

Trembling Hand said:


> Yeah looks to be going to sleep. Nothing here, next opportunity for me.




Cool...why? 

Remember my original statement back on the previous page. Why do we sometimes see a stock come down over *a long period of time*, that then *rapidly increases in price*? It's a dog isn't it? = It's going to sleep isn't it?  I agree that *at this moment* you haven't got a technical trigger for entry, but we're trying to predict the next move (change in trend) with an increased probability for success due to the unwinding of the short position. So what can you see now?

Cheers

Sir O


----------



## Trembling Hand (12 June 2012)

Sir Osisofliver said:


> Remember my original statement back on the previous page. Why do we sometimes see a stock come down over *a long period of time*, that then *rapidly increases in price*? It's a dog isn't it? = It's going to sleep isn't it?  I agree that *at this moment* you haven't got a technical trigger for entry, but we're trying to predict the next move (change in trend) with an increased probability for success due to the unwinding of the short position. So what can you see now?




In fact I would say its actually increasing in its falls. Down trend lines have continually been broken and made steeper falls since 09. Its the kind of index futs chart I would bottom pick on an intraday basis but they, Index futs, on that time frame don't go to sleep, stock ones do.

The only technical thing I would say about it is there is less and less volume as price falls. This _could _lead into a lack of supply when the shorts do try and cover. They may find no offers above them to cover. That can lead to very nasty  moves...... when it happens.


----------



## Sir Osisofliver (12 June 2012)

Trembling Hand said:


> In fact I would say its actually increasing in its falls. Down trend lines have continually been broken and made steeper falls since 09.




I would too. In fact I'd go as far to say that...is a *compounding* pattern, and the increases are part of that compound curve...which is a *fractal or chaotic expression of price*. Is this relevant to your conclusion? 







> Its the kind of index futs chart I would bottom pick on an intraday basis but they, Index futs, on that time frame don't go to sleep, stock ones do.




So why is your analysis telling you that this stock will "sleep" - I assume this means a neutral trend sideways for quite a while? What features lead to this conclusion?







> The only technical thing I would say about it is there is less and less volume as price falls. This _could _lead into a lack of supply when the shorts do try and cover. They may find no offers above them to cover. That can lead to very nasty  moves...... when it happens.




Ahh the entry trigger...As you can see...we haven't got to that part of the process of system building yet TH. We're building up to it and getting closer though so we could probably begin some discussion on it.  Your comment above is interesting. Does this volume indicate a potential bearish divergence? How would you determine if this is the case?

So what kind of technical trigger would you want to see? A break of a previous high pivot? A break of a minor or major trendline? An increase in volume that accompanies one of those features? A fib retracement of 100% +/- 5%, since we've seen a break of the 38.2, 50 and 61.8% retracement levels?

TH - I hope you see that I'm not picking on you...just trying to draw out the benefit of your experience for the newer forum members. In this case we are looking at an example which has not yet displayed the price behaviour I discussed back on page 31. So what price features would *you* want to see in JBH which would make you go long?


Cheers

Sir O


----------



## sinner (12 June 2012)

Sir Osisofliver said:


> So what price features would *you* want to see in JBH which would make you go long?




Hope I can input.

At minimum: 
* higher swing low than the last swing low

But prefer:
* first pullback (lowest close in N (where N between 3-10) days) after a breakout (highest close in N*10 days)
* trend signal (MA crossover or similar)
* breakout itself

If you are expecting rapid movement then it's probably safer to enter at least a portion of the position on a trend/breakout signal so that you don't get left behind waiting for a pullback.


----------



## Trembling Hand (12 June 2012)

Sir Osisofliver said:


> So why is your analysis telling you that this stock will "sleep" - I assume this means a neutral trend sideways for quite a while? What features lead to this conclusion?



 Because thats the pattern that I think it will show at best. it looks like another sp thats heading to zero rather than hero up to this point. 



Sir Osisofliver said:


> Does this volume indicate a potential bearish divergence? How would you determine if this is the case?



 Bearish divergence? huh? It looks to be bullish..... _maybe_. It is to me showing a lack of supply as price falls. Not much more. Whether that eventually turn into demand without corresponding supply at the moment its just a guess. Thats what makes me think its probably going nowhere. Not a lot of increasing supply nor demand.



Sir Osisofliver said:


> So what kind of technical trigger would you want to see? A break of a previous high pivot? A break of a minor or major trendline? An increase in volume that accompanies one of those features? A fib retracement of 100% +/- 5%, since we've seen a break of the 38.2, 50 and 61.8% retracement levels?



 For me a decrease in volume AND price rising would signal end of selling. I reckon that would get me in before any sort of HH or retracement etc.


----------



## Sir Osisofliver (12 June 2012)

Trembling Hand said:


> Because thats the pattern that I think it will show at best. it looks like another sp thats heading to zero rather than hero *up to this point*.




And until a trigger occurs I would agree our action is to merely maintain it on a watchlist.







> Bearish divergence? huh? It looks to be bullish..... _maybe_. It is to me showing a lack of supply as price falls. Not much more. Whether that eventually turn into demand without corresponding supply at the moment its just a guess. Thats what makes me think its probably going nowhere. Not a lot of increasing supply nor demand.




Bah Humbug! Could have sworn I wrote bullish divergence. Damn fingers not typing what my brain tells them to. Typo - sorry for any confusion. 







> For me a decrease in volume AND price rising would signal end of selling. I reckon that would get me in before any sort of HH or retracement etc.




So can you scan for a) a decrease in volume; and crosscheck against b) a *defined level* of price rise? E.G A 2 standard deviation break to the upside?

Cheers

Sir O


----------



## sinner (12 June 2012)

Trembling Hand said:


> For me a decrease in volume AND price rising would signal end of selling. I reckon that would get me in before any sort of HH or retracement etc.




Fair enough, but can you quantify that for us so we actually know what you're referring to? I mean, is "a decrease in volume AND price rising" on a 1 day basis so you'd buy the 'trigger' on the next up day with lower volume than the previous day...or are you describing something more fuzzy like the volume trendline is down while the price trendline is up?


----------



## Sir Osisofliver (12 June 2012)

sinner said:


> Hope I can input.



All Are welcome Sinner.



> At minimum:
> * higher swing low than the last swing low




A purely visual indicator Sinner. Is it possible to construct a robust trigger from that? I mentioned before one of the things I look for is minimal time for execution of the system. This might suit *your system*, you might be willing to spend the time to look for this characteristic (or others) in the price action. I also said that the same idea can generate different methods of execution. Would the above (being a more discretionary decision process) suit your trading style? 







> But prefer:
> * first pullback (lowest close in N (where N between 3-10) days) after a breakout (highest close in N*10 days)
> * trend signal (MA crossover or similar)
> * breakout itself
> ...




1) First pullback - after a break of a *major/minor* trendline. (Horizontal or descending I assume). I'm going to ask you a probability question here Sinner. How frequently does a stock break from a trendline like you've described and not experience a pullback/retracement until partway through the completed emerging structure? What I mean is you may be looking for a pullback *that does not happen* early in the new trend, especially if the shorts unwind quickly.

2) This is a good one, easy to scan for, what are your inputs? 10/20 12/26 SMA?

3) breakout of what exactly?

4) Last comment. Once again you've defined something that *might* be unique to yourself (and also might introduce a risk). You are willing to give up some potential profit for greater certainty. This has introduced the risk that the target moves so quickly that you emotionally assume that the horse has bolted. This is why it's important to ensure that our trigger is a defined one...so that we can test against it and have a degree of expectancy.

Cheers

Sir O


----------



## sinner (12 June 2012)

Sir Osisofliver said:


> A purely visual indicator Sinner. Is it possible to construct a robust trigger from that?




It's not purely visual at all! Definitely possible to construct a trigger. I have a piece of code (IF low > low[1] AND low[1] < low[2] THEN curswinglow=low[1]; swinglows[N]=curswinglow ELSE swinglows[N]=NULL) that measures the high/low price for a swing high/low and keeps it in two arrays, so you can easily check whether the current swing low (what you call a pivot low) is higher than the last one in the array. You can also do things like measure the distance of the current swing low to the N day low to establish the shallowness/depth of the pull-back.



> 1) First pullback - after a break of a *major/minor* trendline. (Horizontal or descending I assume). I'm going to ask you a probability question here Sinner. How frequently does a stock break from a trendline like you've described and not experience a pullback/retracement until partway through the completed emerging structure? What I mean is you may be looking for a pullback *that does not happen* early in the new trend, especially if the shorts unwind quickly.




Trendline? I dunno where you got that from. Unless you count an 'highest close in N days' to be a trendline setup. If I replace the word trendline with breakout in your question, the answer is about 30%.



> 2) This is a good one, easy to scan for, what are your inputs? 10/20 12/26 SMA?




For newbies sake, I would suggest using 'logical' values for example the SMA of 1 week worth of prices (5 SMA) crossing the SMA of 1 months worth of prices (20 SMA). But this isn't realistic for me, I use adaptive techniques to get an aggregate short term signal independent of any particular parameter.



> 3) breakout of what exactly?




Highest close in N days. So a breakout of the N-1 day highest close. 



> 4) Last comment. Once again you've defined something that *might* be unique to yourself (and also might introduce a risk). You are willing to give up some potential profit for greater certainty. This has introduced the risk that the target moves so quickly that you emotionally assume that the horse has bolted. This is why it's important to ensure that our trigger is a defined one...so that we can test against it and have a degree of expectancy.




100% agree with what you say here, although I haven't 'defined' anything, simply suggesting that if your target is trades which "come down over a long period of time, that then *rapidly increases in price*" then use the mechanical setup which is most captures the most alpha off those trades. No point waiting for a pull-back on rapid price increases IMHO.


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## Sir Osisofliver (12 June 2012)

sinner said:


> It's not purely visual at all! Definitely possible to construct a trigger. I have a piece of code (IF low > low[1] AND low[1] < low[2] THEN curswinglow=low[1]; swinglows[N]=curswinglow ELSE swinglows[N]=NULL) that measures the high/low price for a swing high/low and keeps it in two arrays, so you can easily check whether the current swing low (what you call a pivot low) is higher than the last one in the array. You can also do things like measure the distance of the current swing low to the N day low to establish the shallowness/depth of the pull-back.




So the answer to that question is...yes I can construct a robust indicator from that. 




> Trendline? I dunno where you got that from. Unless you count an 'highest close in N days' to be a trendline setup. If I replace the word trendline with breakout in your question, the answer is about 30%.




Ahh I see what's going on. Without going into massive detail Sinner, there's some specific probability that is associated with fractal structures...certain types of trendlines confirm to fractal structures, (Multi-touch trend-lines) which give greater probability of outcome when broken. I assumed you meant that...my apologies for any confusion, I'm responding when I can get a break from doing other stuff. From what you've said then, you're simply looking at an increasing price movement, (which would appear at the change in trend point from a descending trend pattern. What's the advantage of using your metric as opposed to a Std Dev break? I assume you find it easier to scan for? 







> For newbies sake, I would suggest using 'logical' values for example the SMA of 1 week worth of prices (5 SMA) crossing the SMA of 1 months worth of prices (20 SMA). But this isn't realistic for me, I use adaptive techniques to get an aggregate short term signal independent of any particular parameter.




Hmm... I don't like to encourage the use of a bad indicator. Using a 5/20 SMA....not as good as using a cross period like a 12/26 SMA, precisely because a 12/26 doesn't correspond to a week/month. But hey, this is your system, *use what works for you!*


> Highest close in N days. So a breakout of the N-1 day highest close.



 Right, so you're creating a lagging signal that shows the change from the downward trend. Presumably you can then finetune the N value in your testing phase. I like it.







> 100% agree with what you say here, although I haven't 'defined' anything, simply suggesting that if your target is trades which "come down over a long period of time, that then *rapidly increases in price*" then use the mechanical setup which is most captures the most alpha off those trades. No point waiting for a pull-back on rapid price increases IMHO.




"...then it's probably safer"...to me at least, is an emotional "feel", not a statistical statement. It's something we need to be careful of and to make sure we challenge that kind of thinking.  To me it often *predefines* things emotionally, "Stocks that look like JBH are dogs", "It's probably safer to enter after x conditions". We're often correct, but the important thing to understand is why, or more importantly, why we got it wrong. From your comments above...you get it...and to me it's a trade-off between potential alpha and increased expectancy to determine where our system entry exists.

Cheers

Sir O


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## tech/a (12 June 2012)

Hi there.
Had a chance to read through " Stuff ".
I don't wish to add only that we are looking for a measurable set of conditions
So this can be tested.
It is not known whether the conditions chosen are indeed " correct " until placed into a formula which can be tested.

T/H has suggested a low volume rise could signal a change of sentiment.
Tech would suggest that Shorts would be un wound in selling volume not buying volume.
So I would expect any turn to com after some exhaustion of selling.
All of these hypothesis have to be tested against like stocks past data.

Experience has also shown me that prolonged down moves rarely " v " bottom and are likely to rally then fail once again.
Consolidation --- sideways tends to pre cursor sustained up moves.
Mean reversion in my experience works best in corrective up moves--- unless your adding or entering shorts.

In the end it will work or not in the formula tested.


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## Trembling Hand (12 June 2012)

tech/a said:


> Tech would suggest that Shorts would be un wound in selling volume not buying volume.



Yeah agree but I think we were looking for a short squeeze set up. That will clearly not happen when there is still sellers.


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## Sir Osisofliver (12 June 2012)

tech/a said:


> Hi there.
> Had a chance to read through " Stuff ".
> I don't wish to add only that we are looking for a measurable set of conditions
> So this can be tested.
> It is not known whether the conditions chosen are indeed " correct " until placed into a formula which can be tested.




Yup - ideally against a set of data that can support a statistical significance. Ie between 500 to 2000 data runs.



> T/H has suggested a low volume rise could signal a change of sentiment.
> Tech would suggest that Shorts would be un wound in selling volume not buying volume.
> So I would expect any turn to com after some exhaustion of selling.
> All of these hypothesis have to be tested against like stocks past data.




Yup but we know where to find that data.







> Experience has also shown me that prolonged down moves rarely " v " bottom and are likely to rally then fail once again.
> Consolidation --- sideways tends to pre cursor sustained up moves.




A few questions for you on the above.
Rally then fail. Is the rally worth it? IE does the rally give us a beneficial win/loss with *a high expectancy?*

I've shown in your thread one of the things I do in relation to Hard pivots and Soft pivots to manage ongoing trade positions. At the moment in this system we've spoken about what we are looking for, what we might measure it against, what we might use to trigger...but we're yet to discuss under what conditions we will *exit*.

So we have the situation where a change in trend has occurred (albeit from a descending one to a neutral one) - what's our downside risk? Failure to result in a V pattern emerging means what to our bottom line?







> Mean reversion in my experience works best in corrective up moves--- unless your adding or entering shorts.
> 
> In the end it will work or not in the formula tested.




Want to give the Chart the Tech/A onceover?

Cheers

Sir O


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## sinner (12 June 2012)

Sir Osisofliver said:


> From what you've said then, you're simply looking at an increasing price movement, (which would appear at the change in trend point from a descending trend pattern. What's the advantage of using your metric as opposed to a Std Dev break? I assume you find it easier to scan for?




Simplicity is not a substitute for robustness but often an ingredient of it. I'm not discussing here what I use in my own systems, rather the simple and robust concepts which are easy to test, with a goal of keeping the discussion inclusive.



> Hmm... I don't like to encourage the use of a bad indicator. Using a 5/20 SMA....not as good as using a cross period like a 12/26 SMA, precisely because a 12/26 doesn't correspond to a week/month. But hey, this is your system, *use what works for you!*




Like I highlighted in red, 5/20 is only an example! The suggestion was not 5/20 specifically, but to use 'logical' parameters (*e.g.* ones that correspond to a larger unit of time) as a starting point to convert a trading statement into code. You've given 12/26, if this is a robust signal then you'd expect similar performance from a "two week avg/five week avg" crossover, right? 



> Right, so you're creating a lagging signal that shows the change from the downward trend. Presumably you can then finetune the N value in your testing phase. I like it.




Personally, I *don't* use a fine-tuned N, as my testing shows this is actually not the most robust signal. I use an adaptive N, or ranked aggregate of Ns, depending on the market and timeframe I'm measuring trend changes in. But yes, my trend signals lag.



> "...then it's probably safer"...to me at least, is an emotional "feel", not a statistical statement.




Yep fair enough. I might be getting hung up on "rapid increase in prices" thing.


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## Sir Osisofliver (13 June 2012)

Hi All,

Will be a very busy day for me today - lots of stuff happening - and I won't have a chance to look at the thread until late this afternoon.

In post 627 I asked a number of questions about our measurement tools that we will use in the system. We need to have a definitive set of rules...would someone please have a go and post their interpretation of the rules set. For each rule provide *justification.* (this is so that if any adjustment to our rules occurs, we can look to see what our original justification was instead of wondering...why did I do that?).

This needs to occur before we move onto *Entry trigger*, which we have already put some thought into. We need to define *and rank* our entry criteria.

Cheers

Sir O


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## Sir Osisofliver (13 June 2012)

sinner said:


> Like I highlighted in red, 5/20 is only an example! The suggestion was not 5/20 specifically, but to use 'logical' parameters (*e.g.* ones that correspond to a larger unit of time) as a starting point to convert a trading statement into code. You've given 12/26, if this is a robust signal then you'd expect similar performance from a "two week avg/five week avg" crossover, right?




Yup very similar.







> Personally, I *don't* use a fine-tuned N, as my testing shows this is actually not the most robust signal. I use an adaptive N, or ranked aggregate of Ns, depending on the market and timeframe I'm measuring trend changes in. But yes, my trend signals lag.




Sounds intriguing - would you be willing to share and discuss?


Cheers

Sir O


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## burglar (13 June 2012)

Sir Osisofliver said:


> Hmm... I don't like to encourage the use of a bad indicator. Using a 5/20 SMA....not as good as using a cross period like a 12/26 SMA, precisely because a 12/26 doesn't correspond to a week/month. ...
> 
> Cheers
> 
> Sir O




I can see what you are saying here 
(about a crossing over of a short trend indicator and a long term indicator)
but I cannot see what it is you are trying to avoid by the finnessing!


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## tech/a (13 June 2012)

burglar said:


> I can see what you are saying here
> (about a crossing over of a short trend indicator and a long term indicator)
> but I cannot see what it is you are trying to avoid by the finnessing!




Agree
The M/A is hardly going to move with the "finnessing"


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## tech/a (13 June 2012)

Sir Osisofliver said:


> A few questions for you on the above.
> Rally then fail. Is the rally worth it? IE does the rally give us a beneficial win/loss with *a high expectancy?*




Not normally a quick check of this chart will show you that the surges to the upside have been a day or 2 at best---come and gone before you see it.



> I've shown in your thread one of the things I do in relation to Hard pivots and Soft pivots to manage ongoing trade positions. At the moment in this system we've spoken about what we are looking for, what we might measure it against, what we might use to trigger...but we're yet to discuss under what conditions we will *exit*.




Need to look closer and then comment.



> So we have the situation where a change in trend has occurred (albeit from a descending one to a neutral one) - what's our downside risk? Failure to result in a V pattern emerging means what to our bottom line?




This is unknown until we get some structure in the consolidation.
It is a little known chartist art---reading consolidation. If you read it correctly you can place yourself in front of a positive move. read it wrong and at best youll be stuck in a sideways move or worse cop a loss.



> Want to give the Chart the Tech/A onceover?




A techical summary OR
A look at those points I have raised relative to the chart
OR
Ill bet BOTH!


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## Sir Osisofliver (13 June 2012)

burglar said:


> I can see what you are saying here
> (about a crossing over of a short trend indicator and a long term indicator)
> but I cannot see what it is you are trying to avoid by the finnessing!







5/20 SMA corresponds to a weekly/monthly...and there is slightly greater volatility in the Australian Market at the beginning of the week as we react to overseas markets.  End of month is simliar for similar reasons. By making an indicator that is across that natural time period you smooth out this slight volatility. 12/26 on a weekly chart. IME it's just a more stable time period to use.

You could just as easily make it a 6/14 where you wanted a more nimble crossover. Or a 3 minute 8 minute on a minute chart. 

It makes bugger all difference really...but small differences in the short term become big differences in the long term.

Cheers

Sir O


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## Trembling Hand (13 June 2012)

I just never get the idea of two MA crosses. What the F are you trying to do? 

Does it come from some stupid idea that after a certain move you have "confirmation"? Becuase everything i know about trading is waiting = larger stops, smaller winners; therfore no profit.

If you want a MA as a signal why not just use price crossing *one *MA?

Has anyone EVER made a system work with MA crosses?


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## tech/a (13 June 2012)

Trembling Hand said:


> I just never get the idea of two MA crosses. What the F are you trying to do?
> 
> Does it come from some stupid idea that after a certain move you have "confirmation"? Becuase everything i know about trading is waiting = larger stops, smaller winners; therfore no profit.
> 
> ...





I dont know of one with a crossing of an M/A as a stand alone system.

But used as an adjunct they can be useful.
I have used a price cross of a 180 day EMA as a successful exit criteria.
I also have as part of an entry criteria that price must be above a 40 day ema.

Short term forget it.
Working just on the bars and volume best.


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## burglar (13 June 2012)

Sir Osisofliver said:


> ... there is slightly greater volatility in the Australian Market at the beginning of the week as we react to overseas markets.  End of month is simliar ...
> 
> Cheers
> 
> Sir O




Clear!


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## Joules MM1 (13 June 2012)

no disrespect to the OP.....

2c worth on this

theory threads always interest me mostly cause theyre about confidence, mostly m/a's and similar ideas are about confidence to take transactions and with less work, a kinda short-cut.......they tend to say upfront, i dont know what's going on so i'll use something external to price, afterall, all the information you need is always going to exist in price, price doesnt lag anything, doesnt present itself in guise unless the traders at that time decide to trade to set-up a scene for the weaker trader or to attract stronger trade flow in their direction and sometimes trade is just flowing......you can call all those things; volatility, consolidation and trend.....

think about this; if you use a m/a or a m/a xover to enter and then refer to the price bars and then use the same or different m/a to exit what was the point in looking at the bars in between? then, inversely, you could simply use the bars to enter and to exit, , the extraneous nature of m/a's is aloof to the information within the bars because theyre historic......and we know that m/a's get proven in hindsight because of the changing game in price even if the instrument is the same, new liquidity (sell or buy) changes the personality of pricing leading to statistical black spots which is another reason traders attempt to box price discovery with an ideal m/a or m/a xover to get less triggers and smoother results and what they get is a watered down version of business.... business is limited to (and eroded by) looking adrift to a m/a and not finding the cause of price movement

there's nothing wrong with using m/a xovers as such if youre willing to settle for much less of a positive result and you are prepared to be totally disciplined to the message within the regime of m/a's......it's a lot of hard work for lesser results........youre also giving permission to extraneous stuff to distract from what's really going on in the price.....m/a's do not ask you to think of who is present in the trade as it is happening and serve to leave feeling educated and confident you can be hit with minimal downside and abundant upside - that is, until they dont and then the trader goes full circle figuring out which m/a's are going to work in which phase of play and to know which phase of play you have to watch ......price

at the end of the conversation this one thing must be true and is a good stepping stone to education, anything outside of price that attempts to summarise and give a cause and effect way to trigger is also an avoidance of finding the knowledge required to transact price in the present with understanding

m/a's and m/a's xovers are clearly about loose ideas of likelyhood.....they do not tell a trader when liquidity has changed hence multiple crosses erode capital and  i suspect a lot more times this has happened than people let on because far more often i read the same sentences such as "i once used" or "i used to use" which implies the m/a's or xovers have been abandoned even if it's only due to the frustrating work involved for the limited upside outcome......

the thing is; you cannot imperically say in the present that a m/a xover is going to work at the time you decide to pull the trigger......there cannot be any proof because you and price  are in the present and the m/a is not

if there were a solid EA based, on a m/a xover, that could be used and not have to be jigged for every phase of play, then you'd know by now because someone would advertise the equity curve and you could test it 

back to the confidence thing; if your business gets eroded by elusive m/a's or xovers then how do you go from that to a stage of understanding what's going on inside price itself......

this is a newbie thread so i hope this pos makes a difference in how you might approach the whole gambit....very rarely could you make a case that a m/a or xover effects price, so, if that's true wouldnt you gain more by thinking about what is effecting price right now and proceed from that pov?



edit

price is always present and m/a's are always lagging, that must imply that you, the trader, is the forward looking indicator......you need to be one-step ahead in the planning stage, you are trading the next price level, you are not trading the last price level......even if price retreats to a previous level, wherever price goes to, you are trading that level and within that thinking resides the information you need, at least, there is information available for you to use that a m/a cannot give you and you retain control of the decision to trigger a trade rather than be imprisoned by the lack of information within a m/a


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## burglar (13 June 2012)

Joules MM1 said:


> ... this is a newbie thread ...




Wow!

I am not trying to trade on this info.
Just trying to gain some insight!!


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## sinner (14 June 2012)

Trembling Hand said:


> I just never get the idea of two MA crosses. What the F are you trying to do?




Again, it was only an example. But from a momentum perspective which you can either fade at the 'tail' or follow from the mean, what you're trying to do (in this case) is to follow from an aggregate mean.



> Does it come from some stupid idea that after a certain move you have "confirmation"? Becuase everything i know about trading is waiting = larger stops, smaller winners; therfore no profit.




The idea is to smooth out volatility in the time-series. If you run a simple MA trading strategy you can generally see that it successfully reduces volatility in the returns compared to buy and hold. Using MAs to do more than just smooth volatility (i.e. generate alpha) requires an understanding of how volatility effects the nature of returns in the market you're trading.



> If you want a MA as a signal why not just use price crossing *one *MA?




Nothing wrong with that, but a trader generating a 'channel' of average prices (using multiple MAs/envelopes/bands/highs&lows) will be exploiting hysteresis in the time-series, it's not exactly the same thing as purely 'following' from the mean.



> Has anyone EVER made a system work with MA crosses?




Yes. Ever bothered to look? Plenty of papers in journals and analysis in the blogosphere by respectable quants on the topic. Like I said, unless you think averaging the price will make you profit then it's about understanding how vol affects returns in your market(s). I use MA cross in two trading systems, one fades and one follows their respective cross.


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## burglar (14 June 2012)

sinner said:


> ... exploiting hysteresis in the time-series ...




Not to be confused with Hysteria. (lol)
Hysteresis is the dependence of a system not only on its
current environment but also on its past environment.

Getting back to it:

What I think we are doing here is ironing out the wrinkles 
in the Share Price Action so that the trend becomes 
sufficiently clear to avoid entering prematurely.


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## burglar (14 June 2012)

Joules MM1 said:


> ... price is always present and m/a's are always lagging, that must imply that you, the trader, is the forward looking indicator...... ...




So when the Black-Sholes calculator stops working, 
(due to excessive volatility) 
the trader reverts back to gut feeling.


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## tech/a (14 June 2012)

burglar said:


> Not to be confused with Hysteria. (lol)
> Hysteresis is the dependence of a system not only on its
> current environment but also on its past environment.
> 
> ...




The key is 
In a bull market ANYTHING " works "

In more challenging market analysis needs 
To be at the coal face.


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## Trembling Hand (14 June 2012)

sinner said:


> Yes. Ever bothered to look? Plenty of papers in journals and analysis in the blogosphere by respectable quants on the topic.




Bahahahahahah  :bad:


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## Trembling Hand (14 June 2012)

tech/a said:


> The key is
> In a bull market ANYTHING " works "
> 
> In more challenging market analysis needs
> To be at the coal face.




There ya go. That pretty much sums up my thoughts about them too. That being; a MA crosses is probably slightly more effective as the dart board come bullish periods. The other 60% they will have you chopped to bits.

But it still doesn't make sense why if you thought a MA has some effect to smooth out volatility OR as a trend channel why not just use one? To me its like having a chart with 3 indicators in the false sense that more is better, in effect what you will end up doing is having to wait LONGER for all indicators to give a signal in the false sense that that is confirmation. But there is no such thing as confirmation.


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## tech/a (14 June 2012)

Trembling Hand said:


> But it still doesn't make sense why if you thought a MA has some effect to smooth out volatility OR as a trend channel why not just use one? To me its like having a chart with 3 indicators in the false sense that more is better, in effect what you will end up doing is having to wait LONGER for all indicators to give a signal in the false sense that that is confirmation. But there is no such thing as confirmation.




If anything it helps with a visual but as stated just made up of past Closes--highs or lows etc.

Many newbs fill charts with indicators all telling them the same thing. Understanding how an indicator is calculated *should* help users understand how best to apply it----if at all.

Using indicators in systems is entirely different as their continued use over a broad data base can be measured and evaluated.


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## sinner (14 June 2012)

Trembling Hand said:


> Bahahahahahah  :bad:




Rude.



> But it still doesn't make sense why if you thought a MA has some effect to smooth out volatility OR as a trend channel why not just use one? To me its like having a chart with 3 indicators in the false sense that more is better, in effect what you will end up doing is having to wait LONGER for all indicators to give a signal in the false sense that that is confirmation. But there is no such thing as confirmation.




The reason to use more than one is to aggregate signals to take advantage of the fractal nature of price/time (otherwise you suffer from a narrow parameter set, i.e. you better pick the right parameter) and exploit hysteresis...

I don't know why you keep harping on about 'confirmation'. You're the only one who's even mentioned it.

Dunno if you've ever been to Jez Liberty's blog but he tracks simple automated trend following systems. Which have largely been flat/poor this year, but performed quite strongly last month. He's also taken the concept you deride to it's maximum and created a composite trend following index from all the systems.

http://www.automated-trading-system.com/state-of-trend-following-in-may/

Down the bottom is a link showing the systems (which include a few MA cross systems) going back 20 years across a basket of futs. YTD return for 10-20MA system is 17% and 10-20-50MA system is 26%. YTD for the 50-200MA system is -9%, for the 20-50-200 its 6.8%. Across a basket of over 50 instruments. I guess they must all be in a bull market....


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## Trembling Hand (14 June 2012)

sinner said:


> Rude.
> 
> Down the bottom is a link showing the systems (which include a few MA cross systems) going back 20 years across a basket of futs. YTD return for 10-20MA system is 17% and 10-20-50MA system is 26%. YTD for the 50-200MA system is -9%, for the 20-50-200 its 6.8%. Across a basket of over 50 instruments. I guess they must all be in a bull market....




Thats my point. Is that the best, a dude who makes money from adsense banners on a blog.

And BACKTESTS a system he doesn't trade!!


> All the systems were *tested *with the same simple position sizing rules of 1% per new trade. No other Money/Risk Management rules were used. No trade friction (slippage or commission) was applied. No return on margin is added to the system performance



What about someone who actually makes REAL money from a MA cross consistently?


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## Joules MM1 (14 June 2012)

burglar said:


> So when the Black-Sholes calculator stops working,
> (due to excessive volatility)
> the trader reverts back to gut feeling.




no......what youve just said is the trader reverts to throwing their hands in the air and saying (correctly) 



> I don't know what's going on!




if the trader admits they dont know what's going on at that point they'll stop reaching for the nearest crutch and actually search for the right questions rather than all this techno-babble

sometimes i need to step back and ask about the auction in front of me, the current play by the people who are trading now, in the present........you are involved in a simple auction process not a complicated lingo-istic jibba jabba fest......

the sentence 







> I don't know what's going on!



 is the sentence that makes you do nothing or exit.....simple actions that are based on the truth of your thinking, no hiding behind gobbledygook stuff

historic science does not effect current price the way most people want it to and where (argued) it does the measure used is usually way off base because the basis of the measure in use is incongruent to current pricing

price is the measure of supply and demand at the time you see it, in the present.....looking at a 8/15 whatever filter you have distorted the current supply/demand picture to suit rather than attempting to understand the current auction phase........


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## Boggo (14 June 2012)

tech/a said:


> I dont know of one with a crossing of an M/A as a stand alone system.
> 
> *But used as an adjunct they can be useful.*
> I have used a price cross of a 180 day EMA as a successful exit criteria.
> ...




Three chart examples of a simple heads display up that seems to work best on weekly charts.
Basically two closes (the last one higher than the first) above an upward trending 34 EMA, the exit is the reverse regardless of EMA direction.
The bottom chart (PRU) is a current heads up this week.

Just my 

(click to expand)


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## sinner (14 June 2012)

EDIT: Actually, nevermind. I'll rejoin the thread when it returns to being a discussion.


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## Trembling Hand (14 June 2012)

sinner said:


> Again, like I said, I use two different MA cross setup consistently in my real daily trading.




I bet they are not a SMA or even a normal EMA?


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## prawn_86 (14 June 2012)

Just a quick reminder that we might be getting a bit off topic from "Newbie Lessons". If members want to have a more detailed discussion about MA crosses and their viability in detail perhaps it is better off in a diferent thread?


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## sinner (14 June 2012)

Trembling Hand said:


> I bet they are not a SMA or even a normal EMA?




You lose your bet. SMA in one case and EMA in the other. I also use SMA of price and volatility as component in a few technical indicators. What do I win?


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## Trembling Hand (14 June 2012)

sinner said:


> You lose your bet. SMA in one case and EMA in the other. I also use SMA of price and volatility as component in a few technical indicators. What do I win?




Ok a beer   :alcohol:


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## mazzatelli (14 June 2012)

Only MA crossover system I've seen that works is MA on index vs. MA on custom high beta tracker against the index, though it did exhibit potential large draw-downs every now and then. 

Bit different to MA crossover of different lengths on the one [insert stock/index here]


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## timestwo (15 June 2012)

anyone have some tips on what the best way is to calculate the net worth of a company? so you have the financials say total current assets and liabilities but if the liabilities are more than assets would that mean that the company is worth -ve dollars? how does this value then translate to calculating how much the share is worth for that particular company? thanks


----------



## Joules MM1 (15 June 2012)

timestwo said:


> anyone have some tips on what the best way is to calculate the net worth of a company? so you have the financials say total current assets and liabilities but if the liabilities are more than assets would that mean that the company is worth -ve dollars? how does this value then translate to calculating how much the share is worth for that particular company? thanks




.....look at the ability to repay debt, how many times interest can be covered from current earnings, what is the price to growth ratio, a company can have higher liabilities yet have much stronger earnings outlook.....the difference is the established liability versus it's projected ability to pay down those liabilities and not incur, or incur at a lower rate, the cost of producing income, the cost of operation plus any new capital outlays...on top of that what is the expected yield, if any......look at the stock on issue versus it's competitors and ask does the company have to go back to shareholders to raise capital, how many times has the company had to do this and what did they do with the funds, how likely or how deep does the capital raising dilute value ........have fun inside those balance sheets......

what's  the companies competitive edge within it's sector/industry, what are likely to be the future costs of investment by the company to stay with or ahead of the developments within it's own industry....

Fox Freeman use to have a good course on fast fundamental analysis....Peter Spann, ex check-out chick at woolies now multi something-aire in property and stocks


----------



## History Repeats (15 June 2012)

timestwo said:


> anyone have some tips on what the best way is to calculate the net worth of a company? so you have the financials say total current assets and liabilities but if the liabilities are more than assets would that mean that the company is worth -ve dollars? how does this value then translate to calculating how much the share is worth for that particular company? thanks




Always look at cash flow statement first. Source: my auditing class lecturer, former manager at big 4.


----------



## timestwo (15 June 2012)

thanks guys, so that's what fundamental analysis is all about, will have a read of this also (http://www.investopedia.com/university/fundamentalanalysis/#axzz1xq4m4ato) and hopefully come up with a quick summary so that i am able to analyse my own picks in the future


----------



## stu192 (24 June 2012)

So, getting back on topic - what's next SirO?


----------



## Sir Osisofliver (27 June 2012)

EOFY

With 30 June approaching I won't have time to devote to the newbie thread (and our latest discussion on system design) until late next week at the earliest. I'm also going to take a few days rest whilst the school holidays are on.

Here's something to ponder however about the system. Talk about it amongst yourselves.  I mentioned it previously (back on page 32 I think) about the sorts of things we can scan and look for, and I asked for a ranking. One of them I mentioned was *news reports*. Both Tech and TH correctly stated the likelyhood that short volume would be unwound within the selling volume. If you've been tracjing the short positions in JBH, you'll notice that this is already occuring. *Without a triggering event* we are likely to see an extended sideways movement of price whilst the short positions unwind in the selling volume.  For a short squeeze set-up - we need something that will effectively dry up the present selling volume, leaving the short holders little choice but to close out positions and drive up the price.  

Here's something to think about.
1) We are approaching reporting season
2) Companies publish these reporting dates

Cheers

Sir O


----------



## glenmorangie (7 August 2012)

I have just acquired some shares given by my company, can I transfer them to my wife as she is a lower income earner than me and so reduce the tax that I pay on getting the shares?


----------



## Nooob (18 August 2012)

Hi everyone
I'm a new investor (not a trader yet).
I was busy reading 34 pages of information in the last 10 days (I was completely lost from page 30 to 34).
First of all thanks to everyone who contributed in this subject of helping newbies and I really appreciate your effort.

2nd is that after reading some of the posts about the floats and low quality shares circulating within the managed funds, I start to wonder where can I read the proper reviews on different hedge funds and FX manage funds to make sure that I'm not investing with crooks?

After all investors and traders are all part of the same food chain and we should be able to find a ground to trust and work with each other.
Note 1: I'm mostly interested in managed FX fund who are trust worthy and professional 
Note 2: this is not just a question for me and I'm almost sure that this is the question for every investor 

Thanks in advance for your reply


----------



## burglar (19 August 2012)

Nooob said:


> Hi everyone ...




Hi Nooob,
Welcome to ASF

I been in this game a long time and I don't even know what a "managed FX fund" is.
What I do know is that I manage my own funds ... I make my own mistakes!!


----------



## CanOz (19 August 2012)

Nooob said:


> Hi everyone
> I'm a new investor (not a trader yet).
> I was busy reading 34 pages of information in the last 10 days (I was completely lost from page 30 to 34).
> First of all thanks to everyone who contributed in this subject of helping newbies and I really appreciate your effort.
> ...




You might be interested in these guys....Everbank.

US based, currency account and CDs.

CanOz


----------



## sherlock (18 September 2012)

Agreed. good post


----------



## glen rosa (25 September 2012)

Thank you Sir O and others,
you've been incredibly generous with your time and wisdom.
I have ploughed through all 35 pages! and trawled the site generally. I now have just one question... I need some kind of tool to compare outcomes for an investment portfolio of stock property and cash. I have a small six figure sum, I till work, and the bank interest is dropping. Can anyone recommend a tool that will have all the things in it relevant to options (tax, deductiables, outgoings, income etc) - I am prepared to pay for it if necessary.
Thanks everyone.
GR


----------



## Preflight (6 October 2012)

I have just joined this forum and have read this entire thread over the last two nights. I'm sure I'll have to read it several more times to distil what is going to be useful to me as I enter the market. And probably several more times as my knowledge grows.

I have a lot of reading to do in other parts of this forum, and I'm sure I will have questions in time, but for now I just want to say THANK YOU!

I hope Sir O, Tech/A and the other generous experts (not to mention fellow newbies) will keep posting. I find the discussion around areas of disagreement as informative as the discussion around areas of agreement. This really has been fascinating. 

My hats off to you all!


----------



## oowl (16 October 2012)

Hi guys

I'm a new investor. I have some long term investments, but I'm looking to get into more short and medium term trades. I'm looking for information about the best resources. I know of a few popular websites, but its more about what specific sections to really concentrate on.. I find myself aimlessly browsing a few sites with no real direction.

What are some daily websites I can check for news, announcements, buy/sell/hold tips, industry spotlights/analysis/predictions, that are easy to follow, understand, and won't take me hours to read?

Is an online subscriber advisory service worth it? Things like Fool, Scott Pape's Barefoot Blueprint, etc.

Where can I find information about new floats, and experts' reviews/opinions on them?

Many thanks.


----------



## StevieY (15 November 2012)

oowl said:


> Hi guys
> 
> I'm a new investor. I have some long term investments, but I'm looking to get into more short and medium term trades. I'm looking for information about the best resources. I know of a few popular websites, but its more about what specific sections to really concentrate on.. I find myself aimlessly browsing a few sites with no real direction.
> 
> ...




Hi All,

Might be in the same boat with oowl. 

@oowl: I get some additional info from www.sharecafe.com.au.

Has  anyone one else go good websites for us newbies to have a look at? 

Thanks
Steve


----------



## dave1234 (21 November 2012)

Just read through all this over the past 24hrs. Brain hurts! Will have to go back over it a few times and keep following, have a lot of learning to do.


----------



## Russtafaerian (26 November 2012)

Thanks Sir O for the excellent thread - have enjoyed reading over this for quite a few hours this weekend and gleaned quite a lot of new knowledge and insights.

Unfortunately it did more into more advanced territory after about page 30 and I got somewhat lost. Not sure about others, but I am left with a sense that to really do this well, you essentially need to make a career out of it.

Perhaps fundamental analysis is more for me, aiming for longer term investing rather than trading - crossed with the new info I picked up from you about economic cycles, which I think makes sense, I will continue along this route, educating myself as much as possible as I go.

Do hope you will continue with the lessons though, as seems as shame it has trailed off since July this year.

Also thanks to the contributors!


----------



## Sir Osisofliver (30 November 2012)

Hi All,

Ok yes I have to say I have neglected this poor little thread.  Thank-you to everyone who continues to help the newbs with questions, during my extremely busy period.

@ Russ - Got a little lost around page 30......  ahh that's where we started talking about positional sizing methods...which I did feel was a bit advanced for newbies, but it *IS* important and someone asked for it.  We also started to talk about system building stuff.

Technical Analysis and System building is more advanced but is key to providing expectancy and long-term success. I'll try and provide another lesson after Xmas.

What does everyone want?

Sir O


----------



## Russtafaerian (2 December 2012)

Hi Sir O,

I think as newbies that we could look at more basic systems for picking shares - perhaps longer term, value focused. But that's just what I am thinking of working on at the moment. I think the way you and others worked on the system in this thread was interesting, but over my head unfortunately, hence getting quite lost.

Having said that, I'd never have thought of asking for the economic cycles lesson and that was definitely my favourite lesson thus far!

Glad you are considering sparking it up again!

Cheers,

Russ


----------



## WilkensOne (2 December 2012)

Russtafaerian said:


> Hi Sir O,
> 
> I think as newbies that we could look at more basic systems for picking shares




I would be interested in this too and strategies for finding shares to begin with, how do you begin your search for a share to investigate? (hopefully hasn't been covered earlier and I missed it)

Thanks,
Wilkens


----------



## Sir Osisofliver (3 December 2012)

Russtafaerian said:


> Hi Sir O,
> 
> I think as newbies that we could look at more basic systems for picking shares - perhaps longer term, value focused. But that's just what I am thinking of working on at the moment. I think the way you and others worked on the system in this thread was interesting, but over my head unfortunately, hence getting quite lost.
> 
> ...






WilkensOne said:


> I would be interested in this too and strategies for finding shares to begin with, how do you begin your search for a share to investigate? (hopefully hasn't been covered earlier and I missed it)
> 
> Thanks,
> Wilkens




Ok Value Investing is a pretty humongous topic. If you're interested in this kind of stuff go read up on Benjamin Graham, the concepts of Intrinsic Value (and why it's so often wrong), CAPM, Efficient Market Hypothesis. If you simply want to follow Warren Buffett's style there's an ok article on investopedia here. There's simply a tonne of resources on this area - don't get lost. I'd ask around for the best books others have read and read those.

I don't want this to turn into a Fundies Versus Techies thread, but I will say this.  There are great technical analysts and great fundamental analysts. Neither method is "better", because ultimately the usability of either method is determined by the individual. What I mean by that is there are two main schools of thought, Investment philosophy if you will.  I'm going to quote a philosopher here...points if you can identify who they are.

_"Do not deny the classical approach, simply as a reaction, or you will have created another pattern and trapped yourself there"_

_"Use only that which works, and take it from any place you can find it"._

I am predominantly technically orientated, because the technicals suit me better. What's going to suit you better? I have no idea - its your brain.  I suggest you get across as many different styles of investing as you can, and use what works for you. 

As far a value investing goes...this is what works for me. It's not necessarily going to work for you. I look for the ability to largely set and forget this portfolio. It gets a review in the form of about an hour every three months - otherwise I don't bother looking at it. It's not aligned for meteoric performance - just slow and steady returns with little time involvement.

I usually maintain a long-term portfolio between trough and peak of an economic cycle. As in I purchased shares that would deliver long-term appreciation in share prices and dividends yields across a target 8-9 year period. The last implementation of this strategy occurred between roughly November 2008 and June 2009 and used Leverage in the form of Margin Lending, geared at 50%.  No further leverage will occur, and during the economic cycle I use the dividends from the portfolio towards the margin loan. The margin loan in this way is self supporting. I do not need to put funds from outside the portfolio to cover the interest payments. With the changes in margin lending caused by Storm financial and the cowboys; Margin Lending now falls under a different piece of legislation than it did in the past. You will need to prove serviceability just like a home loan (and some will not accept the dividends generated by the portfolio to accomplish this).  It pissed me off greatly when in 2009 the margin lender I had been using since 2004 decided that I needed a directors guarantee on the portfolio. Told them to shove off and swapped my loan elsewhere.

From the 2000+ stocks on the market, 34 stocks were purchased, in a manner that weighted them according to the ASX100 index.

I'm coming back to this later - but a bit busy at present.

Cheers

Sir O


----------



## stevier95 (3 December 2012)

Sir Osisofliver said:


> I don't want this to turn into a Fundies Versus Techies thread, but I will say this.  There are great technical analysts and great fundamental analysts. Neither method is "better", because ultimately the usability of either method is determined by the individual. What I mean by that is there are two main schools of thought, Investment philosophy if you will.  I'm going to quote a philosopher here...points if you can identify who they are.
> 
> _"Do not deny the classical approach, simply as a reaction, or you will have created another pattern and trapped yourself there"_
> 
> _"Use only that which works, and take it from any place you can find it"._




Bruce Lee


----------



## WilkensOne (3 December 2012)

Sir Osisofliver said:


> I usually maintain a long-term portfolio between trough and peak of an economic cycle. As in I purchased shares that would deliver long-term appreciation in share prices and dividends yields across a target 8-9 year period.




Do many of the forum goers here maintain both a trading portfolio and long term portfolio alongside each other? I like the idea of having a trading portfolio I can generate income from where a percentage of the profits are transferred to the longterm portfolio.

Would enjoy some more experienced thoughts if available?

Wilkens


----------



## Russtafaerian (3 December 2012)

Thanks Sir O,

After reading heavily through these forums and the numerous debates/arguments on TA vs. FA, although I'm a set and forget type investor at the moment, I am tending toward learning about incorporating some basic TA in order to buy at a better price, if nothing else. 

No intention of being a day trader or investing anyone else's money - I am now starting to get serious, after relying on my father's stock suggestions for the past 10 years and building a portfolio of about 25K, which should really be worth about double that, had I been more involved in the process, watching and decisions made.

I've relied on other sources for valuations, but will read the items you mentioned to get a better understanding on how to do my own valuations which I think will help progress my investing skills quite a bit.

My plan for next year March onward is to shift over 4K a month from China (where I am working) into AUD and invest this as I go along when I find worthwhile companies - taking a 2-5 year view.

The benefit of being a non-resident is no capital gains tax on share profits, so now is really the time for me to take advantage of the tax situation aggressively, as I plan to be a non-resident for at least the next 10-15-20 years (38 at the moment).

Have been thinking of reading Benjamin Graham for a while, so will get onto that and try to get a firm grasp of the basics and write myself an investment plan, cherry picking what looks like it would fit into my way of thinking from macro down to micro.

My goal is to have a passive income that is enough to live on and a good million or so in investments by the time I am 50.

Thanks again for the advice!


----------



## Sir Osisofliver (4 December 2012)

stevier95 said:


> Bruce Lee




Steve wins a cookie.



WilkensOne said:


> Do many of the forum goers here maintain both a trading portfolio and long term portfolio alongside each other? I like the idea of having a trading portfolio I can generate income from where a percentage of the profits are transferred to the longterm portfolio.
> 
> Would enjoy some more experienced thoughts if available?
> 
> Wilkens




 I certainly do this, but I also don't ignore other asset classes. I use trading profits into Core Portfolio's of shares, non - core portfolio's of shares (I'll explain what I mean later), Residential and Commercial property and fixed interest investments, aligned to economic cycles. 

Non- core portfolio are stocks that I purchase with the intention to sell at the end of the economic cycle. They classically fall under the term of "growth" investing, so selecting stocks for capital gains rather than dividend stability.  You see with the share market cycle and value chain dynamics in the latter part of the share market cycle (9-12), the focus needs to move away from the "blue Chip" shares towards the medium and small cap space.  Whilst this space still has stand-out players at any stage of the cycle, during this window of opportunity that section of the market has a higher expectancy of return.


Ok there is more to come but won't be till this afternoon.

Cheers

Sir O


----------



## WilkensOne (4 December 2012)

Well from what you are saying I am glad I'm completing an economics unit at university soon to help understand this a bit better! Is a potential downside of moving money out of the trading account that you limit the capital available to generate more? I guess in a way it also forces you to lock in profits and maybe take a less volatile approach. 

Either way I'm looking forward to your explanation 

Wilkens


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## Sir Osisofliver (4 December 2012)

WilkensOne said:


> Well from what you are saying I am glad I'm completing an economics unit at university soon to help understand this a bit better! Is a potential downside of moving money out of the trading account that you limit the capital available to generate more? I guess in a way it also forces you to lock in profits and maybe take a less volatile approach.
> 
> Either way I'm looking forward to your explanation
> 
> Wilkens




Removing funds from the trading account..where it's an *active* investment style to core portfolio stocks...where it's a *passive* investment.  Of course I'm decreasing the ability of the trading portfolio to compound gains, but once trading portfolio's start to get large, you start having problems around liquidity and slippage. It's much easier to invest a $50,000 trading portfolio and maintain* consistency* than a $500,000 trading portfolio.  The major gain however is in the time it takes to monitor the non-core portfolio. The hard yards as it were is done on initial investment. Ideally the stock within the core portfolio will *never* be sold.  If I bought BHP at $8.00 (and I did) - why the hell would I ever sell it, even during the worst market correction? I'm better off to *protect* the holding and preserve that cost base...however BHP fulfills the characteristics I'm looking for in a core portfolio stock. 

*So what do I look for?* From my previous post - From the 2000+ stocks on the market, 34 stocks were purchased, in a manner that weighted them according to the ASX100 index. (This is where protection of the cost bases comes in, by weighting the portfolio to the ASX100 index I can purchase an Index put in a mature market to protect the cost base of the portfolio).

Now that's a pretty severe trimming process, so what's the deal? What's "core". Of course Core has to have some rules, but these are just simple rules to help me refine my analysis criteria. What does the space look like after I've applied some rules? (from memory about 67 stocks). It's my fundamental and technical analysis that trimmed this figure from 67 to 34 stocks.

*The Core Rules*

1) Classified as Large Cap (which means I'm really only looking within the ASX100 index to start with).  Anything outside of that isn't going to be a stock that will benefit from Value Chain Dynamics after a major correction. It's the movement created from this that tends to see the stock not be value destroying after a major correction in the wishy washy chaos that follows for a while.

2)  Minimum 10 year history. Basically this rule means I don't buy cowboys. I did own Babcock and Brown (got some in the float) but sold it at ~$25 (500% gain) - it was a non-core holding. This simple rule means that I don't tend to buy stocks that blow up because the company has already been through a correction event and knows what they have to do to survive.

3) Dividend stability measure. Because this is a geared strategy (albeit a positively geared one) the security of the dividend stream is very important. A core portfolio stock will be one in which the stock has a long history (10 years IE over an economic correction) of providing increasing dividends during this time. I'm not so much concerned with the yield of the stock at this time.  The portfolio needs to have a yield that returns a positive number after gearing...that is all. The nature of these companies means that the increasing dividends over the economic cycle mean that there is significant passive income by the end of the cycle.

That's the end of the rules.....and where the analysis starts.

Fundamental analysis - at this stage I tend to concentrate on debt and liquidity ratio's. Finance at this stage is tight, and likely to remain so for quite some time, so companies that are over extended will be in for some rough times ahead.  They will also lack the ability to be predatory in this environment, and the correction is an ideal time to purchase high quality assets at rock-bottom prices.  

liquidity ratio
Debt Ratio

I basically want to ensure that the the cash flows are relatively stable *over the longer term*. Not so concerned about shorter term fluctuations, but security of cash flow is important. EG something like CBA - very solid cash flows - big four bank etc.  

Once this process has trimmed down the list further I will then do Technical Analysis...here's an example...




This is CBA - which meets the above rules and had excellent fundamental ratio's.  The stock was well below my calculated instrinsic value...basically it was sentiment that drove the stock price so low... The horizontal blue line is my entry point. Note the Fib retracement of 100% of the range from '02, and the range into and out of the flag formation. 




Here it is now... Note that the stock returned to Pre-GFC levels much faster than the index...the effect of value chain dynamics...and the wishy washy chaos whilst the *dividend is still increasing*. Core portfolio stock characteristics.

Ok That's enough for today...I'll do non-core characteristics another time.

Cheers

Sir O


----------



## WilkensOne (4 December 2012)

Thanks Sir O,

I am finding this really informative, especially now that I am getting a better understanding of the more specific criteria that are used for stock selection. Can I ask, do you opt for a dividend payment or reinvest them back into the company, or does it come down to a case by case basis?

Earlier you were saying that you use multiple vehicles for investing, do you keep them completely separate or do you attempt to find ways which dividend payments cover the interest of on a loan or mortgage?

Cheers


----------



## Sir Osisofliver (5 December 2012)

WilkensOne said:


> Thanks Sir O,
> 
> I am finding this really informative, especially now that I am getting a better understanding of the more specific criteria that are used for stock selection. Can I ask, do you opt for a dividend payment or reinvest them back into the company, or does it come down to a case by case basis?




No DRP the dividends are used to cover the margin lending interest and pay down the loan amount... Because what's coming? The end of the cycle correction will mean that if the portfolio is too heavily geared I will suffer the risk of a margin call. My target is for a sub 25% LVR on the loan in a mature market. With a hedge in place I don't have to worry about a margin call on the portfolio with the LVR so low.

Think of it like a business. The dividends are my incoming revenue and the margin loan interest are my outgoings. I want to ensure that I have a robust cash flow in the business and to do so I will pay down debt.







> Earlier you were saying that you use multiple vehicles for investing, do you keep them completely separate or do you attempt to find ways which dividend payments cover the interest of on a loan or mortgage?
> 
> Cheers




They are separated by entities but I have the flexibility to manage the increasing equity between assets if I need to. That is significant borrowing capacity in the property and share portfolios.

Cheers 
Sir O


----------



## WilkensOne (5 December 2012)

Sir Osisofliver said:


> Think of it like a business.




As an investor looking to start out in investing and trading is it necessary to plan and create, for example a company to trade under when starting with a limited capital base? I know this isn't a blanket answer for everyone but in your opinion is it worthwhile creating the correct entity from the beginning?

Is the method that you use for picking long term shares similar for your short term trading shares. As my capital is limited at the moment I would like to start by learning a good trading foundation that can feed my investments as you described. Is there anything you could suggest to be mindful of when starting or some good techniques?

Thanks,
Wilkens


----------



## Sir Osisofliver (6 December 2012)

WilkensOne said:


> As an investor looking to start out in investing and trading is it necessary to plan and create, for example a company to trade under when starting with a limited capital base? I know this isn't a blanket answer for everyone but in your opinion is it worthwhile creating the correct entity from the beginning?




No is the short answer. It takes time to learn how to trade consistently and during this learning stage you want to have as few fixed costs as possible. The set up costs and ongoing audit requirements for trust and company entities mean that without sufficient starting capital it will be a major hindrance to compound growth in the portfolio. On e you hit the 100k mark then move to structures. YRMV if your trading is successful early. 







> Is the method that you use for picking long term shares similar for your short term trading shares. As my capital is limited at the moment I would like to start by learning a good trading foundation that can feed my investments as you described. Is there anything you could suggest to be mindful of when starting or some good techniques?
> 
> Thanks,
> Wilkens




No the methodology of the core and non-core portfolios have significant differences. I'm looking for different characteristics in the target space. The difference between this more passive style of investing and the activity trading is even more extreme.

Number one tip... Learn as much as you can and develop a plan.

Cheers
Sir O


----------



## WilkensOne (6 December 2012)

Thanks Sir O, I really appreciate your help.

I will keep reading some more technical analysis books and practice with some paper trading.

Look forward to more of your posts.

Wilkens


----------



## YMI (8 December 2012)

Hi, I read most (still reading) of the thread here and I just wanted to say that people who spend so much time putting all the knowledge together and share it with others for no other reason but to help improving someone else's life deserve the highest respect Some of it I knew already but some of it is new and helpful to me, overall it’s just marvelous. Thank you very much!

*The following is not supposed to be criticism, just my humble opinion.*



Sir Osisofliver said:


> ...by the age of 65
> 
> 38 will be deceased
> 38 will be living in poverty
> ...



Scary numbers although I think we can be grateful to live in OZ, just a guess but the number for living in poverty over in the US for example is probably more like 45. And changing that would be really difficult.



> ...ANYONE can retire very comfortable.



 Really, can they??
Wealth is not defined by the amount of money, it’s more defined by the amount of poverty. In other words, to get another one super rich you probably need 20 more exploited. If we all manage to raise our self-discipline, work harder and save more, it will most likely result in higher inflation and not increased wealth  That may sound depressing but it’s the way our system works after all.

Probably not the right place to say that but perhaps something to think about: If I find a 100 dollar bill on the ground and keep it, I am a thief. If a mine extracts tonnes of Gold out of the ground, they’re rich.


----------



## Julia (8 December 2012)

YMI said:


> Wealth is not defined by the amount of money, it’s more defined by the amount of poverty. In other words, to get another one super rich you probably need 20 more exploited. If we all manage to raise our self-discipline, work harder and save more, it will most likely result in higher inflation and not increased wealth  That may sound depressing but it’s the way our system works after all.
> 
> Probably not the right place to say that but perhaps something to think about: If I find a 100 dollar bill on the ground and keep it, I am a thief. If a mine extracts tonnes of Gold out of the ground, they’re rich.



As you say, this is probably not the place for this discussion, but it's an interesting topic and I'd like to read your expanded version of what you outline above.

We are in need of some new opinions.
Hope you'll start a new thread on wealth and its acquisition.


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## Sir Osisofliver (9 December 2012)

YMI said:


> Hi, I read most (still reading) of the thread here and I just wanted to say that people who spend so much time putting all the knowledge together and share it with others for no other reason but to help improving someone else's life deserve the highest respect Some of it I knew already but some of it is new and helpful to me, overall it’s just marvelous. Thank you very much!




You are welcome. Although I have neglected this thread at times I do enjoy helping others and passing on what I have learned.







> *The following is not supposed to be criticism, just my humble opinion.*
> 
> 
> Really, can they??
> ...




I truly do believe that.... But you'll note I didn't say super meage rich...I said comfortable. What the ATO defines as wealthy in retirement and just wealthy are different. Financial literacy is woefully inadequate for the vast majority of people I meet. I get far more people in their late 30's and early 40's who start to get apprehensions about their future than I do 20 something's. That loss of time is highly significant and it's only by educating the next generation that those numbers will be improved.

Cheers 
Sir O


----------



## bos1234 (13 December 2012)

Great thread! I went through your budgeting thread. Though I always remained 'positive' in my bank accountant, I can't believe how much I've spent on food alone in the year! I've just started to go through my yearly budget. These are two facts that I could NOT believe

Subway: $404.88
Mcdonalds: $282.20
total:  $687.08

These two amounts excludes the times I paid by cash, so it could easily be $100 or so more! 

Thanks again!

p.s. does anyone have an example budget sheet they have?


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## nev25 (14 January 2013)

Sorry for the Hijack
But I have a Newbie Lessons I need questions answered 

Ive read on here and else where about a minimum amount you need to trade
Some say $10,000 Some say more
I read with interest the thread A newbie with a grand
Now I know the ASX  insisted the first trade is $500 in value
I have also read to open an account with some brokers you have to deposits a minimum amount (some like IB is$10000)

So I Pose the Scenario

If I bought shares  say to the Value of $500 @ .027 = 18519 shares + $15 Brokerage (assuming)  =$515 cost
Now I am going to assume the shares increases to  0.30        
Therefore If I sell them all     18519 x .03 = $555.57 - $15 Brokerage  = $540.57

$540.57-$515=$25.57

Sounds like a good deal to me

So whats wrong with that

I hear you saying this guys an idiot not worth the hassles 
Explain to me why

Only one catch I can see (apart from the price not going up) is selling the shares
Ive has sell orders sitting there for weeks unfilled 
I can only assume no one wanted them as its not an automatic process as some would think


----------



## boofis (14 January 2013)

nev25 said:


> No I going to assume the shares increases to  0.30




The 'catch' seems to be rather essential in the whole scheme really.


----------



## nev25 (14 January 2013)

boofis said:


> The 'catch' seems to be rather essential in the whole scheme really.




Lost me


----------



## boofis (14 January 2013)

Well, you'll make $25 if the share price goes up, do the maths on what you stand to lose if the sp goes down.


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## tech/a (14 January 2013)

nev25 said:


> Lost me




Learn basic maths first.

Hint----decimal point!


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## nev25 (14 January 2013)

tech/a said:


> Learn basic maths first.
> 
> Hint----decimal point!




Oh sorry typo 
EXCUSE ME

should read .030


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## nev25 (14 January 2013)

boofis said:


> Well, you'll make $25 if the share price goes up, do the maths on what you stand to lose if the sp goes down.




But thats the same with any share 

If its a $500 parcel or a $500,000 parcel you still stand to lose if it goes down


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## CanOz (14 January 2013)

nev25 said:


> Sorry for the Hijack
> But I have a Newbie Lessons I need questions answered
> 
> Ive read on here and else where about a minimum amount you need to trade
> ...




The simplest way to think of this is that you should only ever risk 2% of your account on any one trade. If you only have a $1000.00 account then its only $20 to risk on each trade. That means that when you get stopped out your loss is no more than $20. That is going to either limit the amount of shares you can purchase or it will put you too close to the price action and you'll be stopped out with the normal 'noise' of the market. that's why you need a bigger account. 

You can go with risking a higher percentage than 2%, but your risk of ruin (risk of losing all the money) is higher.

You see, no matter how good you are at picking winners, you'll be lucky to be better than a coin toss. If however, your winners are three times bigger than your losers on average, then you can withstand a losing streak and you will survive to trade another day. 2% of your capital means you can lose 50 times in a row, that's ample room for survival.

The bigger the account the better and it totally depends on your system how big the account should be. This will determine frequency of trades which also in turn determines brokerage...

CanOz


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## burglar (14 January 2013)

nev25 said:


> ...
> $15 Brokerage
> $15 Brokerage
> ...
> $25.57




The broker is gonna love you, the tax man too.
If you borrow, you can add interest.

As you say it's good for you!


----------



## Julia (14 January 2013)

nev25 said:


> If I bought shares  say to the Value of $500 @ .027 = 18519 shares + $15 Brokerage (assuming)  =$515 cost
> Now I am going to assume the shares increases to  0.30
> Therefore If I sell them all     18519 x .03 = $555.57 - $15 Brokerage  = $540.57
> 
> ...



You would seriously go to all the trouble of buying and selling, doing the necessary paperwork, including it in your tax return, for $25???

And, as has been pointed out, where will you be if the price falls?



> Only one catch I can see (apart from the price not going up) is selling the shares
> Ive has sell orders sitting there for weeks unfilled
> I can only assume no one wanted them as its not an automatic process as some would think



It's not automatic if you choose something with low liquidity.  How are you going to feel if your sell order sits there day after day while the price falls and falls and falls and for pretty obvious reasons no one wants to buy them?


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## nev25 (15 January 2013)

Julia said:


> You would seriously go to all the trouble of buying and selling, doing the necessary paperwork, including it in your tax return, for $25???




Yes I would 
A hobby that makes money Fantastic

Wow its only an example



Julia said:


> And, as has been pointed out, where will you be if the price falls?
> 
> .  How are you going to feel if your sell order sits there day after day while the price falls and falls and falls and for pretty obvious reasons no one wants to buy them?




That could be asked with any stock
Could it not


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## nev25 (15 January 2013)

burglar said:


> The broker is gonna love you, the tax man too.
> If you borrow, you can add interest.
> !




Sorry 
Care to explain???


----------



## burglar (15 January 2013)

nev25 said:


> Sorry
> Care to explain???



If you borrow money from a bank, you can add bank interest to your costs.
And the bank manager will love you too!


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## nev25 (15 January 2013)

burglar said:


> If you borrow money from a bank, you can add bank interest to your costs.
> And the bank manager will love you too!




Borrow $515 from the bank I dont think so


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## Sir Osisofliver (23 January 2013)

Hi nev25,

Hope you are getting what you need from the forums.

Ok so as you have already said minimum marketable parcel is $500, but most brokers require a minimum account size which can vary.

How much is enough to start? I've seen a number of threads on the boards with that topic so here is my take.

When starting out and learning it has been my experience that it is the fixed costs which kill the newbies. This is what Burglar was talking about, your brokerage is a fixed cost to your transaction, win, lose or draw. That brokerage (and any other fixed cost such as data cost, software cost, etc) acts like a millstone around your neck. It's the same situation for professional fund managers, except their costs include things like rent, salary, advertising etc. If only roughly 20% of fund managers can out perform the index, can you see the difficulties inherent on the small scale? I read an article recently that a bunch of professional fund managers went up against a group of students, and a cat...the cat won. He chose his stock by playing with a mouse, and where it landed is what was invested. 

Someone mentioned the 2% rule (google it it's easy to find) which is a positional sizing method. Positional sizing is literally what we do to give us the greatest chance of succeeding. Even if we choose our stocks at random, (like a cat) if we maintain a stop loss (limit our downside risk), and invest the right amount via a positional sizing method, we are usually much better off.

The problem is that positional sizing methods require a reasonable sum to work effectively when you take the fixed costs into account. A starting point would be 10 to 15 thousand if you want to use this methodology. If you have less than that either save up or go looking for an outlying event, knowing your risk of ruin is high. It's what got me started.

Cheers

Sir O


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## Sunflower (24 January 2013)

First of all, thank you all for all the contribution.  I came across this forum in the attempt to improve my financial literacy.  Having read the thread from the first post to the last post, I can't help feeling that I have missed out on something in my understanding.  Maybe, some wise soul out there might be able to fill in the gaps:

(1) Indicators of the end of a cycle.  There were a few posts about some of the indicators to watch out for. I am trying to learn how to discern which part of the economic cycle we are in.  Where is the money going to flow? 

(2) Devising a system.  I really like the initial part of the discussion about strategies, turning an idea into a system.  I think I'm still missing the final step of actioning that system that was discussed.  Maybe, some insights into how experienced investors do this will be helpful.  I don't want nor expect to be given the tools, I just want to see how experienced investors do it so that I can devise my own system.

(3) I'm intrigued by the concept of diversification through different kind of portfolios e.g. Core/Non Core, Real estate (residential/commercial).  Something I would like to take with me on my investment journey.  Insights into how the experienced investors do it would be great.

Once again, thank you. 

Sunflower


----------



## Sir Osisofliver (1 February 2013)

Sunflower said:


> First of all, thank you all for all the contribution.  I came across this forum in the attempt to improve my financial literacy.  Having read the thread from the first post to the last post, I can't help feeling that I have missed out on something in my understanding.  Maybe, some wise soul out there might be able to fill in the gaps:




I'll see what I can do. 


> (1) Indicators of the end of a cycle.  There were a few posts about some of the indicators to watch out for. I am trying to learn how to discern which part of the economic cycle we are in.  Where is the money going to flow?




I could simply tell you the answer to that question, or I can make you work it out.  The first option is giving you a fish, the second teaches you to fish, and you know what they say about that. (wives enjoy husband free weekends  ) So what you need to look for are what influences the big picture? Some of the things you should be looking at are:  

*Interest rates.* Are they above long term averages or below? If you've not been under a rock...they are very low at present.  What do you think this means in terms of the economic cycle? The theory is that the economic cycle (as opposed to the share market cycle) ends with interest rates high, which then have to be cut to stimulate the economy out of recession (like what is happening in the US and Euro zones for a while now).

*Unemployment.* Do we have a tight labour market? IE low unemployment. This is a condition that exists at the end of the share market cycle, and generally lags a short period behind the share market fall (because of the effect on consumer confidence and demand). At present we do not have a tight labour market, although unemployment has been rising over the last couple of months, we are still below our GFC peak but above long term average levels.

*Commodity Prices.* What are they doing? Up or down? Since '05 the global commodities market underwent a significant change...China turned from being a net exporter to net importer of many resources. This has drastically affected the long-term averages of the commodity cycle. As a commodities driven economy Australia is in prime position to benefit from this over the longer term.

The average length of the Share Market cycle is 7.8 years, when did the latest cycle start? The above three should give you a fair idea of where we are.  Let me know what you think.



> (2) Devising a system.  I really like the initial part of the discussion about strategies, turning an idea into a system.  I think I'm still missing the final step of actioning that system that was discussed.  Maybe, some insights into how experienced investors do this will be helpful.  I don't want nor expect to be given the tools, I just want to see how experienced investors do it so that I can devise my own system.




Step 1. What are your strengths and weaknesses? Know thyself.... only use what works for *you.*
Step 2. What resources do you possess? Not just in terms of monetary resources. What time do you have to devote? What information and experiences can you draw upon? Etc
Step 3. What are you attempting to achieve? Have you written down your goals? Are they measurable and achievable? etc
Step 4. Now look at devising a system. Go look at what others have done...work from there.  Ensure that you put the ability to evaluate your progress into your system.



> (3) I'm intrigued by the concept of diversification through different kind of portfolios e.g. Core/Non Core, Real estate (residential/commercial).  Something I would like to take with me on my investment journey.  Insights into how the experienced investors do it would be great.
> 
> Once again, thank you.
> 
> Sunflower




You'll find that there is a good time to buy property....and then there is a bloody fantastic time to buy property...and that there are similar periods that exist across all assets. Each asset class has its time in the sun. You need to recognize when these periods of time exist and how to take advantage of them. If you've been reading these forums...you'll start to get an appreciation of when these time are.

I never seemed to get to non-core portfolio...if I get time (which I know I won't over the next several weeks), I'll write this up.

Cheers

Sir O


----------



## burglar (12 February 2013)

Yesterday JB Hi Fi rose 17%


----------



## Sir Osisofliver (12 February 2013)

Sir Osisofliver said:


> EOFY
> 
> With 30 June approaching I won't have time to devote to the newbie thread (and our latest discussion on system design) until late next week at the earliest. I'm also going to take a few days rest whilst the school holidays are on.
> 
> ...




Some would consider a +5 month position for a ~46% return a slow trade. I'm happy to be patient, to enjoy the short squeeze 

Of course you could have held it for significantly less time and achieved a 30% return as well.

Cheers

Sir O


----------



## Ridgydidge (19 February 2013)

Hi Guys, 

Just finished reading through this wealth of information. I am in awe of a guy who is willing to share his hard earned information for 5yrs now on this thread. I tip the hat at you in appreciation Sir O 

I would also like to thank all the other contributors to the thread… even tho some times over my head your input was interesting. I have just started to look into the share market as an option for investment and honestly did not believe it could get so technical. I am sure I am going to have to read through this again soon to pick up on the things that I missed, but for now I am having my first stab at paper trading on the ASX and will see how I fair… the truth is tho, atm that I can’t trade on the paper trading system the way I would like to trade once I dive in the deep end and have a crack at the real game. But, none the less , I will learn from the experience of sorting out how to pick my marks.

What I would like to do is put a theory I have in my head onto paper and let you guys pick it to pieces if you feel so inclined  lol.

Like I said, I learned a lot from this thread and currently hunting for the resources referred to so often through the banter that has made this read an enjoyable one. My idea is very simplistic (maybe too much so?) and totally hypothetical for now, but here we go…

Say I had a $100K investment portfolio (is it still a portfolio before you buy stocks?) and I would look through the given stockmarket that I was hoping to invest in (most likely would be an overseas exchange until I proved myself sustainable) for the “good news stories” of the day and trade $20K per stock found, looking for a gain of 2% or more before selling out (same day preferably). I would do this 5 times per day (that’s providing there were 5 good news stocks). Ahhh… I was taking notes, lol, I haven’t forgotten about the 2% Rule, so lets say that the $100K is just the portion of the Cool Mil I have that I am willing to risk on the market. The rest I have diversified into rentals, commercial building ect. That would get me in compliance with the 2%er right?

I am a realist ( A Million, yeah right!!! Lol), so I would like to make a reserved call and say that I would only earn 5% a week on my $100K… That’s still 5 Grand , good earning in my ledger. My assumption (if that’s not what I’ve already done so far) is that I would be able to make $130K profit in 6 months (AWSOME!!!) (26 trading weeks X 5G) and that’s without compounding. 

OK.. I know, I will have to pay for my transactions (Brokerage) and support the Swan Fund but it all still seems very worthwhile to me… that’s assuming that my idea works. So here’s your chance to pick my theory to pieces .. looking forward to your insight

Ridgydidge all the way


----------



## Assasin (19 February 2013)

Sounds fantastic,

Start as soon as you can, the market could do with an extra 100k to absorb into thin air.

Please, read , read and learn and when you think you are ready to begin, start the reading and learning process again.:1zhelp::1zhelp:


----------



## theinvestorguru (19 February 2013)

Sir Osisofliver said:


> Hi nev25,
> 
> Hope you are getting what you need from the forums.
> 
> ...




Hi Sir,

well written and explain your thoughts.

I am wondering, I am newbie, I did couple of books, and doing the stock game ASX200.
what do u think about paper trading vs playing with 2000-4000 that i m not worried to lose

thank you all for replying and joining this lovely forums.


----------



## wadesansom (18 April 2013)

Sir Osisofliver said:


> *Risk Management Techniques and Optimisation.* (Part 1)
> 
> OK Time for another secret:
> 
> ...




You say that an investment property (or two) is a better first purchase over a PPR... Can you please elaborate? I am aware I am reading this about 4 years down the track! 

FYI - I was tossing up between the two, I am 22 and bought an investment property first. So I had a lot of anticipation reading which you thought was better, and as happy as I was to have been on the good end of your advice... There was no explanation why.

Thanks, I hope you are still around to answer me.


----------



## KurwaJegoMac (23 April 2013)

I can see a couple of reasons why:

1. It is an income producing asset
2. You can claim tax deductions

Those two factors mean you can pay off an IP quicker than a PPOR (or at least make it cash flow positive). You can also then use your IP income to help pay off your PPOR.

Think about it this way; a PPOR and IP should have roughly the same capital gain (assuming similar factors like suburb, property type, etc). The main difference are tax benefits and income on an IP. Why would you want to plough money into a PPOR then since you'll get a lower overall return on your money?

Of course PPORs have intangible benefits (security, permanent roof over your head, etc) so its worth getting one when you can.


----------



## Sir Osisofliver (24 April 2013)

Sorry all for ignoring the thread for a while.. I've been busy and also taking some time off.



theinvestorguru said:


> Hi Sir,
> 
> well written and explain your thoughts.
> 
> ...




Guru - I find it depends on the person. For me, I do learn by paper trading, but you may or may not and I can't answer this because I don't know your brain. When I'm testing a new system, it's an exhaustive process (because I'm the sort of fellow who doesn't gamble - I take *calculated* risks). I generally data test first (use past market data to evaluate the system).  This allows me to do a large number of simulated trades across different market types and confirm positive expectancy of the system. 

I'll then paper trade using the current market. I usually want around 50 paper trades, trying to see if the live numbers match the previously created equity curve.  Next step is to use a small amount of funds (normally about 20-25k) and run the system for a few months. I usually get a slight degree of slippage at this point, but once again I'm testing for any major differences in expectancy from the previous data sets.

Finally I'll move an appropriate level of funds into the system, depending upon which instrument I'm trading and the level of liquidity. (IE equity trading doesn't have the same level of liquidity and significantly higher risks associated with slippage than say FX).



wadesansom said:


> You say that an investment property (or two) is a better first purchase over a PPR... Can you please elaborate? I am aware I am reading this about 4 years down the track!
> 
> FYI - I was tossing up between the two, I am 22 and bought an investment property first. So I had a lot of anticipation reading which you thought was better, and as happy as I was to have been on the good end of your advice... There was no explanation why.
> 
> Thanks, I hope you are still around to answer me.




Yup still here - just don't post every day like I used to 



KurwaJegoMac said:


> I can see a couple of reasons why:
> 
> 1. It is an income producing asset
> 2. You can claim tax deductions
> ...




Wade, KurwaJegoMac is entirely correct. I'd only add a couple of things.  Property in my view is a long-term investment; that is significantly more orientated towards capital growth than income. But it still provides an income above your employment income. You can trade property... but that holds risks just like share trading and I've never possessed the skills of a "Block" contestant to make it work for me.

For the first property purchase the IP is significantly better because of the taxation profile. Once that property (or two) is positively geared, it provides an income that you can use to support your PPOR purchase, otherwise you are likely to only have your employment income to support the loan for the PPOR. It also provides significant security to use for the loan (always a plus with the banks).


----------



## Sir Osisofliver (24 April 2013)

Time for an amendment...

Does everyone remember bank secret number 1 all the way back on page 2 in February '09?

Here it is again...

Bank Secret number 1.

Ok this is something that EVERY bank will do and by doing this will save you THOUSANDS. When you get a mortgage, they will ask how frequently you want to make payments. If you say monthly... 
they'll say 'No Problems" and continue.

If you say Fortnightly.... they'll say "no problems" and continue.

If you decide to pay fortnightly (AND YOU SHOULD), when you get your mortgage documents, if you are paying attention and haven't gone glassy-eyed from reading all the legalese, you will see that they will amortise your fortnightly payments across the year so that you pay exactly the same as someone paying monthly. You pay exactly the same over the course of a year.

Now ask yourself why would they do that? Go ahead - ask your bank manager (and remember that he'll use sales techniques against you) you probably won't get the REAL answer.... Here it is.

There is 52 weeks a year, 26 fortnights a year...but only 12 months. So by choosing to pay fortnightly (AND NOT AMORTISING THE PAYMENTS) you are in effect making 13 months of payments in a year. You are making EXTRA payments (even though the difference to you is about the cost of a cup of coffee every fortnight). 

By not amortising the fortnightly payments, over the course of a 30 year mortgage, you will make an additional 19 payments earlier than you would normally have done so, and save yourself...72 mortgage payments.

Wait 72??? How is that possible I hear you cry? Because when you start paying your mortgage - for the first decade or so when you make a payment, the largest portion of that payment is paying off the interest - not the principle. Extra payments reduce both the principle and interest portion of the loan - and hence you pay it off that much faster. Don't believe me? Go ahead ask your bank manager. I haven't found one yet who'll give me a straight answer - but they will all blush when they realize they have been caught out.

It's time for an amendment....

*Interest Rate Cycle*

If you've been keeping an eye on interest rate, you'll know that they are very low at the moment. 3% Reserve Bank Cash Rate.  When the Reserve Bank dropped interest rates during the GFC down to 3%, it was the lowest interest rate environment in Australia for 49 years.  I fixed some of my loans for five years back then and they are coming to the end of their fixing period.

So off I trot to fix my loans for another fives, whilst interest are back down to the same level.  It appears that the banks have decided that the half monthly payment every fortnight that I detail above is bad juju for the bank. (Of course it is, my objective is to pay as little interest as possible on the loan - and the bank's objective is that I pay the maximum).  So I'm usually pretty cautious about dealing with the banks because of that objective that the have.

So one of the things that the banks (I won't mention which one I was dealing with, but they will all be doing it), has done is to impose a limit on the amount of funds that can be paid over and above the agreed contract amount. A limit of $20,000, over the fixing period. Now this may not impact everyone, (after all you need to be able to afford that $20k extra), but $20k on even an average size loan of say $350k is really a pittance. If you pay more than this, they intend on adjusting the interest rate on the loan (via a bit of sneaky adjustment to do with margins that they give to clients for having the loan. It's taking away a benefit then rather than breaking a contracted rate.

Why are they doing this? To limit the number of additional payments that you make and push the interest paid back towards the amortised rate. Sneaky sneaky sneaky.

To combat this I had to take a fairly firm approach to the bank, and create a cocktail loan, one which has only a portion of the amount fixed rather than the whole amount. The remaining funds sit in a variable rate loan (with an offset account). You want to be putting the majority of the loan into the fixed portion and a smaller proportion into the variable loan. (Be careful here, the bank I was dealing with failed to tell me that where the variable portion is less than $100k, you lose that margin I was talking about above, pushing the interest rate higher). I bitched, moaned and complained about the lack of disclosure and adjusted the loan amounts so that there was $100,001 in the variable portion. The first *three* times the bank sent me the loan documents, they were wrong and blamed it on bank error. 

You want as little as possible in the variable account as the offset account and additional payments will pay this account down faster than the fixed account. (you still want to make additional payments in the fixed loan account - only up to the maximum - the $20,000 limit - and make these payments in the early part of the loan life - the earlier the better).

This will only apply if you choose to fix your loan amount. If it's all variable....what I wrote five years ago still applies.

Cheers 

Sir O


----------



## prawn_86 (24 April 2013)

Amazing stuff as always Sir Osis


----------



## VSntchr (24 April 2013)

A timely update as I have been reading through this great thread for the past couple days.

Looking at the economic cycle posts which were now 2 years ago is quite interesting. At the time of posting it was suggested that we were around 730 - 8 on the clock....

Its interesting to observe that interest rates have since fallen dramatically and shares have had their first major leg up from 4300ish to 5000. 
Keeping an eye on commodities, unemployment and o'seas reserve levels for further indication/confirmation.


Thanks Sir O for a great read!


----------



## Russtafaerian (30 April 2013)

*Searching for Data TIps*

Hi Everyone and thanks Sir O for the great info.

Not sure if the correct place to ask, so please let me know if I'm posting in the wrong place.

I'm wondering if anyone has any tips on where to find company information more easily. I've been working through places like E-Trade and company Annual Reports and find it a very tedious process - I know there are easier ways to do this.

Specifically, wonder if anyone has tips on where I can get this kind of information:

1. PE trends or annual block data for PE over time - aiming for a 10 year period ideally.

2. The same, but for industry/ASX 200 PE averages over time.

3. Other standard ratios over time (the annual reports only show 2 years data most of the time) I'd like to see 10 years of data - similar to what I've seen Morningstar can provide for US stocks. There is a site called 'Old School Value' which gets 10 years of data in table format - they charge for this, but it's sourced from Morningstar. Anywhere to get this for free in Australia? I can't believe the ASX does not collect this data from company reports and provide to investors - or even brokers such as E-Trade. Am I just not looking in the right places?

4. Number of shares outstanding - another number I'd like to see historical movements on if possible.

Any answers to these questions or advice on where others find data more conveniently would be very helpful - if there is another thread covering this somewhere - also appreciate a re-direct.

Thanks kindly to all!


----------



## bullhunter (1 June 2013)

Sir Osisofliver said:


> There is 52 weeks a year, 26 fortnights a year...but only 12 months. So by choosing to pay fortnightly (AND NOT AMORTISING THE PAYMENTS) you are in effect making 13 months of payments in a year. You are making EXTRA payments (even though the difference to you is about the cost of a cup of coffee every fortnight).




I'm not seeing how by paying a loan fortnightly you'll pay 13mths worth in a year. How is this extra months worth of payments achieved?

Forgive for my lack of understanding. But the maths isn't working out for me here. What am I missing here?





Ridgydidge said:


> I am a realist ( A Million, yeah right!!! Lol), so I would like to make a reserved call and say that I would only earn 5% a week on my $100K… That’s still 5 Grand , good earning in my ledger. My assumption (if that’s not what I’ve already done so far) is that I would be able to make $130K profit in 6 months (AWSOME!!!) (26 trading weeks X 5G) and that’s without compounding.




$130k in 12mths


----------



## burglar (1 June 2013)

bullhunter said:


> I'm not seeing how by paying a loan fortnightly you'll pay 13mths worth in a year. How is this extra months worth of payments achieved?
> 
> Forgive for my lack of understanding. But the maths isn't working out for me here. What am I missing here? ...




There is more than 2 fortnights in every month except February.


----------



## Rider (1 June 2013)

bullhunter said:


> I'm not seeing how by paying a loan fortnightly you'll pay 13mths worth in a year. How is this extra months worth of payments achieved?
> 
> Forgive for my lack of understanding. But the maths isn't working out for me here. What am I missing here?
> 
> ...




there are 28 days in a fortnight, how many days in each month? 30 or 31.... times the difference by 11. there is your extra payments


----------



## systematic (1 June 2013)

bullhunter said:


> I'm not seeing how by paying a loan fortnightly you'll pay 13mths worth in a year. How is this extra months worth of payments achieved?




What people mean here is when you take your monthly payment and divide in half (to pay each fortnight).
If you do that...you will make 26 (fortnightly) payments per year - which works out obviously to 13 monthly payments.


----------



## bullhunter (1 June 2013)

I see now thanks.


----------



## faddishworm (12 June 2013)

*Re: Newbie Lessons - All your questions answered - NCM market indicators*

Hey,

I am new, bought in with NCM at 16.4 a few months ago.

Obviously, it was a stern intro to the market for me with a huge fall to a 52week low of 11.4.

I keep analysing market factors like the AUS dollar falling (good since they are an exporter) - potential inflation due to the US printing money and Gold being used as a hedge. 

Since NCM was supposed to have low production costs I thought that gold prices wouldn't really hurt them unless under $1000/ounce

Given the gold price fluctuation, I also see the recent capital reductions and expenditure reduction as a good thing too.

So my question is: Am I totally on the wrong track, am I looking at the wrong things?

A 30+% drop is huge if the entire 30% can be attributed to bearish investors jumping ship because of negative press. How big an influence do entities like Morningstar have on these trends?

To me NCM at the moment screams buy, and those are the things I am reading into - am I missing the point? Is there some looming disaster about to send them plunging to 0?

Any advise would be great. Thanks.


----------



## ROE (12 June 2013)

*Re: Newbie Lessons - All your questions answered - NCM market indicators*



faddishworm said:


> Hey,
> 
> I am new, bought in with NCM at 16.4 a few months ago.
> 
> ...




Hang around longer you see any commodity business is a tough business, commodity price is unpredictable
and share price tend to follow commodity price...it makes worse if other factors come into play like high production cost, debt, delay etc..

it far easier to predict price of a pizza, a can of coke, a coffee and a MacDonald burger next year than price of iron ore or gold.

with that it hard to predict if the stock is cheap or not .... it's easier to predict something is cheap if you
have confident predicting its earning....

what gold price going to be next year? $1000? $1800? $800? but I can tell you with confident that a price of a coffee will be at least $3.30 and a Dominos pizza for $6-$8 with coupons etc...

sure everyone can have a go at them including multiple brokers but the chance of them being wrong is higher
than predicting WOW or RFG earning......

sometimes investing is just as simple as that ...go with something with reliable earning stream and you don't get surprise like NCM and if for some reason they crash you have a reasonable chance calling it cheap correct...


----------



## qldfrog (13 June 2013)

*Re: Newbie Lessons - All your questions answered - NCM market indicators*



faddishworm said:


> Hey,
> 
> 
> 
> Any advise would be great. Thanks.



we can not give advise but there are often specific conditions/factor on stocks.
Are you aware that NCM  (via the ex lihir it purchased) is exploiting a mine on an active volcano in PNG?
sooner or later {but that could be in a 1000 years) , the mine will go in flame.
If/when this happens, the share would disintegrate.
So, ON TOP OF the POG, global share market and AUD/US, you have another risk factor..
Probably not a stock to play without protection.
I would leave that specific one until you have more experience.
DYOR of course, 
PS I own some NCM : bought at 14.66 but protected by put options so my losses will be  limited to 11%, hard but able to live with


----------



## faddishworm (13 June 2013)

*Re: Newbie Lessons - All your questions answered - NCM market indicators*



qldfrog said:


> we can not give advise but there are often specific conditions/factor on stocks.
> Are you aware that NCM  (via the ex lihir it purchased) is exploiting a mine on an active volcano in PNG?
> sooner or later {but that could be in a 1000 years) , the mine will go in flame.
> If/when this happens, the share would disintegrate.
> ...




This is a good suggestion, I ended up buying a little bit more to consolidate - I am of the attitude that if It does go to 0 then I will write it off as a loss and probably end up with a capital gains tax break. I invested the money the same way I would if I put it onto a blackjack table, quite ok with losing it forever, although would prefer to earn something. So im def. not about to lose my entire life savings. And if I manage to learn something along the way then it wont all be for nothing.

With all the bad press around NCM I have a feeling it will be oversold down to about $10. Maybe a bit of a technical bounce will kick in and I will have an opportunity to get out at only a small 10% loss.

There might be an ace in the hole with a bit of subsidisation from PNG since they are worried losing their development will hurt the economy, although I am definitely not banking on that!


----------



## prawn_86 (13 June 2013)

Please move NCM discussion to the NCM thread. This thread is for Newbie lessons, if you have anything stock specific then please post in the appropriate area

Thanks


----------



## RWTj (3 July 2013)

I have a problem with my assignment on how to calculate franked and unfranked dividend.
My franked dividend received is $3,800. The unfranked dividend is $1,350.
I'm supposed to calculate the taxable income but only these two figures I'm not sure how to solve it.
Am I supposed to calculate franked dividend base on imputation credit (30/70) and unfranked base on marginal tax rate (30%)?
Thank you


----------



## KurwaJegoMac (3 July 2013)

RWTj said:


> I have a problem with my assignment on how to calculate franked and unfranked dividend.
> My franked dividend received is $3,800. The unfranked dividend is $1,350.
> I'm supposed to calculate the taxable income but only these two figures I'm not sure how to solve it.
> Am I supposed to calculate franked dividend base on imputation credit (30/70) and unfranked base on marginal tax rate (30%)?
> Thank you




Yes you're on the right track.

Remember, Franked dividend means tax has been paid on those dividends already, by the company issuing them, at the company tax rate (currently 30%). However you need to mark up the dividend to pre-tax to get a full view of  your tax liability.

So, in this case:

Franked dividend = $3,800

Pre-tax = $3,800/(1-0.3) = $5428.57

Adding together your unfranked = $5428.57 + $1350 = *$6778.57* <- this is your taxable income


----------



## curiost (8 July 2013)

Quick question for anyone out there willing to help: when you place a buy order on a stock through an online broker, where does the "market price" sit in terms of the stock's high and low of the day? Is it the price at the time you place the order? If you don't put market price on your order, what are the chances of you being able to buy less than market price? Is there ever a case where asking to buy at market price ends up with the order not going through?

Sorry that was a bit longer than expected.


----------



## kid hustlr (8 July 2013)

curiost said:


> Quick question for anyone out there willing to help: when you place a buy order on a stock through an online broker, where does the "market price" sit in terms of the stock's high and low of the day? Is it the price at the time you place the order? If you don't put market price on your order, what are the chances of you being able to buy less than market price? Is there ever a case where asking to buy at market price ends up with the order not going through?
> 
> Sorry that was a bit longer than expected.




If you say "at market" the broker will execute immediately at the current price.


----------



## Trembling Hand (8 July 2013)

kid hustlr said:


> If you say "at market" the broker will execute immediately at the current price.




No not really at the *current price* which is really the last price. At market will execute at the next lowest ask price, if a buy and bid for sells. If there is insufficient volume to fill your order it will execute the remaining volume at the next best ask price and so on untill its filled all the order volume.


----------



## skyQuake (8 July 2013)

If you're with IB or Bell Direct, note that the Market to Limit order is a bit different from a regular Mkt order:

A Market-to-Limit (MTL) order is submitted as a market order to execute at the current best market price. If the order is only partially filled, the remainder of the order is canceled and re-submitted as a limit order with the limit price equal to the price at which the filled portion of the order executed.


----------



## curiost (8 July 2013)

I'd be doing it with Commsec. I guess for a trending up stock it would be better to wait until the end of the day to put in an order?


----------



## KurwaJegoMac (8 July 2013)

curiost said:


> I'd be doing it with Commsec. I guess for a trending up stock it would be better to wait until the end of the day to put in an order?




Not necessarily. You might reach end of day and tomorrow the stock opens up 5%. The day after up another 5% and you're still sitting waiting for the perfect buy price.

The real question is, based on your timeframes/investing/trading strategies, is it better to risk missing a move for the sake of saving a couple of dollars?


----------



## curiost (14 July 2013)

Quick newbie question - what's the minimum amount of captial is needed for a noob to give stocks a go?  I'm going to paper trade for a while and then dip my toe in tentatively with real cash. I have a feeling say a weekly trading system would have a relatively high capital entry threshold. Any thoughts on what that should be?


----------



## jjbinks (15 July 2013)

curiost said:


> Quick newbie question - what's the minimum amount of captial is needed for a noob to give stocks a go?  I'm going to paper trade for a while and then dip my toe in tentatively with real cash. I have a feeling say a weekly trading system would have a relatively high capital entry threshold. Any thoughts on what that should be?




basically if you have small capital than brokerage eat into your gains. 
e.g. if you invest $2000 and brokerage is $20. you have already made a 1% loss. 

you can try estimate how much capital you need:

first you need an idea of how often you will be trading over time period x = multiply this by your broker 
then estimate how much % gain you will make over time period x 

then work out out how much capital you will need to make a profit above your brkerage.


----------



## GKLC (7 August 2013)

Hi all,

I'm new to the stock markets as well as this forum. Before I ask the question, here is some background information about myself. I'm a recent graduate with a Bachelor of Commerce and I have an avid interest in not only the stock markets but financial markets in general. Having said that, I have not actually conducted any trades as yet using my capital simply because I don't have that kind of money at the moment. I am interested in learning more about the stock market and getting more exposure possibly through one of the two following associations that are mentioned below. 

Question: Which one of the following would be better suited for someone like me? Any thoughts on why you would choose one over the other are welcome!

1) Australia Investor Association

2) Australian Shareholder Association

Many thanks for your replies in advance.


----------



## burglar (7 August 2013)

GKLC said:


> Any thoughts on why you would choose one over the other are welcome! ...




Hi GKLC,
Welcome to ASF,

What's wrong with right here?


----------



## Julia (7 August 2013)

GKLC said:


> Question: Which one of the following would be better suited for someone like me? Any thoughts on why you would choose one over the other are welcome!
> 
> 1) Australia Investor Association
> 
> ...



What are you looking for that is prompting you to consider either?


----------



## tech/a (7 August 2013)

Julia said:


> What are you looking for that is prompting you to consider either?




+1.


----------



## GKLC (8 August 2013)

burglar said:


> Hi GKLC,
> Welcome to ASF,
> 
> What's wrong with right here?




There's absolutely nothing wrong with right here, but like I said, I'm looking to broaden my exposure to the financial markets and joining one of the mentioned associations would certainly fast track me in that regard. It is simply another avenue which I could use to further my knowledge. I will be able to meet professionals, more experienced traders, attend their networking or information events, and utilise their resources. However, I'm not sure which one is better or more suitable to me which is why I asked the question


----------



## Trembling Hand (8 August 2013)

GKLC said:


> joining one of the mentioned associations would certainly fast track me in that regard.
> 
> I will be able to meet professionals, more experienced traders, attend their networking or information events, and utilise their resources. However, I'm not sure which one is better or more suitable to me which is why I asked the question




Not so sure about that. You are more likely to find a plate of cookies and a collection of lost punters.


----------



## GKLC (8 August 2013)

Julia said:


> What are you looking for that is prompting you to consider either?




Hi Julia,

Thanks for the question. I think I pretty much answered it in my other reply, so here it is:

"There's absolutely nothing wrong with right here, but like I said, I'm looking to broaden my exposure to the financial markets and joining one of the mentioned associations would certainly fast track me in that regard. It is simply another avenue which I could use to further my knowledge. I will be able to meet professionals, more experienced traders, attend their networking or information events, and utilise their resources. However, I'm not sure which one is better or more suitable to me which is why I asked the question"

- - - Updated - - -



Trembling Hand said:


> Not so sure about that. You are more likely to find a plate of cookies and a collection of lost punters.




Hmm. You could be right but it doesn't seem like you've had a first hand experience of cookies and lost punters, so you could be wrong too. Thanks for your opinion though!


----------



## Julia (8 August 2013)

GKLC said:


> "There's absolutely nothing wrong with right here, but like I said, I'm looking to broaden my exposure to the financial markets and joining one of the mentioned associations would certainly fast track me in that regard.



Maybe don't be so dismissive of Trembling Hand's comment.
I'm not sure why you believe joining either of the above mentioned associations would 'fast track' you.

eg The Australian Shareholders Assn. afaik, concerns itself with company failures, matters of governance etc which I doubt is especially relevant to someone with no capacity to actually buy anything yet.

You've just graduated and don't have the capital to invest, so perhaps investigate the many free alternatives like forums before you go paying $100 p.a. to any organisation which promises you untold expertise.

I note the AIA website says:


> Join the Australian Investors Association and you will receive a one month free trial to the Marcus Today Stockmarket Newsletter valued at $75 and a 15 day free trial to Intelligent Investor and 3 special email reports valued at $267.  Member benefits include a range of publications; access to the members online forum; access to AIA meetings and more.  One year AIA membership is $110 or two year membership is $190 plus a $20 joining fee.



I might be cynical but why would anyone offer you - for $110 - a newsletter '*valued at $75,'* plus a package '*valued at $267'*?    Most of these tip sheets will offer a free trial anyway, so you could approach them directly if you believe they contain the secret to success.

Perhaps contact the AIA and ask if you could attend one of their meetings.


> It is simply another avenue which I could use to further my knowledge. I will be able to meet professionals, more experienced traders, attend their networking or information events, and utilise their resources.



Sounds terrific, doesn't it.  I'm more inclined to agree with Trembling Hand's expectation of what you'd actually find.   
Good luck and let us know how you get on.


----------



## tech/a (8 August 2013)

> Hmm. You could be right but it doesn't seem like you've had a first hand experience of cookies and lost punters, so you could be wrong too. Thanks for your opinion though!




Nah
He's spot on.
Experienced traders and professionals don't hang out in and around Associations---they don't have/want to.
Wanna'bes on the other hand---sadly chances are you wont pick it!

Enjoy your cookies.


----------



## GKLC (8 August 2013)

Julia said:


> Maybe don't be so dismissive of Trembling Hand's comment.
> I'm not sure why you believe joining either of the above mentioned associations would 'fast track' you.
> 
> eg The Australian Shareholders Assn. afaik, concerns itself with company failures, matters of governance etc which I doubt is especially relevant to someone with no capacity to actually buy anything yet.
> ...




Hi Julia,

Thank you for your input. I will certainly take what you said under consideration. As you mentioned, I don't really have that much money to spend at the moment, so I'm just investigating pathways right now and have no intention on signing up any time soon. I put the question forward in this forum because if people are saying they're good than I'll sign up for one sooner than later, but I guess that's not the case!

- - - Updated - - -



tech/a said:


> Nah
> He's spot on.
> Experienced traders and professionals don't hang out in and around Associations---they don't have/want to.
> Wanna'bes on the other hand---sadly chances are you wont pick it!
> ...




Oh okay, that's probably true, thanks for advice!


----------



## havaiana (20 August 2013)

Anyone have any free resources for asx equity news/calendar?

Basically looking for any good resources assuming someone wanted to practice avoidance of news movements

When does earnings reporting start/end?


----------



## rrayne20009 (21 September 2013)

pls.suggest a good forex broker to start with.sorry but im a newbie


----------



## burglar (28 September 2013)

rrayne20009 said:


> pls.suggest a good forex broker to start with.sorry but im a newbie




Suggest use search facility with keyword "broker". Much info already there!


----------



## tom82 (14 October 2013)

NeuromanceR said:


> Yep, just the 04xxxxxxxx mobile number. No area code.




04 is the area code for mobiles.


----------



## Jamesantenna (16 October 2013)

Hi everyone,

Newbie here, as this is my first post, please be gentle. I am really interested in share trading but just don't know where to start. I understand charts to a degree. But other than trends etc how does one find a stock to buy? What makes a stock stand out amongst the rest? There is so many out there what makes for a good 20 for my watch list? I understand that good and bad stocks change all the time but what makes one better than the other.  Thanks in advance.

James


----------



## merlinnn (16 October 2013)

Jamesantenna said:


> Hi everyone,
> 
> Newbie here, as this is my first post, please be gentle. I am really interested in share trading but just don't know where to start. I understand charts to a degree. But other than trends etc how does one find a stock to buy? What makes a stock stand out amongst the rest? There is so many out there what makes for a good 20 for my watch list? I understand that good and bad stocks change all the time but what makes one better than the other.  Thanks in advance.
> 
> James




I would read the 39 pages on this thread, some great info for everyone to digest.


----------



## burglar (17 October 2013)

Jamesantenna said:


> ... What makes a stock stand out amongst the rest?




There are two camps, Herbivores and Predators!

You get to choose.


----------



## Trading Tools (26 October 2013)

theinvestorguru said:


> Hi Sir,
> well written and explain your thoughts.
> 
> I am wondering, I am newbie, I did couple of books, and doing the stock game ASX200.
> ...






Sir Osisofliver said:


> Guru - I find it depends on the person. For me, I do learn by paper trading, but you may or may not and I can't answer this because I don't know your brain. When I'm testing a new system, it's an exhaustive process (because I'm the sort of fellow who doesn't gamble - I take *calculated* risks). I generally data test first (use past market data to evaluate the system).  This allows me to do a large number of simulated trades across different market types and confirm positive expectancy of the system.
> 
> I'll then paper trade using the current market. I usually want around 50 paper trades, trying to see if the live numbers match the previously created equity curve.  Next step is to use a small amount of funds (normally about 20-25k) and run the system for a few months. I usually get a slight degree of slippage at this point, but once again I'm testing for any major differences in expectancy from the previous data sets.
> 
> ...




Just wanted to +1 the response given by Sir O and throw in my two cents worth with regard to the importance of truly having a system which shows positive expectancy (a positive edge).   

I believe many new traders can easily get caught in the trap of focusing more on their winning percentage (accuracy) or entry setups, rather than having a balanced approach to their overall trading system, thereby limiting their trading success. There are many aspects to successful trading which are equally important and must not be neglected, including risk/reward ratio, trade management, money management, etc.
Another critical, yet often overlooked aspect is, knowing the system you’re trading actually has a positive edge/positive expectancy over a large number of trades.   Expectancy ($ per trade) = (Win% x Ave Win) – (Loss% x Ave Loss)

Remember trading is an odds-based endeavour and traders are continually challenged by the prospect of making decisions in the face of uncertainty. As a trader, we must therefore place our trades based on a trading plan/system which has a proven edge (positive expectancy) over a large number of trades and we must learn to think in terms of probabilities.

If your trading plan does not show clear positive expectancy then no amount of trading psychology, or anything else for that matter, will help in the long run. 

_*Trade ONLY when you have an identifiable, proven positive edge!*_

Cheers


----------



## Sir Osisofliver (20 January 2014)

Hi All,

Been lurking for a while, so I thought I would drop in and have a chat.... so it's time for a lesson.

*When to get out??*

*Disclaimer:* This is NOT ADVICE. DYOR stands for DO YOUR OWN RESEARCH. You heard me. Don't make me break out the legalese.  I want this to be clean and I DON'T want to get Joe in trouble. This is a discussion about *characteristics* and *signals*.

OK so waaaayy back on page 31 I starting talking about how we go about designing a system or turning an idea into a profit. This was designed to show an idea (identifying a short squeeze), and showing the process of what variables we needed to think about to turn an idea into a profit. We got to the point of talking about entry signals and things like that....very important stuff...but until we sell something we don't have a profit or a loss. It's just a paper win or loss. Yet our exit can be be perhaps our most challenging decision sometimes...*because our emotions tend to get involved.* I don't want to sell because.... 

The trade

On page 32 (8th of June 2012), I identified JBH as a potential target for the system we were discussing demonstrating and invited commentary. Post #628 I threw a chart up and asked people's views...

The next few pages was a spirited discussion about the best kind of measurements and triggers for which to use.* I did not tell people when I entered the position. Or what my triggers were. DYOR at it's best.*

On the 12th of February 2013 post #725 pointed out that JBH rose 17% the previous day. At that point in time my profit was about 46%  *($8.96 entry)*.




*I'm no longer in the stock*

*Question: WHY AM I OUT?*

Last close is *$19.63.* @ $19.63 I have a 119% profit in the stock. At the share price peak ($23.13) I had 158% profit. (Assume my profit is somewhere between these two numbers..$19.63 and $23.13 having held the stock for roughly 14 months....) *(I'll tell you exactly where and why I got out later).*

- What am I hoping to do here....

a) Generate some discussion about the transaction. 
b) Demonstrate why exits are frequently misunderstood.

*Grabs a scotch and heads over to the side*

Will check back in later.

Cheers

Sir O


----------



## tech/a (20 January 2014)

Held for over 12 mths
Lower high
AUD coming off.

You have to replenish your scotch stocks.


----------



## Valued (20 January 2014)

I wouldn't hold for 14 months but if I did I would have exited at 20.50. At that point we are under the prior swing low and have stopped making higher lows which signals the end of the uptrend. It's just a general rule I go by. If for some reason I held I would be out right now due to the extremely high volume down bars and the fact we haven't made a higher high... meaning the end of the uptrend.

I would look at shorting this except there is something a little funny going on with the professional money on this one. One substantial holder dumped 200k shares then acquired 1 million more, indicating they might have been trying to drive the price down to buy more. Other professional groups became professional holders in late December, indicating there might be a level of support where they bought, if they are willing to buy more... if this drops under the 200 SMA the shorting opportunity will be golden in my very non-professional opinion (There is nothing special about the 200 SMA, but it just happens to be a bit below the price these professional groups bought in, so if they arn't going to stop the price falling no one will. It was just a useful marker that anyone can go look at).


----------



## burglar (21 January 2014)

Sir Osisofliver said:


> ... a) Generate some discussion about the transaction.  ...




My guess:
Entry: Mid September 2012. 
Exit: Mid November 2013 around $21.50.

Reason for exit ... falling below an arbitrary Maroon line on a chart. :


----------



## Sir Osisofliver (21 January 2014)

tech/a said:


> Held for over 12 mths
> Lower high
> AUD coming off.
> 
> You have to replenish your scotch stocks.




Tech you are the very definition of succinct 

Yes I held more than 12 months....this is relevant from a taxation perspective. As an active asset holding that asset more than 12 months means that I am entitled to a discount on the tax payable.

How relevant was this to my investment decision? EG if I had received an exit signal at 11 months and 20 days would I have immediately exited or hung around for ten days to get the discount?

Indeed there is a lower high in my chart...in fact on a daily time scale there are several that occur as the price moves up from my initial purchase...which one is relevant and more importantly why?

AUD is indeed falling...which will impact things both positively and negatively to the company, with negatively a higher probability.

As for the scotch supply...no, there was no opportunity cost issues or other investments or expenditure to make. I could have continued to hold had I wished.

Yet I chose not to.... Any other theories?

Cheers

Sir O


----------



## Sir Osisofliver (21 January 2014)

Valued said:


> I wouldn't hold for 14 months




May I ask why? 



> but if I did I would have exited at 20.50. At that point we are under the prior swing low and have stopped making higher lows which signals the end of the uptrend. It's just a general rule I go by. If for some reason I held I would be out right now due to the extremely high volume down bars and the fact we haven't made a higher high... meaning the end of the uptrend.




So in terms of the exit signals you would have used are based on price action and the formation of a lower high, lower low formation. As a secondary confirmation you'd use a low term moving average and some of the current volumetrics.

Sounds good....is it always that easy?

Cheers
Sir O


----------



## Sir Osisofliver (21 January 2014)

burglar said:


> My guess:
> Entry: Mid September 2012.
> Exit: Mid November 2013 around $21.50.
> 
> Reason for exit ... falling below an arbitrary Maroon line on a chart. :




Care to put that on a chart Burglar?

Cheers Sir O


----------



## burglar (21 January 2014)

Sir Osisofliver said:


> Care to put that on a chart Burglar?
> 
> Cheers Sir O




I had accepted your challenge!
I had put it on a chart.
Due to my computer being riddled by corrupted files I am unable to display it here!

The line I drew was a straight line touching lows of mid Feb2013, late Jun, late Jul and end Oct2013.
It did indeed, slice through a large red candle in mid Nov2013 at around $21.50

Cheers burglar


----------



## Valued (21 January 2014)

Sir Osisofliver said:


> May I ask why?
> 
> 
> 
> ...




For exit signals I use price action and volume. The moving average isn't that relevant. It just happened to fit nicely with around where I was talking about. It's not always that easy. For example, can you tell from price action and volume where where the market is starting to top out at the end of a bull run? Maybe it can be done or maybe it can't, but it's not as easy as keeping Dow's definition of a trend in your back pocket.

As for why I wouldn't hold for that long, I don't like money doing nothing for me and at risk. If a stock is in a side ways action I would exit and wait for the breakout. You may say this would reduce profit but my money could be doing other things while waiting. I would miss the initial surge from the breakout but I also wouldn't be holding through all the downswings. Some of those trading ranges lasted for months. That's months your money is not doing anything for you. You're actually losing money due to opportunity cost. Now we don't know they would have lasted for months but normally I would give up after a week of not seeing anything happen and come back to the stock later, especially since I would be using options a lot of the time for stocks that allow it. I can't afford time decay.


----------



## Sir Osisofliver (21 January 2014)

burglar said:


> I had accepted your challenge!
> I had put it on a chart.
> Due to my computer being riddled by corrupted files I am unable to display it here!
> 
> ...








Like this?

Cheers

Sir O


----------



## Sir Osisofliver (21 January 2014)

Valued said:


> For exit signals I use price action and volume.




Lets drill down on this comment Valued...why? Can you explain for me why *price action* is so important in your analysis rather than say...pattern analysis.....or the use of an indicator or three?




> For example, can you tell from price action and volume where where the market is starting to top out at the end of a bull run? Maybe it can be done or maybe it can't, but it's not as easy as keeping Dow's definition of a trend in your back pocket.




Who me? Uh it's been known to happen....but not because I've been looking at a technical chart *in isolation*. I look at a large number of factors to decide whether we are at the end of an economic cycle.







> As for why I wouldn't hold for that long, I don't like money doing nothing for me and *at risk*. If a stock is in a side ways action I would exit and wait for the breakout. You may say this would reduce profit but my money could be doing other things while waiting. I would miss the initial surge from the breakout but I also wouldn't be holding through all the downswings. Some of those trading ranges lasted for months. That's months your money is not doing anything for you. *You're actually losing money due to opportunity cost.* Now we don't know they would have lasted for months but normally I would give up after a week of not seeing anything happen and come back to the stock later, especially since I would be using options a lot of the time for stocks that allow it. I can't afford time decay.




OK a lot of the above has to do with your strategy....options orientated...short time scale... scary Greeks will get you if you hold too long ...but you've mentioned a couple of things I highlighted...risk and opportunity cost...that for newbies probably needs to be understood.

*Risk*
So assume I was in around September 2012 as Burglar suggested... and that I purchased a nice round 10,000 units of JBH. *How much risk did I take?* How do I meaningfully compare the risk against a benchmark?

The market during the September 2012 - November 2014 period moved from ~4300 - ~5400 an increase of 25.6%, as opposed to my level of return, which was during the same period somewhere between 119% and 158%

*Opportunity Cost*

You mentioned opportunity cost, *if* I was in in September 2012 from October 2012 to February 2013 I'd have had very little movement (while the market went from 4400 to 4900). You are undoubtedly correct that during this period of time there would have been other investments I could make that would have outperformed my holding during that time. If I had chosen to do so I could have exited the position and then re-entered (hopefully not missing the price and volume signals that triggered an entry in Early February an not missing the gap)... but is opportunity cost that simple? 

Many things have pro's and con's, rarely is something black and white, and so the opportunity cost for me is the time commitment that jumping in and out takes, and there would have easily been a dozen instances where the stock went sideways for a week or more. What if I'd missed a re-entry signal...that would defray my return....potentially significantly.

Cheers

Sir O


----------



## burglar (21 January 2014)

Sir Osisofliver said:


> ... Like this?
> 
> Cheers
> 
> Sir O




Exactly!
How did you know?


----------



## Sir Osisofliver (21 January 2014)

burglar said:


> Exactly!
> How did you know?




Not quite where my line is (I'll show you what I did later).

OK Burglar in Late June and July with the placement of that line (which is in hindsight) you had small breaks of your ascending support line.

Why didn't you transact at either of those points?

Cheers

Sir O


----------



## burglar (21 January 2014)

Sir Osisofliver said:


> ... Why didn't you transact at either of those points?
> 
> Cheers
> 
> Sir O




Because I'm not good at this game ... yet!





I did notice the small breaks as I drew the line.
Just couldn't see the relevance/importance.

I am guessing that the type of stop-loss employed 
would leave a little room for running the winners.
Now you'll be asking me, "How much room do ya leave?"


----------



## tech/a (21 January 2014)

Historical low for entry.
Historical high for exit.
Cycle 5 yrs.
Length of Trend (peak to valley) and angle very similar to the historical high of 5 yrs. ago.
Time of trend Jan to Jan (a year) also the same.

So end of cycle for me.


----------



## Valued (21 January 2014)

Sir Osisofliver said:


> Lets drill down on this comment Valued...why? Can you explain for me why *price action* is so important in your analysis rather than say...pattern analysis.....or the use of an indicator or three?
> 
> Sir O




I do use indicators but mostly I use them to get a feel for where a stock is at. I use the 200 SMA as well as short term SMA and EMA just to help define the price action and show in a different way what has been happening to the price both short term and long term. Indicators lag behind the price. They are a derivative of price action and can only present the price action in a different way. That's the only reason I use them, to present the price action in a different way to candlesticks or bars. 

There is no publicly available evidence that pattern analysis works. The issue with pattern analysis is that patterns are merely a symptom of price action and if patterns do work, then they are based on psychology of the market. Patterns are simply another lagging indicator, a derivative of price. Drawing patterns only presents the price in a different way (or at least allows you to see it in a different way) but it's the same price action. There is nothing special about patterns but it may help someone perceive certain price action in a way that their mind works. For example, someone may be able to recognise an ascending triangle better than they could see higher lows bumping up against resistance. However, I would say that you should consider the source, the price action and volume rather than relying on patterns which are symptoms or derivatives. The symptoms could be wrong and price action and volume may paint a different picture than what the pattern suggests. 

Of course, anything can be wrong too. The last two days I had two stocks that were up about 5%, gave off a no supply signal the day before, and both got absolutely smashed on open, faster than I could sell my call options. Thankfully I only lost a small amount on one and was able to break even on the other. The increased volatility can soften the blow of a plunge in the intrinsic value.


----------



## Sir Osisofliver (21 January 2014)

burglar said:


> Because I'm not good at this game ... yet!
> 
> I did notice the small breaks as I drew the line.
> Just couldn't see the relevance/importance.
> ...




Indeed I will, because that question is...how much room do you leave for *noise* rather than *trend*?




Ok here's a more interesting looking chart...which has a couple of questions..

The purple line is where and when I moved my stop...yes sometimes I went for months not moving my stop.  So...why didn't I transact on the 23rd of May?

I would have have a nice Profit (In $8.96, Out ~$16.15)

Should I have re-entered on the 17th of December?

Cheers

Sir O


----------



## tech/a (21 January 2014)

Valued said:


> I do use indicators but mostly I use them to get a feel for where a stock is at. I use the 200 SMA as well as short term SMA and EMA just to help define the price action and show in a different way what has been happening to the price both short term and long term. Indicators lag behind the price. They are a derivative of price action and can only present the price action in a different way. That's the only reason I use them, to present the price action in a different way to candlesticks or bars.
> 
> There is no publicly available evidence that pattern analysis works. The issue with pattern analysis is that patterns are merely a symptom of price action and if patterns do work, then they are based on psychology of the market. Patterns are simply another lagging indicator, a derivative of price. Drawing patterns only presents the price in a different way (or at least allows you to see it in a different way) but it's the same price action. There is nothing special about patterns but it may help someone perceive certain price action in a way that their mind works. For example, someone may be able to recognise an ascending triangle better than they could see higher lows bumping up against resistance. However, I would say that you should consider the source, the price action and volume rather than relying on patterns which are symptoms or derivatives. The symptoms could be wrong and price action and volume may paint a different picture than what the pattern suggests.
> 
> Of course, anything can be wrong too. The last two days I had two stocks that were up about 5%, gave off a no supply signal the day before, and both got absolutely smashed on open, faster than I could sell my call options. Thankfully I only lost a small amount on one and was able to break even on the other. The increased volatility can soften the blow of a plunge in the intrinsic value.




http://thepatternsite.com/



> they are based on psychology of the market



*ADD THE WORD---PARTICIPANTS*
Done and am doing a lot of work on Patterns.
Flatly don't agree.
Evidence indicates they are like a road map to sentiment.
Some far far better than others.
In context of chart life also far more valuable.

Single bar and cluster bar price action coupled with volume ---I would argue is simply another pattern.
A read of Market participant psychology.

Subjective.
Well if it is its not a pattern worth consideration.---in my view of course.


----------



## Sir Osisofliver (21 January 2014)

tech/a said:


> Historical low for entry.
> Historical high for exit.
> Cycle 5 yrs.
> Length of Trend (peak to valley) and angle very similar to the historical high of 5 yrs. ago.
> ...




So you're looking at data from 2009-2010....does past price action have a use-by date?


Sir O


----------



## tech/a (21 January 2014)

Sir Osisofliver said:


> So you're looking at data from 2009-2010....does past price action have a use-by date?
> 
> 
> Sir O




They tell me history repeats!
Bet you were grabbing a scotch 5 yrs ago!


----------



## Sir Osisofliver (21 January 2014)

Nicely Answered - thank-you.



Valued said:


> I do use indicators but mostly I use them to get a feel for where a stock is at. I use the 200 SMA as well as short term SMA and EMA just to help define the price action and show in a different way what has been happening to the price both short term and long term. Indicators lag behind the price. They are a derivative of price action and can only present the price action in a different way. That's the only reason I use them, to present the price action in a different way to candlesticks or bars.




Correct, indicators lag behind the price action, so would you agree with the comment that Indicators *should only be used to confirm the analysis that occurs in price action? * Would this mean you rank price action as a higher quality analysis tool than indicators?

(The reason that I stress this is that my experience with Newbies is that they are lured into feeling that indicators are silver bullets...when they are the least important of our analysis techniques.)



> There is no publicly available evidence that pattern analysis works. The issue with pattern analysis is that patterns are merely a symptom of price action and if patterns do work, then they are based on psychology of the market. Patterns are simply another lagging indicator, a derivative of price. Drawing patterns only presents the price in a different way (or at least allows you to see it in a different way) but it's the same price action. There is nothing special about patterns but it may help someone perceive certain price action in a way that their mind works. For example, someone may be able to recognise an ascending triangle better than they could see higher lows bumping up against resistance. However, I would say that you should consider the source, the price action and volume rather than relying on patterns which are symptoms or derivatives. The symptoms could be wrong and price action and volume may paint a different picture than what the pattern suggests.




Hmm... Ok I would say that patterns are emergent from price (not lagging per say). I would also say that certain emergent patterns are of a higher quality of analysis than indicators, but not as high as Price action. 

Basically everything works...for a given value of "works". What is important then is...which patterns work?

link

You might find this interesting....

Cheers

Sir O

- - - Updated - - -



tech/a said:


> http://thepatternsite.com/
> 
> *ADD THE WORD---PARTICIPANTS*
> Done and am doing a lot of work on Patterns.
> ...




Ninja'd  - I linked that as well

Sir O


----------



## Sir Osisofliver (21 January 2014)

tech/a said:


> They tell me history repeats!
> Bet you were grabbing a scotch 5 yrs ago!




So for the newbies...that's a no.  Price action doesn't have a use by date. Agree?  Disagree?


----------



## tech/a (21 January 2014)

Sir Osisofliver said:


> So for the newbies...that's a no.  Price action doesn't have a use by date. Agree?  Disagree?




My experience is that regardless of timeframe the market has a memory.
At times though it will display Alzheimer's at others it will be photographic.


----------



## Trembling Hand (21 January 2014)

tech/a said:


> My experience is that regardless of timeframe the market has a memory.
> At times though it will display Alzheimer's at others it will be photographic.




And therein lies the problem with T/A for newbies. We are all controlled by our biases. If you are new to the game T/A isn't much better than a dart throw for predicting future movements. If you have seen the game 1000s of times you're more likely to be biased by the pattern and general market rather than hope. Just like any field, what counts is experience not the tools.


----------



## Valued (21 January 2014)

Sir O I might not even go as far to say that indicators should confirm your analysis. If your analysis is good, who cares if some indicator doesn't confirm it. You could go to a software package out of 400 indicators and find one that fits your analysis. If your indicators are constant and your indicators disagree with your assumptions about price action, I think it's prudent to find out why. For example, indicators may signal downwards action but the price, volume, resistance, and support as well as news/announcements may point you in a different direction. Indicators do not confirm your original analysis and should not make you feel safe but they may help you point out an anomaly if something is clearly wrong. For example, you should probably have a good reason if you're choosing to sell once your stock breaks through the upper Bollinger band. It's not that bollinger bands are special, they just tell us that something is rising quite far, depending how many standard deviations you set your bands too. We don't normally sell into markets that are actually rising (as opposed to markets that just were rising and stop - that's a good time to sell).


----------



## tech/a (21 January 2014)

Trembling Hand said:


> And therein lies the problem with T/A for newbies. We are all controlled by our biases. If you are new to the game T/A isn't much better than a dart throw for predicting future movements. If you have seen the game 1000s of times you're more likely to be biased by the pattern and general market rather than hope. Just like any field, what counts is experience not the tools.




You put it the best way I have seen it described.

Not exact words but to the effect.



> If your in a crowd *YOU* will pick out your mothers face from 1000s
> Others wont recognise her.




Personally I have a whole family.

That's why the argument of self fulfilling prophecy is 
in my view at best very limited.




> We don't normally sell into markets that are actually rising (as opposed to markets that just were rising and stop - that's a good time to sell).




Many do!!
You may wish to re visit this statement.--on your own level and timeframe.


----------



## burglar (21 January 2014)

Sir Osisofliver said:


> Indeed I will, ...




As you did not require provisioning of staples, you had run a very loose stop loss strategy! :
I would have thought a trailing stop would have been more appropriate.



Sir Osisofliver said:


> ...  have a nice Profit ...




You and I are not in this game to make a 
nice Profit. 




Sir Osisofliver said:


> ... Should I have re-entered ...




Only if you wanted to!!
I suspect it did not fall in with the original plan i.e. squeezing the shorts.
It would therefore require a new plan.


----------



## Sir Osisofliver (21 January 2014)

Trembling Hand said:


> And therein lies the problem with T/A for newbies. We are all controlled by our biases. If you are new to the game T/A isn't much better than a dart throw for predicting future movements. If you have seen the game 1000s of times you're more likely to be biased by the pattern and general market rather than hope. Just like any field, what counts is experience not the tools.





So newbies this is a great comment..and welcome to the discussion TH. 

This comment is about the impact that our emotions and experience have on our trading. A positive experience means we tend to have positive bias and go looking for the same or similar, a negative experience colours all similar things negatively.

Because we are all different, with different mindsets, time frames, tools and experience, we perceive and weigh things differently.

How important is this emotional context in our decision to sell?

What can we do to offset this emotional bias?

Sir O


----------



## Sir Osisofliver (21 January 2014)

Valued said:


> Sir O I might not even go as far to say that indicators should confirm your analysis. If your analysis is good, who cares if some indicator doesn't confirm it. You could go to a software package out of 400 indicators and find one that fits your analysis. If your indicators are constant and your indicators disagree with your assumptions about price action, I think it's prudent to find out why. For example, indicators may signal downwards action but the price, volume, resistance, and support as well as news/announcements may point you in a different direction. Indicators do not confirm your original analysis and should not make you feel safe but they may help you point out an anomaly if something is clearly wrong. For example, you should probably have a good reason if you're choosing to sell once your stock breaks through the upper Bollinger band. It's not that bollinger bands are special, they just tell us that something is rising quite far, depending how many standard deviations you set your bands too. We don't normally sell into markets that are actually rising (as opposed to markets that just were rising and stop - that's a good time to sell).




Indeed Valued...who cares if an indicator... (how much credence should you give) to an indicator that disagree's with Price action. Similarly I find that if Price action *and* pattern point in one direction, and indicator goes against it, invariably the indicator is incorrect as to the direction of the price action.

For me the why question...as in find out why the indicator disagrees...it generally for me boils down to using imperfect mathematical tools to attempt to predict the price action.

This does not mean that indicators are worthless though...experience frequently tells you when the correct signal is given.



burglar said:


> As you did not require provisioning of staples, you had run a very loose stop loss strategy! :
> I would have thought a trailing stop would have been more appropriate.




So Burglar...why would I make a hard rule (trailing stop as opposed to discretionary stop) when analysing something that exhibits chaos?


> You and I are not in this game to make a
> nice Profit.




I'll take a nice profit over a nice loss any day of the week 


> Only if you wanted to!!
> I suspect it did not fall in with the original plan i.e. squeezing the shorts.
> It would therefore require a new plan.




Correct...the original reason for my entry was that JBH was heavily shorted, and that these short positions would inevitably unwind as price increased. By tracking the short positions I was able to tell how much *potential* buying pressure remained in the share price....

This also provides a part answer to one of my questions...Why didn't I sell in May? (In May there still remained ~15% of the issued capital in shorts). In addition to this the peak of $17.56 fell short of my target at that time of  $18.11 (an amount outside of noise probabilities). Once I had the reference points in June and July, my stop was moved on the basis of my indicated ascending support line.

Cheers 

Sir O


----------



## burglar (21 January 2014)

Sir Osisofliver said:


> ... So Burglar...why would I make a hard rule ...
> 
> Cheers
> 
> Sir O



When you started this exercise, my brain went mushy.


Thank you, I am now a slightly more educated vegetable.


----------



## Samtheman (9 March 2014)

Read the entire thread thanks sir O good insight!


----------



## Ken Oath (8 April 2014)

Hi All,

Finally got to the end of this thread after several side tracks due to recommended reading along the way.  As a result I am firstly kicking myself for taking so long to discover you all were here helping confused newbies like myself.  With a property background but big interest in financial markets I always found them too technical and confusing and at times frightening. Not that that's changed but I now have a sense of the direction I want to travel.

Most helpful reading outside this thread for me so far has been 'Taming The Lion'. Can't recall who recommended it but thankyou.  Couldn't help but think of this books focus on economic trends whilst going through the JBH section.  Comparing other charts JBH were similar to most stocks during the last 6 months of last year BUT add the analysis and experience (ie well refined system) of the likes of Sir O to identify an opportunity and the results are AWESOME!


----------



## Ironik (17 April 2014)

Hi All,
This is my first post here.
I am currently paying off my PPR which I bought couple of yrs now on an average single income.
After reading all the posts by Sir Osisofliver and other contributors in this thread, it makes more sense to have bought an investment property in the first place. I cannot change anything now as I'm quite happy with my purchase of the PPR.
My plan is to have some liquid assets(mostly shares) work for me as I learn how the market works, using the equity of my PPR.
I have diligently paid slightly more than the minimum required for the mortgage.As I have no real savings to put towards the other asset class(mostly shares), I was wondering how best to structure a line of credit from the equity of my PPR so that it is tax deductible for share investment.
I also understand that this would be general advice as I will have to do my own research after some inputs from folks here.
I would like to take this opportunity to thank Sir Osisofliver for his contibution here. Really a great resource for newbies.
I have a general idea of how the ASX works and how to do some basic chart reading through my new online broker( E-trade). (I do bank with ANZ and easy to transfer funds to E-trade.)
Would like to add that I have read all the pages on this thread once, I might have to go over it a second time in the future.
Thanks,
Ironik


----------



## bluey99 (22 April 2014)

Hi guys n gals and Sir Beerlover

Well, it would seem that I have finally found the place to learn about this vehemoth, Day Trading.
Can anybody give me actual real proof that a person can earn money sitting at a computer all day dredging through all the stock charts and what not?

As you can tell, I am a newbie at this. But I am willing to learn.

Bluey99


----------



## Sir Osisofliver (22 April 2014)

bluey99 said:


> Hi guys n gals and Sir Beerlover
> 
> Well, it would seem that I have finally found the place to learn about this behemoth, Day Trading.
> Can anybody give me actual real proof that a person can earn money sitting at a computer all day dredging through all the stock charts and what not?
> ...




Welcome Bluey99.

The answer to your question is a not so simple...yes. There are people who can indeed make a living from day trading (and even people who do it professionally), *but* and its a big but...

...is day trading right for *you*?  Answer these questions to see if it is...


Am I comfortable that I have a system that provides positive expectancy?
Am I comfortable using a highly leveraged derivative instrument?
Am I comfortable in transacting in an unregulated market?
Am I comfortable in loosing 40% of my money?
I understand Risk management..
I understand position sizing
I understand stop losses
I understand what drives my chosen instrument or space
I know what and where to look for data
I have a plan that includes the activities that I will do daily/weekly/monthly
I have the time it takes to do these activities
I understand the importance of evaluation
I understand my own strengths and weaknesses and how to design a system that enhances or minimizes these things
I understand that good trading is as boring as watching paint dry.


These are just some of the things you'll need to know. I suggest you have a good solid read of these forums and learn some more before trying to decide whether day trading is something you want to do.

Cheers

Sir O


----------



## CanOz (22 April 2014)

bluey99 said:


> Hi guys n gals and Sir Beerlover
> 
> Well, it would seem that I have finally found the place to learn about this vehemoth, Day Trading.
> Can anybody give me actual real proof that a person can earn money sitting at a computer all day dredging through all the stock charts and what not?
> ...




You might want to read this from ASF's undisputed king of the screen, Trembling Hand....

Nothing to something scalping system 

TH is now a professional trader, has been for a few years now. He is a day trader in that he is flat at the end of the day.


----------



## Wysiwyg (22 April 2014)

bluey99 said:


> Hi guys n gals and Sir Beerlover
> 
> Well, it would seem that I have finally found the place to learn about this vehemoth, Day Trading.
> 
> ...



Years ago I had a crack at day trading ASX stocks using the Commsec Pro-Trader trading platform with streaming live data, market depth, order pads, charts etc. Being a self taught, DIY type of person, I was one of the many scrambling for a parcel of shares when a positive company announcement came out. There was a jockeying for positions to guarantee your parcel before the trading halt was lifted. When the stock opened I had to decide when to sell. Sometimes the price would keep going up from the open and other times it would reverse from the open. I can tell you that it was a rush when I won but I lost more often so stopped playing the game. 

Nowadays I have a dabble on the CFD Indices and FX markets. Not betting a lot to lose but still mentally challenging and sleep depriving on those late nights/early mornings.


----------



## bluey99 (4 May 2014)

Wysiwyg said:


> Years ago I had a crack at day trading ASX stocks using the Commsec Pro-Trader trading platform with streaming live data, market depth, order pads, charts etc. Being a self taught, DIY type of person, I was one of the many scrambling for a parcel of shares when a positive company announcement came out. There was a jockeying for positions to guarantee your parcel before the trading halt was lifted. When the stock opened I had to decide when to sell. Sometimes the price would keep going up from the open and other times it would reverse from the open. I can tell you that it was a rush when I won but I lost more often so stopped playing the game.
> 
> Nowadays I have a dabble on the CFD Indices and FX markets. Not betting a lot to lose but still mentally challenging and sleep depriving on those late nights/early mornings.




On the subject of CFDs, do any of the online brokers offer an Indicator for trade volumes within their online trading tool?.
I find that trying to trade without real-time volumes is like trying to drive a car without a steering wheel.

Much indebted to anyone who can help me
Bluey


----------



## Activeproject (16 May 2014)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



Sir Osisofliver said:


> Not sure if you want a seperate stickied chapter Prawn - I think this might be better if it's all in one place.
> 
> *Chapter 2 - How to manage your bank manager... secrets from the inside.*​
> This is gonna sound a little like bank bashing - and there is a reason for that. Simply put...when you go and see your bank manager does he have *YOUR* best interest at the front of his mind or *THE BANKS'* best interest?  We know the answer to that one it's the Banks best interest - otherwise your bank manager is out of a job. Yet the bank manager as an employee of the bank will do his or her best to appear to be your best friend and trusted banking professional who saves you money.
> ...




Hi there, 

I think your comparison between making fortnightly payments over monthly payments is a bit unclear.

I think your statement to do fortnightly payment is based on an assumption that the mortgage is for a "fixed" period of time i.e 30years fixed mortgage of a fixed interest rate? If this is correct then your statements are logical and may be correct.

However, mortgages that are not time fixed are chosen to allow more frequent repayments .. so if you pay fortnightly your principal goes lower every fortnight and so does your interest .. you would not want to do a monthly repayment in a non fixed time mortgage at all because you would want to appear to be borrowing for the least time .. so if i can pay a bit of principal (as small) as soon as possible ( over a fortnight then in a month) I should do so since I will pay lower interest on a smaller principal next fortnight.

Yes! at the end of 12 months you would have paid more "number" of repayments that is if you are just comparing this to  "number" of repayments over a year.

BUT you would save more "money" by doing fortnightly repayments then monthly "repayments" and for a non time fixed type mortgage.. 

I think its crucial to specify what mortgage is time specific or not .. if yes then you may be correct if not then you appear to be incorrect.. 

Could you discuss this please .. I would like to know what you think of it..


----------



## burglar (16 May 2014)

*Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the*



Activeproject said:


> Could you discuss this please .. I would like to know what you think of it..




Hi Activeproject,
Welcome to ASF!

The post by SirO, to which you refer, is about one of the foundation stones in your financial education.



> ... when you go and see your bank manager does he have YOUR best interest at the front of his mind ...




By discussing a variety of vagaries surrounding the savings of Fortnightly over Monthly repayments, you would be missing the point.

The point is this:
You need to know what questions to ask your bank manager! (Also read Stock Broker or Financial Manager)
You need to check his answers.
You need to know what is important and what is not.


----------



## HawkNZ (10 June 2014)

Sir Osisofliver said:


> Correct...the original reason for my entry was that JBH was heavily shorted, and that these short positions would inevitably unwind as price increased. By tracking the short positions I was able to tell how much *potential* buying pressure remained in the share price....






Hi Sir O

Noob here,
Firstly I have just finished getting through 41 pages of this thread which has been enormously helpful, thankyou.

Secondly, could you explain what is meant by "heavily shorted" & "short positions" etc, I see these terms often but don't understand it, I don't recall it being covered anywhere here previously,

Thanks Again


----------



## payday (10 June 2014)

HawkNZ said:


> Hi Sir O
> 
> Noob here,
> Firstly I have just finished getting through 41 pages of this thread which has been enormously helpful, thankyou.
> ...




Shorting simply means profitting from a stock when it's price falls. So there was probably a lot of people short JBH hoping for a fall in price, but when price kept rising, their losses presumably kept increasing hence leading to some people having to cover their short positions which would put upward pressure on the price since they have to buy back their position


----------



## brty (10 June 2014)

Hawk,

A short, going short, means selling stock you don't own. This can be done by borrowing stock from another entity with the agreement that you will replace the stock. There is usually a fee involved, negotiated between the lender and borrower of the stock.

Once you have borrowed stock, you then sell it, with the intention of buying it back later at a cheaper price, hence making money by "going short".

Hope this helps.


----------



## Sir Osisofliver (11 August 2014)

Hi All,

OK so It's time to visit the newbie thread again and talk about something that's been a topic of discussion for a while now in an ongoing attempt to bring clarity to the newbies...not that more experienced posters aren't welcome, but please give the newbies a chance to think about the questions posed and don't be harsh with someone still learning. If anyone wants to do an analysis on the below, happy for it to happen, but I will not be commenting in order to abide by forum rules...that said....

*Disclaimer: *This is NOT ADVICE. DYOR stands for DO YOUR OWN RESEARCH. You heard me. Don't make me break out the legalese. Remember the forum rules about stock ramping. I want this to be clean and I DON'T want to get Joe in trouble. If I see a post that skirts the grey area I will ask a mod to remove it. Clear? In this discussion similar to the first time I will be pre-empting a *potential* trade *in the absence of a signal* in an effort to give clarity.

I'm hoping that this discussion brings the newbies out to ask questions, but also brings out the more experienced traders/investors to comment. Lets keep this discussion clean and task focused people.

Waaaay way back on page 31, on the 4th of June 2012 I introduced the a discussion about turning an IDEA into PROFIT. This was an attempt to show the process of turning an idea into a system or strategy, showing the steps along the way. I challenged newbie posters about their methodology and tried to guide them to making conclusions about making a system that was designed for them.

I demonstrated the idea (a short squeeze), showed the steps to evolve this into a system, and then introduced a *potential* target of said system with a stock, JBH at that time. On the 12th of February 2013 Burglar pointed out that JBH rose 17% in post #724.

On the 20th of January 2014 post #774 I came back and discussed JBH again, within the context of how/when to exit, and included a share chart at the time on post # 790, showing my exit and posed questions about *why* I exited, and why hadn't I exited earlier? And why hadn't I re-entered? We didn't get as much discussion around the exit as we had for the system design and entry portion of this long running discussion...despite the critical nature of the exit decision. So now with some more time and hindsight it's time to revisit the process.

My first chart was prior to my entry, my last chart was after my exit....

It's time for another chart and some questions........




Since November 2013 I have not held JBH, nor has any of my system's scanned JBH as a potential trade. This does not mean that there have not been any trading opportunities in JBH. There have been respectable price movements of $3-$4, easily profitable, particularly when using leveraged instruments.

*Question:* Why am I showing you this now? 

*Question:* With the benefit of hindsight was my decision correct?

*Question:* What do you notice about the price action, prior to and after my exit point?

*Question:* Why have I said this is a *potential* trade and what kind of trade am I looking at?

Takes a Scotch over to the corner and waits for responses....

Cheers

Sir O


----------



## burglar (11 August 2014)

Sir Osisofliver said:


> ....*Question:* Why am I showing you this now? ...




JBH is in the news today. 
They have just reported:

http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01541349

Earnings are within expectation.
Despite that, they are trading approx. 8% lower today.


----------



## Sir Osisofliver (11 August 2014)

burglar said:


> JBH is in the news today.
> They have just reported:
> 
> http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01541349
> ...





I am of course aware of this Burglar.....I'd happily encourage analysis of that report and the price action, (even though I won't be analysing myself), did you want to have a go at the questions?   Don't be shy. 

Cheers

Sir O


----------



## crypto (11 August 2014)

Are you suggesting that now is the price to buy into JB? Perhaps based on the green line across the price peaks in January, May and this month?

Cheers.


----------



## Sir Osisofliver (11 August 2014)

crypto said:


> Are you suggesting that now is the price to buy into JB? Perhaps based on the green line across the price peaks in January, May and this month?
> 
> Cheers.






> If anyone wants to do an analysis on the below, happy for it to happen, but I will not be commenting in order to abide by forum rules...that said....
> 
> Disclaimer: This is NOT ADVICE. DYOR stands for DO YOUR OWN RESEARCH. You heard me. Don't make me break out the legalese. Remember the forum rules about stock ramping. I want this to be clean and I DON'T want to get Joe in trouble. If I see a post that skirts the grey area I will ask a mod to remove it. Clear? In this discussion similar to the first time I will be pre-empting a potential trade in the absence of a signal in an effort to give clarity.




I have to be extra careful crypto because of what I do for a living...I am not suggesting nor advising anything.

Would you like to have a go at the questions?

Cheers 

Sir O


----------



## crypto (11 August 2014)

Sir Osisofliver said:


> Would you like to have a go at the questions?
> 
> Cheers
> 
> Sir O




I'm certainly thinking about them. I am pretty new to this and have only spent the last few weeks lurking here, reading and utilising the introductory materials at ASX.

I'll get back to you


----------



## burglar (11 August 2014)

Again, I find myself in frontier territory!
I'm awaiting some new neurones to fire.

Meanwhile I would suggest:

You were demonstrating a squeeze.
Low risk, high reward strategy.

Question: Why am I showing you this now? 

It may be cyclical, I should be looking at the shorts once more.

Question: With the benefit of hindsight was my decision correct?

Yes! You got out before it got bumpy!

Question: What do you notice about the price action, prior to and after my exit point?

Uptrend prior to exit, and then pivoting into downtrend

Question: Why have I said this is a potential trade and what kind of trade am I looking at?

I seriously doubt you would want to go long.
If you know the cycle, you might want to seek indicators to go short.

But I am surmising!


----------



## Sir Osisofliver (11 August 2014)

Yay! Forum engagement!



burglar said:


> Again, I find myself in frontier territory!
> I'm awaiting some new neurones to fire.
> 
> Meanwhile I would suggest:
> ...




Indeed that was the *Idea* I was putting forward, a system that looks for outlier formations, and more importantly how do we go about putting structure and system in place to take advantage (make profit) from such an idea. I hope the newbies took those lessons to heart.



> Question: Why am I showing you this now?
> 
> It may be cyclical, I should be looking at the shorts once more.




Okay, well an examination of the short positions would show you that the shorts effectively bottomed out at roughly 7% of issued capital just prior to the peak in Nov '13. Since then they have been fluctuating and currently sit at around 12.3% of issued capital, well below the ~25% of issued capital they were when we began looking. What hypothesis can you draw from this?



> Question: With the benefit of hindsight was my decision correct?
> 
> Yes! You got out before it got bumpy!
> 
> ...




Hmm, can you give me more detail? If you were to describe the price action prior to and following from my exit, what is the one descriptive word you would use?

You can see your original (green) line on the chart, and where I placed my line (the black one). At the time I questioned you about the placement of your line, with regards to the breach of your line and what your actions were....

So what do you think was my indication (prior to the confirmation proposed by the descending green line that crypto identified) that we were moving away from an up-trend and into a down-trend?


> Question: Why have I said this is a potential trade and what kind of trade am I looking at?
> 
> I seriously doubt you would want to go long.
> If you know the cycle, you might want to seek indicators to go short.
> ...




So if you are correct, I would be using what kind of instrument?

Cheers 
Sir O


----------



## crypto (11 August 2014)

Sir Osisofliver said:


> So what do you think was my indication (prior to the confirmation proposed by the descending green line that crypto identified) that we were moving away from an up-trend and into a down-trend?




Was the issuing of shares / options during the second week of November a factor?


----------



## Sir Osisofliver (11 August 2014)

crypto said:


> Was the issuing of shares / options during the second week of November a factor?




It was not a factor that entered my decision process.

Cheers 

Sir O


----------



## burglar (11 August 2014)

Sir Osisofliver said:


> ... what is the one descriptive word you would use? ...




Volatility!


----------



## Craton (11 August 2014)

Sir Osisofliver said:


> Hi All,
> 
> View attachment 58962
> 
> ...




G'day Sir O.

Disclaimer: Total noob when it comes to charting but that's what I'm here for, to learn.

*Question:* Why am I showing you this now? 
To show us:
SP shows a lot of the classic bullish chart with uptrend, peak then downtrend along with up and down thrusts.
How to let a runner/winner run by using Trailing Stops
It doesn't matter if one doesn't sell at the top. Profit is, well, profit  as the trailing stops show.

*Question:* With the benefit of hindsight was my decision correct?
For you, probably yes. Others might have ecked out another few more dollars allowing for the bounce.
Am not sure but the indicator at the top of the chart is volume yes, so volume may have been a factor?

*Question:* What do you notice about the price action, prior to and after my exit point?
On the up, higher lows and higher volume.
After the peak, lower highs, lower lows and falling volume.

*Question:* Why have I said this is a *potential* trade and what kind of trade am I looking at?
At a guess, a derivative probably a Call option. 

Now a question for you Sir O. Single malt or blended?

Thanks for taking the time to illuminate the beginner. Cheers!


----------



## crypto (11 August 2014)

Craton said:


> Thanks for taking the time to illuminate the beginner. Cheers!




And you too mate, for asking the questions which I struggled to articulate.


----------



## burglar (11 August 2014)

Sir Osisofliver said:


> ... So if you are correct, I would be using what kind of instrument? ...



It's not pointy-nose pliers or forceps.

I'll let the others have a "Yay" forum engagement.


----------



## Sir Osisofliver (11 August 2014)

burglar said:


> Volatility!




So what does this increase in volatility in the auction process that is the market represent? A) increasing impulsive movement (trend) or B) increasing uncertainty?

Does the increase in volatility make is easier or harder to trade the share in terms of your resources, (including time?)



Craton said:


> G'day Sir O.
> 
> Disclaimer: Total noob when it comes to charting but that's what I'm here for, to learn.
> 
> ...




Not a bad response for the impulsive movement, but the share has been consolidating for some time now, why am I now showing the chart with vague hints about a potential trade?







> *Question:* With the benefit of hindsight was my decision correct?
> For you, probably yes. Others might have ecked out another few more dollars allowing for the bounce.
> Am not sure but the indicator at the top of the chart is volume yes, so volume may have been a factor?




You raise a good point on psychology. The trade was exited at the right time *for me.* another person may lament the lost opportunity those few extra dollars represents.







> *Question:* What do you notice about the price action, prior to and after my exit point?
> On the up, higher lows and higher volume.
> After the peak, lower highs, lower lows and falling volume.



 so this is confirmation that the market has entered a period of consolidation and uncertainty over the timeframe I have chosen to represent the price action. Does this lead you to suspect that I am forecasting a resumption of "trend" in the somewhat near future?







> *Question:* Why have I said this is a *potential* trade and what kind of trade am I looking at?
> At a guess, a derivative probably a Call option.




Assume you are correct. By using a leveraged instrument of some kind, what have I introduced to this potential trade that was not present in the original equity investment?







> Now a question for you Sir O. Single malt or blended?



 a bottle of Nants will do nicely.

Cheers

Sir O


----------



## Craton (11 August 2014)

crypto said:


> And you too mate, for asking the questions which I struggled to articulate.




Cheers crypto, thanks for the acknowledgement.

BTW, forgot to mention a couple of things which, from my perspective, are taken for granted.
On the uptrend, the highs were getting higher too and, with regards to resistance lines any pullback was struggling to break the resistance (downwards) or conversely, met with support at resistance.

No doubt there is jargon like the double top and the like that I've left out but the main thing is to learn to recognise what the chart is telling us, not so much the technical terms or jargon (which will come naturally with the time invested in learning), thus learning to apply or dismiss a trade quickly and efficiently and then moving on to the next trade decision.

Sir O has mentioned time and again that we are emotive critters and this is the one bugbear that one needs to learn to override. I know personally in my early days I spent far too much time mulling over my course of action. Being decisive can not only lock in profits but eliminate excessive losses (and the associated time waiting for a stock to recup, if ever). Risk/reward, know thyself.


----------



## Craton (11 August 2014)

Oh, didn't see you had replied Sir O.


----------



## Wysiwyg (11 August 2014)

Sir Osisofliver said:


> *Question:* Why am I showing you this now?



To show a chart tells us what has happened in the past and that with this past observation your (our) choice of technical analysis is used to propose a possible price direction moving forward.


----------



## Craton (11 August 2014)

Sir Osisofliver said:


> Not a bad response for the impulsive movement, but the share has been consolidating for some time now, why am I now showing the chart with vague hints about a potential trade?



To be honest, I'm not sure. Perhaps there's the potential to trade the resistance? I do note that the SP struggles to break the bottom resistance line or conversely, there is support there. This must be significant.



> You raise a good point on psychology. The trade was exited at the right time *for me.* another person may lament the lost opportunity those few extra dollars represents. so this is confirmation that the market has entered a period of consolidation and uncertainty over the timeframe I have chosen to represent the price action. Does this lead you to suspect that I am forecasting a resumption of "trend" in the somewhat near future?



Knowing one's appetite for risk v reward is essential when it comes to trading. An uptrend is quite possible in this bullish market although I can not pin point why an uptrend may develop. If you mean the consolidation is the trend then yes, a continuation is most likely looking at the trading range.



> Assume you are correct. By using a leveraged instrument of some kind, what have I introduced to this potential trade that was not present in the original equity investment?



Leverage generally means higher risk but also the added risk comes with the higher potential for reward. Can it also be a form of de-risking by having less money on the table for the same reward? If you know what I mean.



> a bottle of Nants will do nicely.
> 
> Cheers
> 
> Sir O




Ah-huh and buying Australian too, dig it! About to have two fingers with a cube of ice myself, cheers.


----------



## Craton (11 August 2014)

Wysiwyg said:


> To show a chart tells us what has happened in the past and that with this past observation your (our) choice of technical analysis is used to propose a possible price direction moving forward.




So I would guess that the starting point is that one needs the tools to predict what a SP may do in the future.


----------



## burglar (12 August 2014)

Sir Osisofliver said:


> So what does this increase in volatility in the auction process that is the market represent? A) increasing impulsive movement (trend) or B) increasing uncertainty?
> 
> Does the increase in volatility make is easier or harder to trade the share in terms of your resources, (including time?)
> 
> ...




To the best of my knowledge, increased volatility generally denotes a downtrend.
Or uncertainty.

Now I'm uncertain.
Oft I have heard that volatility presents opportunities.
If only I knew what opportunites (IDEAS) 
and how (STRATEGY/SYSTEM) to profit from them.

That would make me a Vice-Demi-God!?




Is now a good time to throw up some trading jargon?

e.g. Descending Triangle forming.


----------



## burglar (12 August 2014)

Sir Osisofliver said:


> Yay! Forum engagement!
> 
> So if you are correct, I would be using what kind of instrument?
> 
> ...




Please Sir,

I would be purchasing a PUT Option.
But would I anticipate a breakout to maximise potential?
Or would it be more prudent to wait for confirmation?


----------



## Sir Osisofliver (12 August 2014)

Wysiwyg said:


> To show a chart tells us what has happened in the past and that with this past observation your (our) choice of technical analysis is used to propose a possible price direction moving forward.






Craton said:


> So I would guess that the starting point is that one needs the tools to predict what a SP may do in the future.




I'm going to contrast the above two statements. I'n not picking on you Craton, I merely wish to demonstrate a mindset.

Look at the language in Wysiwig's comment...*propose a possible direction* vs Craton's use of the word *predict*.  This is important (it may seem I'm harping on) because of the definition of financial risk. Financial risk is about expectation. If my expectation is that JBH will be between $50 and $8 in the next 12 months I have minuscule financial risk because the probability that the SP will be outside of that range is extremely low.  However I cannot make money with such a wide range or wide expectation of SP movement. I must choose a direction for price movement (go sideways is also a price direction). If I expect that JBH will be at $50 in 12 months time, and it falls to $8, significant financial risk has already occurred, because the result is vastly different from my expectation.

We cannot *predict* anything with 100% certainty. There are simply too many variables that can occur over time. All we can do is anticipate a price direction, act accordingly and act to limit what happens if/when our expectation is proved incorrect. This is the importance of stop losses, both as a method of preserving profit and as a method of limiting losses.


Getting to the other comments shortly.

Cheers 
Sir O


----------



## Sir Osisofliver (12 August 2014)

Craton said:


> To be honest, I'm not sure. Perhaps there's the potential to trade the resistance? I do note that the SP struggles to break the bottom resistance line or conversely, there is support there. This must be significant.




So how significant would it be if the horizontal support you have identified is broken? What would your actions (and anticipation) be if this were to occur? Conversely if the descending line in the chart were broken, how significant would this be and what would be your actions/anticipation?







> Knowing one's appetite for risk v reward is essential when it comes to trading. An uptrend is quite possible in this bullish market although I can not pin point why an uptrend may develop. If you mean the consolidation is the trend then yes, a continuation is most likely looking at the trading range.




Whilst sideways can be a trend (as I said there have been opportunities to make profit from the "bumpy" price movement since my exit), trend moves either upwards or downwards. We can only anticipate and act accordingly.







> Leverage generally means higher risk but also the added risk comes with the higher potential for reward. Can it also be a form of de-risking by having less money on the table for the same reward? If you know what I mean.




So higher risk due to leverage (among other things), what actions will I take to offset this additional risk that was not present in the pure equity transaction?

Cheers

Sir O


----------



## Sir Osisofliver (12 August 2014)

burglar said:


> To the best of my knowledge, increased volatility generally denotes a downtrend.
> Or uncertainty.







Have a look at the SP action prior to the very significant touch I've identified in the price action. How volatile was it? This is an example of consolidative volatility or simply uncertainty, prior to the bullish trend. If you compare this with say.....




You should be able to see the visual difference between consolidative volatility and trending (in this case corrective) volatility.

When you look at the corrective volatility, you should note that a) it occurs much faster in comparison to impulsive volatility and b) the ranges of that volatility are wider.

How would this change the way you approach the potential trade in comparison to the bullish trend?




> Now I'm uncertain.
> Oft I have heard that volatility presents opportunities.
> If only I knew what opportunites (IDEAS)
> and how (STRATEGY/SYSTEM) to profit from them.
> ...




Perhaps it's more accurate to say a *change* in volatility (the volume at which people shout in the auction) presents opportunities...







> Is now a good time to throw up some trading jargon?
> 
> e.g. Descending Triangle forming.




Interesting.  What does this emergent pattern mean to you?

Cheers

Sir O


----------



## Sir Osisofliver (12 August 2014)

burglar said:


> Please Sir,
> 
> I would be purchasing a PUT Option.
> But would I anticipate a breakout to maximise potential?
> Or would it be more prudent to wait for confirmation?




You could also use a CFD (contract for difference) if your anticipation was for a downside break.  What's the pro v con of using an option over a CFD?

I have stated that *for me* there is no signal yet present in the price action, and am using this as a teaching example. Turning points, like pivots and compounds represent the greatest *potential* profit points. This is where the auction changes, from where the buyers yell louder than the sellers or vice versa. These points due to their very nature however also represent the greatest points of uncertainty, at these points there is little technical evidence to base an anticipation upon.

We therefore get to risk/reward. For me, I require technical and fundamental evidence (although what I look for fundamentally isn't necessarily what others look for) so rarely do I perfectly pick the top or bottom of a movement. (It's been known to happen and I get chuffed when I do so, but it is not an expectation) I trade off _potential_ gains for _increased certainty_ in accordance with my personal risk reward profile. To some degree, so must you.

Cheers

Sir O

*Takes scotch and heads to the corner again*


----------



## burglar (12 August 2014)

Sir Osisofliver said:


> What's the pro v con of using an option over a CFD? ...







> Give me option trading any day! They far more interesting anyway - and their flexibility and *limited risk *makes them a much safer way to trade.



My bold.
 Options vs CFD trading


----------



## burglar (12 August 2014)

Interesting that you use different jargon to other pattern traders.

If it is going sideways, would that be consolidation or would it be a channel?
If it is in vigourous uptrend, would be that be impulsive or bullish?

I suppose if you more closely define the terms, we would need to do less thinking.
It might even give the game away!

I could not separate these:
propose a possible direction
predict
expect  
anticipate 

Missing is:
protect
holding your nerve


----------



## Sir Osisofliver (12 August 2014)

burglar said:


> My bold.
> Options vs CFD trading




From your link...._About 3 years ago, I made a lot of money in a short time, trading options, once I had learned how flexible they were. Then I got greedy. thought I could make more money trading CFDs because the leverage was higher, so I signed up and went for it. Within a month, I had lost most of my trading capital and had to go back to work. _

How do you think the above has impacted the authors emotional bias?

Cheers

Sir O


----------



## burglar (12 August 2014)

Sir Osisofliver said:


> ... How do you think the above has impacted the authors emotional bias? ...




Is he wrong, should I research further?










I am in his corner, drinking Strongbow Sweet*


----------



## Sir Osisofliver (12 August 2014)

burglar said:


> Interesting that you use different jargon to other pattern traders.




Probably because a) self taught for much of the technicals b) I don't like to overcomplicate for the newbies.  Sideways is sideways.







> If it is going sideways, would that be consolidation or would it be a channel?




A channel is merely support and resistance bands that define the directionality of the movement, whether that movement is ascending, descending or neutral (sideways). A neutral channel frequently exhibits consolidative characteristics, but then, many different patterns also indicate consolidation, such as flags. 







> If it is in vigorous up-trend, would be that be impulsive or bullish?



 Impulsive = no direction, ascending or descending
Bullish = up


> I suppose if you more closely define the terms, we would need to do less thinking.
> It might even give the game away!
> 
> I could not separate these:
> ...




Really?

I think the share is going down. (propose a possible direction)

I think JBH will hit $2.11 (predict)

I expect JBH to hit $500.00 (financial risk is based upon our expectations)

I anticipate JBH will go ?? (financial risk is based on expectations - anticipate just feels like a better word to me, because you always have to consider...what if I'm wrong?)







> Missing is:
> protect
> holding your nerve




I did ask this previously...So higher risk due to leverage (among other things), what actions will I take to offset this additional risk that was not present in the pure equity transaction?

and also mentioned stop losses and personal psychology sooo many times.

Cheers

Sir O


----------



## Sir Osisofliver (12 August 2014)

burglar said:


> Is he wrong, should I research further?
> 
> 
> I am in his corner, drinking Strongbow Sweet*




I question his approach. Did he maintain stop losses? Did he maintain correct position sizing methods? Was he doing his CFD investing as part of a system? Did he increase his risk minimisation with the increase in risk associated with leverage? Did he have a plan of any kind?  I cannot answer any of those things and now that the author has burnt himself, he never wants to burn himself again (perfectly normal human reaction) but from my reading of his article has lost his objectivity.

Simply put, if the instrument didn't offer something that options couldn't meet...they wouldn't exist. 

Cheers

Sir O


----------



## burglar (12 August 2014)

Sir Osisofliver said:


> Probably because a) self taught for much of the technicals b) I don't like to overcomplicate for the newbies.  Sideways is sideways ...
> 
> 
> Really? ...




I meant no harm ...


----------



## tech/a (12 August 2014)

*If you don't mind*---when I have a little time
Id like to comment on your chart from my
perspective of what it is I see and in the past what it
would have been that I saw.


----------



## Sir Osisofliver (12 August 2014)

burglar said:


> I meant no harm ...




Hey no worries Burglar I'm not offended, and if you had the question, I'm sure someone else did as well, so its all good.

Cheers

Sir O


----------



## burglar (12 August 2014)

Sir Osisofliver said:


> ... and also mentioned stop losses and personal psychology sooo many times.
> 
> Cheers
> 
> Sir O




Yes. You have, in many many posts, both here and in other threads.
I was referring to the absence of protection in the current scenario of taking *additional* risk associated with derivatives.

You have since brought up the case of Mr. Burnt Fingers.

So here I am  ... harping about protecting because 
in my minds eye I am still expecting to go short with a PUT option.




(I know about burnt fingers, I work in a kitchen


----------



## Sir Osisofliver (12 August 2014)

tech/a said:


> *If you don't mind*---when I have a little time
> Id like to comment on your chart from my
> perspective of what it is I see and in the past what it
> would have been that I saw.




Not at all Tech, If you remember back on post #622 I said...



Sir Osisofliver said:


> That would be great Tech. I won't be doing any current examples.....but you could.  JBH is looking like a target at present. ~24% of the issued capital is in short's. I'm sure that the newbies and myself would appreciate your technical analysis of the stock at this time.
> 
> Cheers
> 
> Sir O




I had Trembling Hand say at the time the technicals indicated it was going to sleep (and they did for quite a while, it was only my second entry that was profitable). I've got a more complex chart I can break out as well, but it might be better for the newbies to keep it simple for now.

Cheers

Sir O


----------



## Sir Osisofliver (12 August 2014)

burglar said:


> Yes. You have, in many many posts, both here and in other threads.
> I was referring to the absence of protection in the current scenario of taking *additional* risk associated with derivatives.
> 
> You have since brought up the case of Mr. Burnt Fingers.
> ...




Well Burglar, what kind of approach would *you* take? I know what my approach would/will be, but my brain doesn't = yours.

Cheers

Sir O


----------



## burglar (12 August 2014)

Sir Osisofliver said:


> Well Burglar, what kind of approach would *you* take? I know what my approach would/will be, but my brain doesn't = yours.
> 
> Cheers
> 
> Sir O




Ok?! I'll bite!

I predict a breakout! It may go up, down or even a reversal.
It will be a big move (BOLD statement).

I would want to hedge my bets. 
I would go long with a CALL Option and short with a PUT Option.

You were hinting CFD's.
I should research CFD trading.


----------



## Sir Osisofliver (12 August 2014)

burglar said:


> Ok?! I'll bite!
> 
> I predict a breakout! It may go up, down or even a reversal.
> It will be a big move (BOLD statement).
> ...




Now I know what you are doing, care to explain it in more detail for the newbs? Why would you place an option on either side of the transaction?

I was merely pointing out that Options aren't the only way of skinning that particular cat.

Cheers

Sir O


----------



## burglar (12 August 2014)

Sir Osisofliver said:


> Now I know what you are doing, care to explain it in more detail for the newbs? Why would you place an option on either side of the transaction?
> 
> I was merely pointing out that Options aren't the only way of skinning that particular cat.
> 
> ...




On the balance of probability, I would say that most newbs including self, have never traded derivatives.

I now know that JBH is breaking to the down side. 
(Yes folks, it has broken through the green line at the bottom of the triangle)


What if I am wrong? What if it is a reversal? I have never dealt with one.

Obvious to me that I should protect against an up move. 
Especially as I have made a bold statement that the move will be big.

craton predicted an up move. What if he is wrong? Might he also, like to have insurance?


----------



## Sir Osisofliver (12 August 2014)

burglar said:


> On the balance of probability, I would say that most newbs including self, have never traded derivatives.
> 
> I now know that JBH is breaking to the down side.
> (Yes folks, it has broken through the green line at the bottom of the triangle)




*DYOR THIS IS NOT A RECOMMENDATION.* SERIOUS LEGALESE HERE, and I will be having Joe check this post out to make sure he is comfortable.

*Disclaimer*
*I am currently not in the position!* Whilst it appears that there will be further downside, with articles in the Fin review, brokers reports coming out etc, this is not guaranteed and the stock has yet to break that line in a meaningful manner (to me). Burglar may not have accounted for "noise" as opposed to trend. Some of the strongest movements are Broken pattern movements.. link, particularly if the break occurs within "noise".

FYI
*IF* I trigger into the position I will refrain from commenting and will go dark until the trade completes, just as I did for my entry. This is why the previous discussion at Post #676 ends abruptly, (my original entry on 28th). 



> What if I am wrong? What if it is a reversal? I have never dealt with one.
> 
> Obvious to me that I should protect against an up move.
> Especially as I have made a bold statement that the move will be big.
> ...




Ok I might just stop there for now until I hear back from Joe.

Cheers

Sir O


----------



## Sir Osisofliver (13 August 2014)

Ok spoke to Joe, we're all good. In future if you make a statement like burglars, (I think x), please back it up with your own reasons and don't use my chart and I will be very happy.

Not to put too fine a point on it guys and girls but I have to take extra precautions in making sure what we are doing here is clearly understood as training and not a recommendation for a given action in any form.

That said...

So Burglar, can you run a trailing stop behind your proposed transaction?

Cheers 

Sir O


----------



## burglar (13 August 2014)

Sir Osisofliver said:


> Ok spoke to Joe, we're all good. In future if you make a statement like burglars, (I think x), please back it up with your own reasons and don't use my chart and I will be very happy.
> 
> Not to put too fine a point on it guys and girls but I have to take extra precautions in making sure what we are doing here is clearly understood as training and not a recommendation for a given action in any form.
> 
> ...




I am in frontier territory when discussing derivatives.

options_trailing_stop_loss



> How Does Trailing Stop Loss Work?
> Trailing stop loss is an advanced options order where your options broker system automatically tracks the continuously changing prices of your options and then triggers a market order to sell when those prices retreat a predetermined amount from the highest price achieved. This saves the options trader from having to monitor the prices whole day long in order to achieve the same outcome.





By proposed transaction, I am assuming an option on either side of the transaction.

If there is a trailing stop on both options, one will stop out on a big move, the other would trail the move until retracement of a predetermined amount. I think if volatility was high, that predetermined amount would be difficult to calculate.


----------



## Craton (13 August 2014)

Sir Osisofliver said:


> I'm going to contrast the above two statements. I'n not picking on you Craton, I merely wish to demonstrate a mindset.
> 
> Look at the language in Wysiwig's comment...*propose a possible direction* vs Craton's use of the word *predict*.  This is important (it may seem I'm harping on) because of the definition of financial risk. Financial risk is about expectation. If my expectation is that JBH will be between $50 and $8 in the next 12 months I have minuscule financial risk because the probability that the SP will be outside of that range is extremely low.  However I cannot make money with such a wide range or wide expectation of SP movement. I must choose a direction for price movement (go sideways is also a price direction). If I expect that JBH will be at $50 in 12 months time, and it falls to $8, significant financial risk has already occurred, because the result is vastly different from my expectation.
> 
> ...




All good Sir O, pick away as no umbrage taken on my part, as stated here to learn.

Must say I've have always found it interesting that the choice of a word or words can have such an impact. Not surprising really that the word predict in relation to a possible stock or market movement is an inappropriate word to use as I'd reckon, if a financial planner/adviser/broker used that word there could very well be legal implications and grounds for the word sue being used.

So, duly noted that one cannot predict but can anticipate a certain direction. Just this alone, not predicting, lowers the emotive pressure/connection but increases the awareness of risk which, has got to be a good thing for the decision making process and helps in identifying the reason/s for (or against) executing a particular trade.

To reinforce what you have already stated, if one predicts a certain direction and the direction is opposite to the prediction, one may not act to minimize losses because the assumption would be that one is right and the market is wrong. The would be a very bad mindset to be in.

Also want to reinforce again too the importance of stop losses. As you rightly point out, this an important method to lock in profits and to minimize losses. Also a subject that needs further discussion as stop loss is linked to ones exit strategy.


----------



## Craton (13 August 2014)

Sir Osisofliver said:


> So how significant would it be if the horizontal support you have identified is broken? What would your actions (and anticipation) be if this were to occur? Conversely if the descending line in the chart were broken, how significant would this be and what would be your actions/anticipation?




If support (or resistance) was broken I'd probably wait to see that a confirmation of trend was in place. After the move up I'd anticipate the SP to retract to the old resistance line then move up again and it would be around here I'd enter the trade.

On a downward trend I'd look at short selling.



> Whilst sideways can be a trend (as I said there have been opportunities to make profit from the "bumpy" price movement since my exit), trend moves either upwards or downwards. We can only anticipate and act accordingly.
> 
> So higher risk due to leverage (among other things), what actions will I take to offset this additional risk that was not present in the pure equity transaction?
> 
> ...




Hmmm, that last question had me stumped because I thought I didn't understand the question but again, short selling and placing tighter stop losses are my best guesses. Perhaps a straddle would work too.


----------



## Craton (13 August 2014)

I want to add that like burglar, derivatives are frontier land for me too although are something I've been study more and more about of late.

I never thought I'd tackle T/A either but thanks to tech/a (and the many others here on ASF like yourself, thank you all) this is an area that fascinates and excites me. Whether I'll ever become a trader is another matter because as my tag says, I am mostly passive, contrarian.

Must say though, my objectives I set out to do via the stock market all those years ago, small as they were, have mostly come to fruition and as such, I suspect now is the time to take the next step in my financial evolution.


----------



## Sir Osisofliver (14 August 2014)

So Tech,

Are we getting your once-over on JBH?

Sir O


----------



## tech/a (14 August 2014)

Sir Osisofliver said:


> So Tech,
> 
> Are we getting your once-over on JBH?
> 
> Sir O




I pulled up 5 charts last night( Various aspects of the JBH Chart)
and had a knock
on the door from the neighbours.
That Kyboshed that!

Ill get them posted before it goes to Zero or makes a new high!

In particular I'm looking at the 2 consolidations
(1) The first which breaks out higher---the characteristics in that---which are very clear and common to most that do the same.
(2) The second in which it is in now.---Different in structure and characteristics.
Right now Support is being tested so at a very interesting point. I'm confident it will hold for now. (Infact if you trade ranges (Not you personally) Yesterday was a low risk entry in my view.)

More to come but it takes time as you know.
At latest the weekend.---out tonight.


----------



## Sir Osisofliver (14 August 2014)

tech/a said:


> I pulled up 5 charts last night( Various aspects of the JBH Chart)
> and had a knock
> on the door from the neighbours.
> That Kyboshed that!
> ...




Sounds good Tech will look forward to seeing your views and I'm sure the newbs will as well.



burglar said:


> I am in frontier territory when discussing derivatives.
> 
> options_trailing_stop_loss
> 
> ...




I have to ask the somewhat philosophical question, that price action moves in three directions, Up, Down and sideways.  If we limit ourselves to only going long, that means we have limited ourselves to one third of the possible trend movements...so how do we expand this?

More about shorting for the newbs

By necessity if you are going short to take advantage of a perceived downwards trend, you are going to be using a derivative of some kind, be it an option or a CFD, (I've spoken previously about going short needing a helpful full service broker as well and the need for the stock to be on the approved list).

If sideways is the direction, (ranging between horizontal support and resistance), what can we do to make profit? As you can see in the price action after my exit the stock is "bumpy" or simply more volatile. It is in this space that traders who are knowledgeable in Options have a significant advantage as they can structure strategies that will limit downside risk. 

If you are interested in these kinds of strategies I will point you in the direction of WayneL, who hangs out in the derivatives section of this forum. He's made numerous threads on options and explains things in a concise and clear manner and I will not be re-inventing the wheel. Link

Cheers 
Sir O


----------



## Craton (14 August 2014)

Sir Osisofliver said:


> If we limit ourselves to only going long, that means we have limited ourselves to one third of the possible trend movements...so how do we expand this?




So much to learn... am assuming that going long is in anticipation of an uptrend. Please do tell on how to manage the other 2/3.



> If sideways is the direction, (ranging between horizontal support and resistance), what can we do to make profit? As you can see in the price action after my exit the stock is "bumpy" or simply more volatile. It is in this space that traders who are knowledgeable in Options have a significant advantage as they can structure strategies that will limit downside risk.
> 
> If you are interested in these kinds of strategies I will point you in the direction of WayneL, who hangs out in the derivatives section of this forum. He's made numerous threads on options and explains things in a concise and clear manner and I will not be re-inventing the wheel. Link
> 
> ...




Thanks for the link. Now I know where the expression, it's all greek to me, came from... 

So for a newb that doesn't understand too much about derivatives, wouldn't conditional orders like Falling and Trailing Buy, Rising and Trailing Sells be well suited to trading the range and with less risk?

Looking forward to Tech's chart analysis also.


----------



## Sir Osisofliver (14 August 2014)

Craton said:


> So much to learn... am assuming that going long is in anticipation of an uptrend. Please do tell on how to manage the other 2/3.




Yes "going Long" means an anticipation of an upwardly trending share price.

"Going short" means an anticipation of a downwardly trending share price.

If the share price direction is sideways, ranging between and upper an lower resistance and support, there are various options strategies that involve placing both a short and long position on either side of the current share price with a view to closing the losing position and allowing the winning position to turn a profit. Trailing sells and buys can be incorporated into the process to lower risk. This is a simplified example, the importance of the Greeks and the impact on the relative value of the option employed can be *critical* and I encourage you to learn more.







> Thanks for the link. Now I know where the expression, it's all greek to me, came from...
> 
> So for a newb that doesn't understand too much about derivatives, wouldn't conditional orders like Falling and Trailing Buy, Rising and Trailing Sells be well suited to trading the range and with less risk?
> 
> Looking forward to Tech's chart analysis also.




Indeed that is how you lower risk, but refer to my previous comment about the importance of understanding the impact of the Greeks.

Cheers

Sir O


----------



## Wysiwyg (14 August 2014)

Sir Osisofliver said:


> I have to ask the somewhat philosophical question, that price action moves in three directions, Up, Down and sideways.  *If we limit ourselves to only going long, that means we have limited ourselves to one third of the possible trend movements...so how do we expand this?*



If specialising in long only then one could expand their trading universe into other markets as there is always an up trend for trading waiting somewhere. There is an art to short and range trading too.


----------



## burglar (14 August 2014)

Sir Osisofliver said:


> ...  If we limit ourselves to only going long, that means we have limited ourselves to one third of the possible trend movements...so how do we expand this? ...




I had to get my head around the squeeze (uptrend).
Now, I am in shorts (downtrend).

I had not ever forgotten that third direction (sideways is sideways).

Is there one instrument that can deal with three directions simultaneously?


----------



## Sir Osisofliver (14 August 2014)

Wysiwyg said:


> If specialising in long only then one could expand their trading universe into other markets as there is always an up trend for trading waiting somewhere. There is an art to short and range trading too.




Oh yeah I don't disagree with this...there are always opportunities...if you can find them...but tell me honestly Wysiwyg, unless you were a pure technician like Tech/A and actually used fundamental information, how many different stocks do you think you could get adequately follow?

In broking world, analysts usually only cover about 5-6 stocks close enough to write a research report.  Since money is at stake...how much due diligence is enough?

IMO when we look at transacting in all three directions over a generally pretty limited number of potential stocks that we follow, we can be smarter with our trading positions.

Cheers

Sir O


----------



## Sir Osisofliver (14 August 2014)

burglar said:


> I had to get my head around the squeeze (uptrend).
> Now, I am in shorts (downtrend).
> 
> I had not ever forgotten that third direction (sideways is sideways).
> ...





Not for what I want to try and do, but experienced options traders will tell you that they can. 

Think about this however....

I entered the second JBH trade at the beginning of October 2012 and exited near the end of November 2013. An option has an expiry....and I had no idea how long the trend was going to continue, (no one has 100% certainty).

Cheers

Sir O


----------



## burglar (14 August 2014)

Sir Osisofliver said:


> Not for what I want to try and do, but experienced options traders will tell you that they can ...




Just had to ask.




Sir Osisofliver said:


> ... An option has an expiry ...





CFD's have more leverage than Options (no premium) and don't expire.
So now, with this new information in my arsenal, I'd like to suggest CFD to short.
But I am told that a CFD goes in one direction.
Then:


> Options trades can also be used to hedge CFD trades.



Link:
http://boombustblog.com/blog/item/6227-contributions-from-my-constiuency-cfd-vs-options-trading

But I am still assuming a breakout on downtrend, insuring against an uptrend and ignoring Mr. Sideways.


----------



## Gus Fring (14 August 2014)

Hello all. First post, hoping to build my share empire.

Know virtually nothing but looking to change that of course. Have a decent risk appetite and part of my strategy is to make LT plays on high risk high upside junior miners where I think the stock is undervalued. Problem is I don't have a scientific bone in my body and have no idea how to interpret drilling reports. 

I had a little look to try and get my head around intercepts and strike lengths and work out if higher grades at deepers levels is better etc., but that and all the different measurements used (ore being measured in tons, grading in grams but spot price in ounces really confused me, as did recovery rates and different terms of gold -- saleable gold versus gold concentrate etc.) Anyway, I know I need to change all that, so to cut a long story short, where can an absolute newb like me learn not just how to read these reports but learn more about the commodities market in general. Is that any books that you'd recommend etc.?

Thanks in advance.


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## burglar (14 August 2014)

Sir Osisofliver said:


> ... Interesting.  What does this emergent pattern mean to you? ...





Patterns are the study of the net effect of a diverse group under certain pressures, right?
So what are people doing that makes this pattern, what it is?
And what are they doing in the following cases:
a.) breakout above resistance?
b.) breakout below support?
c.) ranging?


----------



## burglar (14 August 2014)

Gus Fring said:


> ... no idea how to interpret drilling reports.






Hi Gus Fring,
Welcome to ASF

All that you need to know is hereabouts.
Trouble is, its not in one place.
I'll do a search for you and get you started.


Try this:
https://www.aussiestockforums.com/forums/showthread.php?t=22486

https://www.aussiestockforums.com/forums/showthread.php?t=9561


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## Gus Fring (14 August 2014)

Thanks for the welcome Burglar, and also for the links. Definitely have my reading for the night!


----------



## burglar (14 August 2014)

Gus Fring said:


> Thanks for the welcome Burglar, and also for the links. Definitely have my reading for the night!



Your welcome! 

When you're ready for something light and breezy visit here:
Smooth Banter Radio
https://www.aussiestockforums.com/forums/showthread.php?t=28797


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## Sir Osisofliver (15 August 2014)

If you ever come across a drilling term you don't recognise try here


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## burglar (15 August 2014)

Gus Fring said:


> ... ore being measured in tons, grading in grams but spot price in ounces ...






> If the conversion is from *troy* ounces (for precious metals, gold etc.), it is 31.1034768 grams.




Source:OuncesToGramsConversion


----------



## Craton (15 August 2014)

Sir Osisofliver said:


> Yes "going Long" means an anticipation of an upwardly trending share price.
> 
> "Going short" means an anticipation of a downwardly trending share price.
> 
> ...




Thanks for the feedback Sir O.

I was going to PM you the following but have decided to post here instead as a psychology example.

I'm none too sure if I'll ever get my head around derivatives as I had decided a long time ago when I first looked at these type of instruments that, no matter how hard I tried I wouldn't understand them let alone know how to use them. Time to learn/study was also against me.

Also when I first started investing, the first rule I used (apart from knowing oneself) was to understand my risk tolerance and "playing" with things I don't understand was clearly and firmly off the agenda and so, derivatives and the like just didn't feature on my horizon. My strategy was simple. Buy a quality dividend paying share, build the position over time on perceived lows so as to build an income stream via div's or the sold share via cash and the interest come retirement. Yes, I do have more than one stock.

I also made it a rule to have an allocation available (approx. 30%) in cash for rainy day events and for spec and penny dreadful stocks.

This has suited me fine and it's been amazing how I've turned my life of renting with bugga all savings or assets into owning outright two residential properties and a retail business along with the associated building and property. I also work within the business so have a wage to live on. Sounds impressive but remember I live in a remote/regional area so like for like, I doubt if I could do the same in the big smoke. Not that I want too, ten years eking out an existence in Sydney was ten years to many.

Options/derivatives, FX and the like to me are complex and hence I avoid like the plague. Sure I might and probably do miss opportunities but the payoff is that I can sleep well at night. Now having discovered ASF (why I hadn't seeked out stock forums in the past in beyond me, too busy working, being a dad and learning a new trade I'd say) I find myself coming back to these complex instruments. 

The questions you pose and meant as lessons are fantastic. I can tell you honestly that the discussion on the potential trade stump me. I simply don't know enough about how these de-risking plays work and as such, shy away from them and any attempt to answer. My feeble attempts as you'll note have been just that, feeble. As such I doubt if I'll be able to get my head into the option/derivative space as it doesn't float my boat as much as say, T/A does.

I feel I'd be wasting my time studying option plays when I'd rather be looking more and more into the T/A side of things and just playing the long game. I accept that I may miss opportunities but I'd rather play with something I'm far more comfortable and perhaps familiar with than going out on a limp. Of course this may all change if or when I have that eureka moment. Will leave it there for now and do as you suggest because it's obvious, there is much to learn.

Thanks ever so much for stimulating and thought prodding this old clunker mind of mine, much appreciated.

Cheers!


----------



## Sir Osisofliver (15 August 2014)

Craton said:


> I'm none too sure if I'll ever get my head around derivatives as I had decided a long time ago when I first looked at these type of instruments that, no matter how hard I tried I wouldn't understand them let alone know how to use them. Time to learn/study was also against me.
> 
> Also when I first started investing, the first rule I used (apart from knowing oneself) was to understand my risk tolerance and "playing" with things I don't understand was clearly and firmly off the agenda and so, derivatives and the like just didn't feature on my horizon. My strategy was simple. Buy a quality dividend paying share, build the position over time on perceived lows so as to build an income stream via div's or the sold share via cash and the interest come retirement. Yes, I do have more than one stock.
> 
> ...





Hi Craton,

Glad you've gotten some insight from the discussion. You are definitely on the right track there about only doing what you understand and feel comfortable with.  It's part of "know theyself" in my mind. 

I know this is a newbie thread and that some of what is in here can be seen as daunting and complex, but usually I'm responding to requests for information. This time I felt was important to help open the eye's to the possibilities and as JBH was a stock we discussed in detail and timing seems opportune, I jumped on the chance to discuss these issues. I intend to show what happened afterwards, but the lesson is always more powerful if you can pre-empt the trade on record before/if it happens. (You then don't get people saying prove it).

One of the things I have neglected (as simply too busy), has been a discussion around what I consider to be top tier and second tier stocks, and their impact over a longer term investing/trading horizon. I started talking about them around the #690 mark back on page....35.

I then kinda got distracted by the silly season and didn't tie the big picture of what I do all together. It's appropriate however to talk about the above transaction in context with a broader picture however, so....

Here's the model of how I invest in the share market (note this isn't the whole picture, because despite what brokers and financial advisers will tell you, the market isn't the only game out there and you need to diversify away from the share market into non-related asset classes).

*Tier 1 Portfolio (Long-Term, passive, geared)*
Market cycle bottom (6 o'clock - about March 2009) - I'm on record on these forums somewhere that I did indeed purchase at this time. Here you purchase core tier 1 portfolio stocks. Use margin lending up to 50%, ensure portfolio is *positively geared*. I can now effectively hold these positions *indefinitely*. The ability to hold them indefinitely is important because the market will undergo a period of instability and uncertainty. It's important to realize that this is simply fluctuations in capital value of the portfolio that is perfectly in line with fluctuations of the market. By positively gearing the portfolio at this time I can be a passive holder of those assets. Any capital growth during this period will lower the LVR (loan to valuation ratio) of the portfolio below 50%, so re-establishing the 50% gearing ratio by purchasing more shares (if you do not lose the self sufficient nature of the portfolio - dependent on borrowing rates and income from the portfolio) is appropriate. 

Once the above is done, when you can no longer create a self sufficient portfolio of high quality stocks, the nature of the market has changed, and our actions within that market also needs to adjust to the changing conditions. For this core portfolio, it may no longer be appropriate to purchase additional shares, so debt reduction becomes important. I will use excess income from trading activities and yield from the portfolio to pay down the margin loan until my LVR is at a minimum 25% or below. (I've started this process, but it's likely to take a while). This ensures the integrity and longevity of the core portfolio. (This core portfolio in terms of money allocated to this asset class will be approx 85-90% of investment at inception). 

*Tier 2 - Long-term, active, geared*
After the bottom of the market investors start looking for shares that aren't as high a quality as the Tier 1 stocks. They may simply be smaller market cap, or be industry centric or have other reasons behind their lack of inclusion into Tier 1. Many of them have higher yield or growth characteristics, so generally it's appropriate to look at these shares to enhance the characteristics of the core portfolio over time. These assets however an *not* Tier 1 shares that I would be happy to hold across multiple market cycles. Therefore assets in this category have a greater focus upon a) risk and b) profit taking. If/when appropriate to do so I will crystallize my gains, or limit my losses in these kinds of position, and usually use the proceeds to pay down debt. That is the active component of the portfolio, but these shares can be held for quite a length of time. I've got some stats on this, but can't be stuffed looking them up (they are on the home comp anyway). No allocation of funds is made towards this area at inception. Stocks in this category are purchased with proceeds from the trading portfolio's.

*Trading System - A, B, C, D* I will not be sharing how they are constructed, don't ask for more detail.
Trading System *A* works across all kinds of markets to a greater or lesser efficiency. As a consistent system with little time commitment it just plugs away, average months it will net 2.5%-3%, good months are 6%-8%, bad months are -2%-1%. Approximately 10% of funds will be placed in this at inception point (March 09).

Trading System *B* is...well it's really not a system at all, it's simply a cash box that I use for trades that smack me across the face. This is "play money" and highly discretionary in nature. It may have nothing in it from time to time, by I like to start it with 5% of funds at inception. (I also tend to dump a bit of cash in here to pay the tax man if a Tier 2 stock is sold). It mostly sits in cash investments all the time. As you might expect, this tends to get ravaged in a trading position if I'm not careful and paying attention, (which I frequently am) so hence the tiny allocation towards it at inception. (This is however where I've made some good gains when I am paying attention).

Trading System *C* is the short squeeze system I demonstrated here. This looks for outlier events within a low risk environment, and incorporates stops and position sizing methodologies. It has no allocation at inception, I will fund it from profits in the trading system. This is largely ignored in early cycle and starts to come on-stream later in the market cycle.

Trading System *D* is a secret. Sorry not sharing.

Ok I posted this before I finished because the page went glitchy and I thought I lost it. Will come back to this later, but ask question if you want.

Cheers

Sir O

P.S. With the above said, into which does the JBH proposed trade fit in?


----------



## tech/a (15 August 2014)

Ok I guess This T/A will tie in with some of Sir O's stuff.
Havent read his last post.

But here is *chart 1* a long term overview to the Latest high.

I have noted most of the important technical features.

Some maybe interested in how I structure a picture
of a chart------Its landscape

Other charts will be specific to certain areas of interest 
(To me) and daily time frame.

*Click to EXPAND*


----------



## tech/a (15 August 2014)

*Chart 2* a quick look at the trends structure on a daily chart

*Click to expand*


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## Craton (15 August 2014)

Sir O. Again, many thanks for sharing not only you insights but your time.



> P.S. With the above said, into which does the JBH proposed trade fit in?




Hmmm...righto, I'll have a stab at it.

Can’t be Tier 1 nor secret Trading system D for obvious reasons.

Trading system A just chugs away and as you are currently not holding JBH, can’t be A.

This leaves the less obvious Tier 2 and the Trading systems B and C.

Trading system B is “not a system at all” and you only allocate 5% so rule out B as you say you may not pay enough attention to this one.

C is low risk and has no allocation but does “comes on-stream” late in the cycle. Low risk so this one ruled out too but could be a candidate.

Leaving Tier 2 as the most likely strategy as focus is on risk and profit taking.


----------



## Sir Osisofliver (15 August 2014)

Craton said:


> Sir O. Again, many thanks for sharing not only you insights but your time.




No worries, if you get something out of it I'm a happy camper.







> Hmmm...righto, I'll have a stab at it.
> 
> Can’t be Tier 1 nor secret Trading system D for obvious reasons.
> 
> ...




That's 5% at inception. The amount in there will vary. 







> C is low risk and has no allocation but does “comes on-stream” late in the cycle. Low risk so this one ruled out too but could be a candidate.
> 
> Leaving Tier 2 as the most likely strategy as focus is on risk and profit taking.




So the original trade was the first trade I did in the short squeeze system. This proposed trade fits in the cash box as a trade that "smacks me across the face." Tier 2 is long only focussing on growth and income, so JBH as a proposed trade fits within there...I just have to remember to a) keep an eye on it and b) maintain appropriate risk management like a trailing stop.

Looking forward to what Tech/A has to say about it. I like his analysis so far and it's always interesting to me to see a technical approach that differs from my own yet comes up with the same results. (So far anyway).

Cheers

Sir O


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## tech/a (16 August 2014)

JBH is such a good chart to look at and analyse.
A lot to gain.
This chart I look at Accumulation Characteristics of a consolidation
This being the initial consolidation in Sir O's chart.

If you look at any of the smaller boxes I noted on chart 2
you'll be able to find characteristics there that would offer
opportunity to hold or add or make other derivative decisions.

*The key here is to Analyse whats happening at the Top and 
bottom of the box---there ----are the tests!*

Simply Is supply Increasing and over coming demand
Is demand over coming supply?
How do we know---?
(1) Price is not being forced lower by supply 
(2) Following bars are NOT indicating a follow on of supply
Supply is NOT searching lower prices. Its waiting for higher prices.
And keeps getting it.
(3) Demand is not prepared to search for higher prices until its evident that 
Supply has with drawn---due to the fact that those holding don't now want to sell as they see strength.
*This is evident when price then makes NEW highs on low---er volume*
The characteristics of a trend

The next chart is of the *CURRENT* (Loosely described---Consolidation )
Accumulation---Distribution---Not Clear yet?
The next 2 charts

One longer term and one more right of screen.
Sorry for the wait---but always busy!

*Click to expand*


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## tech/a (17 August 2014)

Ok I have come to a technical conclusion. How that falls in with Sir O I don't know.

But I think the following charts and in particular the JBH Chart is a great one for some technical analyzing.

*Click to expand any of the charts.*


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## burglar (17 August 2014)

tech/a said:


> ... Sorry for the wait---but always busy! ...




Thanks tech/a! 

Worth the wait.


----------



## Craton (17 August 2014)

tech/a said:


> Ok I have come to a technical conclusion. How that falls in with Sir O I don't know.
> 
> But I think the following charts and in particular the JBH Chart is a great one for some technical analyzing.
> 
> ...





Thanks tech/a, you make it look and sound so easy! Those price/volume indicators really stand out.

Question. Is it my eyes but in the SP sticks only the close and not the open is shown, is the a reason for that?


----------



## Sir Osisofliver (18 August 2014)

tech/a said:


> Ok I have come to a technical conclusion. How that falls in with Sir O I don't know.
> 
> But I think the following charts and in particular the JBH Chart is a great one for some technical analyzing.
> 
> ...




Hi Tech/A this is very much appreciated,

We do indeed have a similar conclusion that differs in only one respect, that of price target. Once again, just for kicks.... *DYOR THIS IS NOT ADVICE.* I can see that your technical price target is based upon the descending triangle formation. (If that wasn't clear to any newbies he's taken the range of the triangle, and projected that from the break point to achieve the stated 12'ish price target)

I won't be sharing here at this time what my projection and price target and the analysis behind it is.  So it is on record however I'll be sending Tech/A a PM (which I hope he'll keep), which records what my projection is and we'll see how each of us comes out when the trade ends. (Remember it's my intention to go dark on commentary on this trade until conclusion.)

I'm also going to assume that we as traders know how much equity is appropriate to place into a proposed transaction. For position Sizing see the information in this thread or search the forum. There is plenty of information around to determine "how much" to put into a particular transaction.

OK, so now we have an anticipated direction, what are our options at this time? Since the direction is downwards we cannot use an equity position and equity platform such as E*trade or Commsec, (unless this is a feature attached to your account in the form of derivatives).  Many Market participants require you to sign waivers and other actions before using such products to make sure you understand the risks involved, the most obvious one being leverage risk.

Downward trending price movements are historically more volatile than upward trending price movements. Meaning that typically they move downwards faster, but also tend to counter-trend rally with a larger movement of price action. Stops that would have been appropriate to maintain during an upwards movement typically would be stopped out (in percentage terms at least).

This leaves us with a bit of a quandary, do we widen our stops?  If we do what's the potential impacts of such an action?
Do we tighten our stops? If we do what's the potential impacts of such an action? 

Cheers

Sir O

P.S. - Does anyoe have any questions for me at this time (likely to be busy today but will come back this arvo)


----------



## Sir Osisofliver (19 August 2014)

What no questions?

Remember newbies (and others) I won't be commenting or engaging if/when the trade enters, so you won't have forever to ask me questions that I will answer.

Cheers

Sir O


----------



## VSntchr (19 August 2014)

Sir Osisofliver said:


> if/when the trade enters




If we are on the same page, it must have been veeeerry close to triggering yesterday!


----------



## ROE (19 August 2014)

market is heating up lot of new people join the forum, lot of spammers and marketeer
taking advantage of the new fish, take extreme caution 

plenty of good information available for free, all you do is ask and the good people will point you in the right direction 
by not paying for thousand of dollars on system or course you already ahead of the pack by a few thousand bucks.


----------



## Sir Osisofliver (19 August 2014)

VSntchr said:


> If we are on the same page, it must have been veeeerry close to triggering yesterday!




And today.


----------



## Sir Osisofliver (19 August 2014)

Hey crawler - please take your *spam* away from this thread. But congratulations, you're the first! 

I'm going to ask a mod to dive-bomb your post.

For the newbies, here's alternative views about the wealth within course...that don't give a glowing recommendation from a newly registered, single digit poster...The below is from the wealth within thread link




kded said:


> I have been doing the course for 9 months & I am not at all happy with it. The material is very outdated, all examples are late nineties or early 00s. The support is abysmal and they have an attitude of 'we are always right & you are wrong regardless'.
> 
> The on line webinars are terrible; also very old & the presenters waffle on about rubbish without concentrating on the subject material. If you want to learn all about Gann & Dow theory go ahead & they only use Market Analyst. It is a lot of money although it can be covered by VET Fee HELP, so you only have to pay if your income exceeds $50,000. I have done many other University courses & on line trading courses and this is one of the worst that I have come across. I think the Government should investigate it & take it off of being eligible for Govt assistance. Many of the webinars on their website are extremely old.
> 
> ...






620K said:


> I'd like to agree wholeheartedly with 'kded' below. WealthWithin were hopeless, I wish I hadn't got sucked in by their slick website - their student support is terrible.
> I had a so called 'coach' who was useless - I emailed him to say I couldn't understand a tax formula & therefore couldn't even begin to answer a question. His response was that nobody else had had trouble with this question (ie I must be an idiot?) and that he'd help me *once* I'd answered the question & showed my calculations. This is their standard, cut & paste ansewer to all enquiries it seems. I guess you're supposed to bash your head against a brick wall for a few hours before daring to ask for help.
> I suspected at this point that I'd stepped into the twilight zone of trading courses and withdrew asap. I got all my money back thank goodness.
> The webinars are outdated, repetitive, boring & not very useful. The videos I bought before I started the course were so old they were an embarassment.
> ...






DJG said:


> Plenty of one-posters hey! Does anyone have a book on how to read between the lines?


----------



## prawn_86 (19 August 2014)

I have just removed some spam posts. Anyone wanting to advertise can contact the forum owner directly


----------



## tech/a (19 August 2014)

Sir Osisofliver said:


> And today.




Oh My!


----------



## Sir Osisofliver (19 August 2014)

tech/a said:


> Oh My!




<.<   >.>

No comment.


Lets just say the window closed a short time ago. 


Cheers

Sir O


----------



## skyQuake (19 August 2014)

Sir Osisofliver said:


> <.<   >.>
> 
> No comment.
> 
> ...




Thanks for the heads up, pretty hard finding shorts in this market


----------



## skc (19 August 2014)

skyQuake said:


> Thanks for the heads up, pretty hard finding shorts in this market




Pretty hard finding short setup? Or pretty hard finding short borrow in JBH? We don't have any


----------



## DeepState (19 August 2014)

skc said:


> ....Or pretty hard finding short borrow in JBH? We don't have any




skc, can you outline where are you sourcing borrow from and under what terms are you getting it in general?


----------



## skc (19 August 2014)

DeepState said:


> skc, can you outline where are you sourcing borrow from and under what terms are you getting it in general?




My shorts with the prop firm come from one of the major prime brokers. Most of the ASX200 are available bar a few really popular ones (e.g. MND, JBH, and LYC back in the days). And we can email special requests if they are not on the list. There is a blanket borrow fee which I can't disclose here, and sometimes more exotic names attract higher costs. Sorry about the generic response but it's company's business so I can't disclose too much here.

With personal stuff, I typically use IG as my CFD provider. They source from a number of prime brokers and can actually have a larger list than my shop. Borrow costs from them is usually free except a few specific (popular) ones. They are also overseas borrows so no franking credits on ex-div in most instances.

Interactive Brokers are offer some shorts but usually in the most active names only. I haven't really shorted with them.

This is probably quite off-topic so may be worth a new thread if you are looking for more on where to find shorts.


----------



## DeepState (19 August 2014)

skc said:


> My shorts with the prop firm come from one of the major prime brokers. Most of the ASX200 are available bar a few really popular ones (e.g. MND, JBH, and LYC back in the days). And we can email special requests if they are not on the list. There is a blanket borrow fee which I can't disclose here, and sometimes more exotic names attract higher costs. Sorry about the generic response but it's company's business so I can't disclose too much here.
> 
> With personal stuff, I typically use IG as my CFD provider. They source from a number of prime brokers and can actually have a larger list than my shop. Borrow costs from them is usually free except a few specific (popular) ones. They are also overseas borrows so no franking credits on ex-div in most instances.
> 
> ...




Aren't we newbies? .  Actually, perhaps the mechanics of this might be of interest/relevance given it is a genuine trading issue which will be incurred by newbies too.

Thanks.  IG uses UBS for the majority of its services in relation to borrow.  It was also my experience that UBS had the best access although I was pretty happy with others.  It was also my experience that the charges being levied as retail cost recovery are quite a bit higher than what I used to incur.  Sec lending revenue had been squashed to near nothing several years ago.

FYI IG charges for borrow over and above the financing fee (and bro') if held overnight.  This is buried pretty deep into their doco.  For a stock like BHP the borrow cost is 1%...which includes the admin charge (0.5%).  I have been able to request locate in special situations which they managed to secure for me.




Was just wondering if you had better options.


Thanks, I'll sign off.


----------



## skyQuake (20 August 2014)

DeepState said:


> Aren't we newbies? .  Actually, perhaps the mechanics of this might be of interest/relevance given it is a genuine trading issue which will be incurred by newbies too.
> 
> Thanks.  IG uses UBS for the majority of its services in relation to borrow.  It was also my experience that UBS had the best access although I was pretty happy with others.  It was also my experience that the charges being levied as retail cost recovery are quite a bit higher than what I used to incur.  Sec lending revenue had been squashed to near nothing several years ago.
> 
> ...




Yep I remember that 0.5% admin charge... Game changer.

For those still interested, IG publishes a lost of stocks tradable, and whether its shortable:

http://www.marketdatasystems.com/content/files/Tiered Margin.xls

Good thing with them is that they can have inhouse borrow from client longs when there is no real borrow floating around elsewhere



> Pretty hard finding short setup? Or pretty hard finding short borrow in JBH? We don't have any



Both! I never touch JBH normally so I was ok to short them pa through IG


----------



## skc (20 August 2014)

skyQuake said:


> Yep I remember that 0.5% admin charge... Game changer.




Dam... I've forgotten about them. 



skyQuake said:


> Both! I never touch JBH normally so I was ok to short them pa through IG




I captured this chart but didn't post it since they report today. But that would have been a good short on open today.


----------



## skc (20 August 2014)

skc said:


> Dam... I've forgotten about them.




On second thought... that's 0.5% per annum. Not on full trade value.


----------



## Sir Osisofliver (13 October 2014)

Hi Newbies et al,

So I thought I would pop in and say G'day to all the guys and gals and have a chat. So what are we going to talk about?

Well I did say I was going dark on commentary on JBH until the trade was completed...which is true...and the trade is *not yet completed*...so don't ask me what I think about it. Legalese disclaimer inserted here. 

I'd be interested in hearing if any ASF'ers actually did take a position and what that position was, because we can talk about your position, just not my position.

So this discussion will be about how we maintain objectivity in an ongoing trade position. Ah yes those pesky emotions once again skewing how we look at our positions. I find this is the hardest part for a new trader, when there is real money on the table and it's not just a theoretical exercise any more.

It becomes particularly relevant when using any kind of leveraged position via a derivative. (which we've generally had to do to go short in JBH). That derivative generally means we are swinging around a pretty big lever and for some people that enhances their emotional aspects in trade as well. 

To highlight this discussion I'll be using some quotes from here on ASF, in the JBH thread.  Please note - *I'm not picking on anyone.* If I use your post from the JBH thread I am doing so to highlight a psychological point and I'd like to sincerely thank you for contributing. I can talk about price action in shares, demonstrate a successful trade, pre-empt a trade and use charts and fundamental information to explain price movements, and there's lots of this around the forum...

It's significantly more difficult to actually show the mind set of those involved in the auction process that is the market. So once again, Thank-you very much for demonstrating a very, very useful lesson to learn. So for Newbies, (and others interested), let get out our styling listening caps on as we examine the below...

Ok you can ignore all posts in the thread prior to #325 which occurred on the 11th of August...the date on which I started talking about JBH (post #817 back on page 41).

One of the first things to occur in the JBH thread was a comment by Junior, quoting a research analyst. This is not an exhaustive process, we have one comment from an Analyst (who is himself or herself subject to their own emotional and and analytical bias). There are seven major broking or analysis houses that cover JBH. At the time of the August 11 announcement most of them updated their research....prior to this research the intrinsic value average across all seven was ~$20.70, post the August 11 announcement the intrinsic value (Assume the price target) across them dropped to ~$18.00. Interesting to note that the spread of those numbers however increased, with Morgan Stanley up at the $21 price target, and Morningstar with a fair value of $12.....that's a pretty wide margin I'm sure you agree.

So, look at the commentary in the JBH thread. We have one analyst viewpoint, and some chatting in there about whether they called it correct or not, and what people think might happen.  This is *exactly* what is occurring in the market in the form of price action. Buyers and sellers are reading the research reports, doing technical analysis, talking to their brokers or whatever it is they do, and taking an action based on that and other factors (IE what they *think* will happen). It's important to realize that this view is just one voice among the many. They who shout the loudest will form the majority view and the likely direction of the share price.

In the first few posts, the direction certainly seems to be "Down" with comments from McCoy Pauley, DB94, skc, and Notting all expressing a degree of uncertainty in relation to the share.

What happens next (on the 20th of August - by now the JBH share closed at $16.72) is we start to see some voices with a differing opinion, Sammy84, TPI make comments that express a divergence (meaning a potential price movement in an opposing direction), and "oversold", one a technical expression and one a fundamental expression.  By now in the Newbie thread, I've just gone dark on commentary, Tech/A has done a lovely chart analysis and the prevailing view appears to be "down".

Notice the commentary from TPI in particular in the JBH thread (TPI once again I am not picking on you and no offence is intended) The next several posts all appear to be justifications or evidence based around supporting his viewpoint, that JBH appears oversold. (I'll say it once again.... *They who shout the loudest will form the majority view and the likely direction of the share price.*)

We then get Tech/A with his usual brevity. (One criticism Tech is you do seem short with the newbs or less experience, but I understand how frustrating it can be talking to people and brevity makes sure you don't waste your time). Note that Tech doesn't come right out and say "you're an idiot", he wants to know whether TPI has protected against downside risk....turns out he had...as we are told on the 27th of August, well done TPI. He then goes on to say a bunch of anecdotal and fundamental-based reasons about why he thinks he got it wrong and when he might revisit in the future. (Notice that TPI is only trading long, he has limited his choices to 1/3 of potential price direction in a stock he appears very familiar with).

goccipgp then makes a comment...pretty terse, making a fundametal statement about p/e and relative value for the Fundies, and a support levels and the like for the techies...and then mentions a commercial information provider. *They who shout the loudest will form the majority view and the likely direction of the share price.* (who's shouting here?)

Galumay and Porper kind of hose that down, providing their own view about support and resistance levels and then....

Hiddencow! In - Long term - over 5% dividend yield....Tech/A unfortunately this time say's "you're being foolish".  
*Question for the newbies.* How do you think the relative time period involved influences the decision process here? Hiddencow would not be alone as a long-term (20+ year) investor in thinking that an over 5% dividend yield was "attractive". Do you think Tech/A (or most other people) are working to the same time frame? How does this influence the relative merit of the decision process?  Now imagine that Hiddencow! operates inside a 15% taxation environment, has half a billion dollars up his sleeve that is looking for a home, can make additional yield by employing options strategies and other activities. 

Then there's a bit of argy bargy, and some mod noise about staying on topic. (shares in JBH now closed at $15.49)

Boggo, Tech/A and now Julia, are now more fully detailing to a persistent Hiddencow the potential danger of what he's doing and using technical and fundamental information and anecdotal experience.

There's then some more argy bargy and voices predominantly from a fundamental viewpoint about relative value.

Then we get some more anecdotal evidence and fundamentals which might explain a falling shareprice from TPI, and Tech asks hiddencow how's s/she is going in trade. There's some snark (gotta love the internet) and Hiddenco re-affirms his/her long term view. (once again do you think these two very different investors/traders are operating on the same time period and valuing the relative aspects of the share under the same basis?) this is what is happening in the broader market as well.

Just like the market (auction) there will be differences of opinion that have to do with the time period being a major factor in the decision making process. Just like the market it's the loudest voice that determines the directionality of the share price.

Last comment by Burglar is some more media/analyst words on the 1st of October.....shares were $15.52 on the close.

As I type this JBH is trading at $14.58

Those in a short position are now significantly in profit.
Those in a long position are showing a capital loss.

*So how do we maintain objectivity?*

So what's the emotional state of each investor/trader and how will this influence *future* price action? Because the profit or loss of each investor is only determined by the *exit* of the position, whether that is now or in 20 years time.

*It's important to realize the impact of our proposed time period* has on our decision making process, and this is directly related to financial risk. Plan or estimate how long you will hold a position. From my outside perspective, Hiddencow has an expectation around yield and price movement over a long-term time frame. As long as the yield is maintained he doesn't seem overly concerned about price fluctuations...*because* such fluctuations are secondary to him/her and the type of investing s/he does. S/he has made no mention of stops, so the relative fluctuation in capital value appears immaterial to the decision process.

To those who are short-term, system or hard rule orientated this looks like sheer madness...madness I tells ya!!!! Doesn't change the fact that there are a lot of hiddencows around and their voices are part of the auction process. I know investors who are the bottom drawer types. Buy the stock, chuck it in a drawer and check it out in ten years time and collect the div in the interim.

What to expect...well it still appears that the sellers are yelling the loudest, given the movement of the share price, but we can expect more value investors to start to chime in, (at this point the p/e is now 11.50 and the yield on JBH is 5.8% with 100% franking and stability ratio of 98.6%), these voices will get louder, as those numbers show further improvement in a falling share price environment.

*At some point* the scales will shift, the voice that yells the loudest will be calling for an accumulation of the shares. The real question is once again one of time and expectation. At this point you can be assured that I have moved my stop position. I am now comfortable (because I have relatively low risk compared to my original entry), for were a counter-trend rally to occur, I will still make a profit in the position, so by doing so I am maintaining my objectivity in trade. 

Note the relative urgency of the voices (and the emotions and snark) as people get further into and out of profit. To me it's just a number. I'll maintain a target price, but it's subject to review and careful movement of stop levels and I tend to ignore a whole bunch of media and analyst reports when in trade.

What do you do to maintain your objectivity?

Cheers

Sir O


----------



## Craton (13 October 2014)

G'day Sir O

Interesting and thought provoking as always.



> Question for the newbies. How do you think the relative time period involved influences the decision process here? Hiddencow would not be alone as a long-term (20+ year) investor in thinking that an over 5% dividend yield was "attractive". Do you think Tech/A (or most other people) are working to the same time frame? How does this influence the relative merit of the decision process? Now imagine that Hiddencow! operates inside a 15% taxation environment, has half a billion dollars up his sleeve that is looking for a home, can make additional yield by employing options strategies and other activities.




Certainly the time frame comes into play be it short, med or long term. For those that have little or no time to learn (or perhaps don't have the desire) to become a trader and/or have little spare cash to invest, the longer route may prove to be the best way forward.

For those that have greater experience, are more proficient, have time to spare then a shorter time frame may suit their skills.

So too, should a position turn sour then a stop might be triggered against a planned time objective. However, I do understand that by having a longer time span envisioned that this may be *perceived* to de-risk a position.

If I had $15B to manage, my job would be different, better paid and indeed, my knowledge of the machinations of the "auction" would be a lot more intimate. My stress factor would also be higher no doubt. *tongue-in-cheek* 



> What do you do to maintain your objectivity?




Emotions and money make very bad bed fellows and getting the emotions sorted goes a long way for making good, solid decisions in all aspects of life. Doing so is not an easy process though is it?

I go back to the reasons why I hold equities in the first place, why I hold a particular stock and yes, I do look at my time frame because I am reminded, for better or worse, I don't intend on selling any of the stocks I'm accumulating as my aim is to have a passive income in retirement and then, upon my leaving this mortal coil, leaving a trust in perpetuity for my descendants to grow from. Altruistic?

Perhaps but it's what floats my boat as I know what it is like to start with $200, some hand tools and a dream. Of course all this may change without notice.

My position in JBH is: zero.


----------



## burglar (13 October 2014)

burglar said:


> From The Motley Fool:
> ... hold-onto-your-jb-hi-fi-limited-shares/
> 
> 
> ...






Sir Osisofliver said:


> ... Last comment by Burglar is some more media/analyst words on the 1st of October.....shares were $15.52 on the close.





And more from the Fool!
http://www.fool.com.au/tickers/asx-jbh/

No doubt in my mind that each and every article contains a single sentence which sort of says both "JB Hi-Fi’s quality business model" and "won’t go down without a fight."

No matter which way it goes, "we were correct".


----------



## PinguPingu (14 October 2014)

Gotta give Motley Fool credit for the SEO techniques. Almost every time I bring up the ASX200/All Ords or any ASX stock there articles always appear in the 'news' section on the side with some very click-bait titles. Must pick up a lot of subscribers via that.


----------



## Craton (15 October 2014)

PinguPingu said:


> Gotta give Motley Fool credit for the SEO techniques. Almost every time I bring up the ASX200/All Ords or any ASX stock there articles always appear in the 'news' section on the side with some very click-bait titles. *Must pick up a lot of subscribers via that*.




Yep, and probably more so when stock prices tumble.


----------



## Tooth Faerie (11 December 2014)

Sir O,

I cannot express how much I appreciate your time and effort into educating us all. I hungrily digested the thread twice over and will read it again another time. It's ignited a new passion in me, to retire sooner.

I have a newbie question.

What investment strategies work before an oncoming recession?

My newbie thoughts are:
Share - generally will go down
Property - will go down
Government bonds - will go up


----------



## burglar (11 December 2014)

Tooth Faerie said:


> Sir O,
> 
> I cannot express how much I appreciate your time and effort into educating us all. I hungrily digested the thread twice over and will read it again another time. It's ignited a new passion in me, to retire sooner.
> 
> ...




This is one post which refers:
https://www.aussiestockforums.com/forums/showthread.php?t=14370&p=483900&viewfull=1#post483900


----------



## Tooth Faerie (17 January 2015)

burglar said:


> This is one post which refers:
> https://www.aussiestockforums.com/forums/showthread.php?t=14370&p=483900&viewfull=1#post483900




Please go easy on me everyone. I'm a total noob and I'm just going to have a stab at what "time" we are on the economic cycles.


Unemployment - High
Interest rates - Low
Property market - Slowing down
Fixed Interest - Bonds doing well recently


Are we currently from 5 o'clock to 6 o'clock?

I would really appreciate it if other people would give me some feedback. Especially where you think we're at in the overall cycle.


----------



## burglar (18 January 2015)

Tooth Faerie said:


> ... Especially where you think we're at in the overall cycle.




There are differing opinions on what constitutes a good strategy in a recession.

1.) As you are in SirO's Thread, I had tried to point you to his strategy.
That is to say, you hold your "Core" long positions!
Then insure them against going down, by purchasing a Put Option.

2.) Another strategy is running to cash/bonds.
This is fraught with timing difficulties, ... when to get out ... when to re-enter.

3.) And there is the "Buy and Hold" strategy.





As for your question about the clock, I'll wait until SirO drops in.


----------



## Tooth Faerie (19 January 2015)

burglar said:


> There are differing opinions on what constitutes a good strategy in a recession.
> 
> 1.) As you are in SirO's Thread, I had tried to point you to his strategy.
> That is to say, you hold your "Core" long positions!
> ...




Went through all 46 pages yet again and made some notes on the particular points above. This thread and its contributors are a absolutely goldmine of knowledge.


----------



## The Falcon (19 January 2015)

Really enjoyed Sir O's post of 13 OCT. Will look through the thread again tonight...great resource


----------



## trancearc (19 January 2015)

Sir O

Do you have any recommendation of the book for me to read please?   I am very raw here and would like to learn more or at least know a little jargon in this currency trading.

By the way, your writing inspires me to budget more carefully.

Thank you.

Trancearc


----------



## StockTrader010 (26 January 2015)

trancearc said:


> Sir O
> 
> Do you have any recommendation of the book for me to read please?   I am very raw here and would like to learn more or at least know a little jargon in this currency trading.
> 
> ...




ForeX Trading for Maximum Profit: The Best Kept Secret Off Wall Street by Raghee Horner is a good book on FX


----------



## grehar (20 February 2015)

Not sure if this question has previously been asked? I'm feeling my way around and still too much to learn.
From my observations the best time of the day to acquire shares is between 10am and 3pm where it appears less price movement. But I wonder if there is a certain time of the year which is better to purchase shares? Or does it not matter?


----------



## ROE (20 February 2015)

grehar said:


> Not sure if this question has previously been asked? I'm feeling my way around and still too much to learn.
> From my observations the best time of the day to acquire shares is between 10am and 3pm where it appears less price movement. But I wonder if there is a certain time of the year which is better to purchase shares? Or does it not matter?




There is no such thing , stock market price move with many wheels in motions, could be rumors, bad press, earning down grade, scandal, fund managers exiting/entering position, competition and hundred of other reasons.

your job is to work out which news is relevant, there is no easy way you just have to learn the art before you can make good judgement and make money.


----------



## g-topa-g (23 March 2015)

I have a few questions;

1. How do I pick and choose certain parts of a post instead of including the whole post? 

2. There are different coloured envelopes that I see from time to time...what do the colours represent?

3. When I post something what is the best way to see if my post has been replied to?

Thanks

GTG


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## burglar (24 March 2015)

g-topa-g said:


> ... 1. How do I pick certain parts instead of the whole post? ...




If you mean when you reply with quote, 
then you can highlight the unwanted bits and delete them.




g-topa-g said:


> ... 3. ... what is the best way to see if my post has been replied to? ...




Suscribe to the thread.
Your subscription list will update with each new post.


----------



## g-topa-g (24 March 2015)

burglar said:


> If you mean when you reply with quote,
> then you can highlight the unwanted bits and delete them.
> 
> 
> ...




Thanks burglar...I'll give it go. 
GTG


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## scub (27 August 2015)

Can any one direct me to  index charts comparing PE ratios with historical  concurrent interest rates?

I am looking to buy local and over seas "whole market ETFs" but keep putting it off because the markets are persistently rated as overvalued.

If the PE ratio is linked to interest rates then  perhaps I should reconsider  what now is a reasonable PE ratio rather than a median "ideal " PE ratio historically tilted by prolonged periods of higher interest rates

Scub


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## goponcho (10 February 2016)

Ughhh what does this mean?!: What is happening to equity and is it in the interest of shareholders?

Shareholders approved a proposal to reconstruct the capital of the company whereby consolidating every 10 fully paid ordinary shares into 9.827 fully paid ordinary share. Fractions rounded up. The return of capital and the share consolidation are interdependent. Accordingly, approval of each item is conditional on the approval of the other. Shareholder approval is not required for the Board to determine and pay the fully-franked dividend of 25 cents per share that forms part of the capital management initiative. However, the Board has decided that declaration and payment of the fully-franked dividend is conditional on shareholders passing Item 6 (Return of Capital to Shareholders) and Item 7 (Share Consolidation). Accordingly, if either or both of these items are not passed, no funds will be paid to shareholders. 28/10/2014 - The company proposes a capital management initiative of $1.00 per share made up of a return of capital of 75 cents per share; and a fully-franked dividend of 25 cents per share. If approved, the return of capital of 75 cents per share will be accompanied by an equal and proportionate consolidation of share capital through the conversion of each share into 0.9827 shares. Entitlements for the return of capital and dividend will be determined by reference to Wesfarmers' pre-consolidation capital. Trading in post-consolidated shares commences on a deferred settlement basis on Wednesday, 26 November 2014.


----------



## StockTrader010 (25 February 2016)

I'm looking for an excel template that correctly applies the XIRR calculation to calculate the internal rate of return. I've found an example excel file here (external link). 

Can someone quickly verify whether it's correct (see bottom page)? Thanks


----------



## goponcho (8 March 2016)

Hi,

Is there a website i can get 52 week rolling lows from?

I guess i could create a filter alternatively, but an easy accessible one would be nice


On further search foudn this one:
http://asxiq.com/performance-data/end-of-day/year-low/1/

Another would be handy as not much detail on this one on first glance


----------



## Wysiwyg (8 March 2016)

Easy. 


goponcho said:


> Hi,
> 
> Is there a website i can get 52 week rolling lows from?
> 
> ...




XAO from 4th. to today. 

Ticker  Date       52 Week Low	
ADO	7/03/2016	0.06
ADO	8/03/2016	0.06
CAJ	7/03/2016	0.13
CLX	4/03/2016	0.89
CLX	7/03/2016	0.86
DVN	7/03/2016	0.42
DVN	8/03/2016	0.42
HIL	8/03/2016	0.20
KPL	3/03/2016	0.10
KPL	4/03/2016	0.10
PAC	7/03/2016	4.99
PAC	8/03/2016	4.88
SAI	7/03/2016	3.53
SLM	4/03/2016	0.56
SLM	7/03/2016	0.55


----------



## goponcho (11 March 2016)

Wysiwyg said:


> Easy.
> 
> 
> XAO from 4th. to today.
> ...




Thanks, will try that out if there's no easier option!! Not an amibroker user, yet


----------



## Telamelo (26 March 2016)

goponcho said:


> Thanks, will try that out if there's no easier option!! Not an amibroker user, yet




Thought I'd share some timely trading/investing advice applicable to both newbie's as well as us a little more experienced one's alike - as we never stop learning during our trading journey....  Enjoy and Good Luck!

TRADER PSYCHOLOGY

1.	Be flexible and go with the flow of the markets price action, stubbornness, egos, and emotions are the worst indicators for entries and exits.

2.	Understand that the trader only chooses their entries, exits, position size, and risk and the market chooses whether they are profitable or not.

3.	You must have a trading plan before you start to trade, that has to be your anchor in decision making.

4.	You have to let go of wanting to always be right about your trade and exchange it for wanting to make money. The first step of making money is to cut a 'losing trade' short the moment it is confirmed that you are wrong.

5.	Never trade position sizes so big that your emotions take over from your trading plan.

6.	"If it feels good, don't do it." – Richard Weissman

7.	Trade your biggest position sizes during winning streaks and your smallest position sizes during losing streaks. Not too big and trade your smallest when in a losing streak.

8.	Do not worry about losing money that can be made back worry about losing your trading discipline.

9.	A losing trade costs you money but letting a big losing trade get too far out of hand can cause you to lose your nerve. Cut losses for the sake o your nerves as much as for the sake of capital preservation.

10.	A trader can only go on to success after they have faith in themselves as a trader, their trading system as a winner, and know that they will stay disciplined in their trading journey.

--Bring your risk of ruin down to almost zero.

RISK MANAGEMENT

1.	Never enter a trade before you know where you will exit if proven wrong.

2.	First find the right stop loss level that will show you that you’re wrong about a trade then set your positions size based on that price level.

3.	Focus like a laser on how much capital can be lost on any trade first before you enter not on how much profit you could make.

4.	Structure your trades through position sizing and stop losses so you never lose more than 1% of your trading capital on one losing trade.

5.	Never expose your trading account to more than 5% total risk at any one time.

6.	Understand the nature of volatility and adjust your position size for the increased risk with volatility spikes.

7.	Never, ever, ever, add to a losing trade. Eventually that will destroy your trading account when you eventually fight the wrong trend.

8.	All your trades should end in one of four ways: a small win, a big win, a small loss, or break even, but never a big loss. If you can get rid of big losses you have a great chance of eventually trading success.

9.	Be incredibly stubborn in your risk management rules don’t give up an inch. Defense wins championships in sports and profits in trading.

10.	Most of the time trailing stops are more profitable than profit targets. We need the big wins to pay for the losing trades. Trends tend to go farther than anyone anticipates.

--Develop a winning trading system that fits your personality.

YOUR ROBUST METHOD

1.	“Trade What's Happening...Not What You Think Is Gonna Happen.” – Doug Gregory

2.	Go long strength; sell weakness short in your time frame.

3.	Find your edge over other traders.

4.	Your trading system must be built on quantifiable facts not opinions.

5.	Trade the chart not the news.

6.	A robust trading system must either be designed to have a large winning percentage of trades or big wins and small losses.

7.	Only take trades that have a skewed risk reward in your favor.

8.	The answer to the question, “What’s the trend?” is the question, “What’s your timeframe?” – Richard Weissman. Trade primarily in the direction that a market is trending in on your time frame until the end when it bends.

9.	Only take real entries that have an edge, avoid being caught up in the meaningless noise.

10.	Place your stop losses outside the range of noise so you are only stopped out when you are likely wrong.

www.traderplanet.com/articles/view/165953-30-great-trading-rules/

======

ASSAD'S RULES OF TRADING

Trading rule No 1. Never chase. Forget about the Dollar loss for a moment as the real damage comes from the distraction it creates.

Trading rule No 2. Wait for the break. Most traders buy inside the range, get impatient and as a result they sell on first sign of strength which ends up being the breakout.

Trading rule No 3. Don't ride the ticks and Dollar profits. It creates emotional turmoil and is draining. Prevention is best cure. Takes the fun out of the game.

Trading rule No 4. Price action trumps everything. Management lie or mislead but price action (money flow) never lies.

Trading rule No 5. Sell the news or a least sell partials. Markets discount everything and over the long run you will be better off.

Trading rule No 6. Always stay in control. Do NOT put yourself in news related coin toss trades, where the risk cannot be managed.

Trading rule No 7. Mind your own business, avoid conflict. If you take offence because someone has disagreed with your trade, then you are such a precious little petal.

Trading rule No 8. Do NOT set targets as all this creates is a premature EXIT. Run a trailer and let that take you out.

Trading rule No 9. Minimise whipsaw at all costs. It's a trader killer. The root cause of trading failure more often than not, starts with whipsaw.

Trading rule No 10. Do NOT buy stretched breakouts. More often than not they recoil back into the range to flush traders out.

Trading rule No 11. Start with long term charts and look to catch major breaks/moves. These tend to follow through and it makes it easier to run with winners.

Trading rule No 12. DO NOT trades Forex short-term. It is a mugs game, news driven by central banks. It is like betting on the greyhounds.

Trading rule No 13. Turn trading rules into habit. There is no point in having trading rules if you dont apply them!

Trading rule No 14. And the most important; only tell your wife about your losers.  

Trading rule No 15. Hit those stops, no questions asked. Hitting your stop and watching a stock rally hurts but not htting your stop and watching the stock fall hurts a hell of alot more.

www.asenna.com.au/asenna/node/34842

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


Cheers tela


----------



## bowfinger (12 April 2016)

Hi there, 

I am to investing and new to the Aussie Stock Forums. This thread seems a great place to start. 

I am quite baffled by Chapter 2, which asserts that " by choosing to pay fortnightly (AND NOT AMORTISING THE PAYMENTS) you are in effect making 13 months of payments in a year"...

I understand the benefit of making 26 half-monthly payments (as compared to 12 monthly payments); I don't understand what's meant by "not amortising the payments". 

Is amortising the process whereby the percentages of principle and interest repayments change over time (more interest and less principal at the start, less interest and more principle at the end of the loan term)? 

I have an interest-only loan (and keep the offset account topped-up to minimise interest repayments); is it possible to not amortise my fortnightly repayments with this loan ?

Thanks in advance for your advice

Cheers,

Bowfinger


----------



## Alpaca5 (1 May 2016)

What is the best place for getting a full listing of All Ords or ASX200 and filter/rank them by things like p/e or dividend yield?  Sorry if this is a dumb question. I can search them on Yahoo but I don't see how to list or sort.

Is there somewhere free for this or do I need a trading account at e.g. Commsec?


----------



## mcgrath111 (4 January 2017)

Where can I get broker report like the one produced by Morgans or the big brokers etc. 
Like the one in the link below:
https://www.google.com.au/url?sa=t&...HXzxMnQKDLnIHdG-g&sig2=YlSR6diNyjtRs9x8FxT_RA

I realise that for the most part such things would require subscription, os there any round about ways to accessing such information?

Thanks,


----------



## galumay (4 January 2017)

mcgrath111 said:


> I realise that for the most part such things would require subscription, os there any round about ways to accessing such information?




Well there is really 2 separate types of info in there, firstly all the financial stuff is obviously freely available just through the standard reporting by the business. Then there is broker analysis, which to be honest is notoriously inaccurate anyway! 

So the first part you can, and should gather yourself for businesses that interest you, the second part you can get a bit of a window into from places like Commsec, but honestly you may as well take a strawpoll on HC!

I think you can learn as much about understanding and analysing a business from following the share specific threads here on ASF, there are some very knowledgable and skilled people that share their analysis and research here and I have always found that if you ask questions to further your understanding, they are more than happy to help.


----------



## mcgrath111 (4 January 2017)

galumay said:


> Well there is really 2 separate types of info in
> I think you can learn as much about understanding and analysing a business from following the share specific threads here on ASF, there are some very knowledgable and skilled people that share their analysis and research here and I have always found that if you ask questions to further your understanding, they are more than happy to help.



Definitely agree, particularly in regards to financials, however I like the comprehensive summaries that they provide.
As to HC, it can get muddled between conspiracy theories and actual content haha


----------



## OmegaTrader (5 January 2017)

Telamelo said:


> Thought I'd share some timely trading/investing advice applicable to both newbie's as well as us a little more experienced one's alike - as we never stop learning during our trading journey....  Enjoy and Good Luck!
> 
> TRADER PSYCHOLOGY
> 
> ...





Rule 1: Be the devil's advocate
Rule 2: Be the devil's advocate



> Trade your biggest position sizes during winning streaks and your smallest position sizes during losing streaks. Not too big and trade your smallest when in a losing streak.




How do I know when I am going to win or lose??
If I knew that I would just not trade when I am going to lose.



> Never expose your trading account to more than 5% total risk at any one time.
> 
> Structure your trades through position sizing and stop losses so you never lose more than 1% of your trading capital on one losing trade.




Depends on the strategy. Some strategies 5-10% position size might be the optimum.

for others it might be 1%.




> DO NOT trades Forex short-term. It is a mugs game, news driven by central banks. It is like betting on the greyhounds.




There are professional Forex traders as there are professional gamblers as well




> Sell the news or a least sell partials. Markets discount everything and over the long run you will be better off.




The market discounts everything???
Then how do you make money???



> --Bring your risk of ruin down to almost zero.




Please explain?



> And the most important; only tell your wife about your losers.




I don't have a wife so who do I tell?
hahaha 




> Only take real entries that have an edge, avoid being caught up in the meaningless noise.




How do you do this?


I think you get the point I am trying to make..........


----------



## goponcho (10 January 2017)

Question - if value investing, when calculating return on equity, do we use stockholder equity _excluding goodwill/tangibles??_


----------



## luutzu (10 January 2017)

goponcho said:


> Question - if value investing, when calculating return on equity, do we use stockholder equity _excluding goodwill/tangibles??_




Top of my head stuff here, but I don't think goodwill/intangibles are anywhere in the ROE equation.

I suppose if you break down DuPont's ROE to its components and there's that asset turnover component. In that case, I think you would have to use gw/intangibles as they are the company's assets and it would indicate how well they return in earnings.


----------



## mcgrath111 (19 January 2017)

Hi All,

Being a relatively young guy (25), I was wondering if you could share a light on one or two things that you've realised have an effect on building wealth.

A key for me is using credit cards. Aside from the annual fee; rewards have paid for trips, and a few gift cards along the way. 
If I had of realised this earlier, I would have accumulated far more/ received greater rewards. 

The point I'm trying to get at, is there things that you only realised until you were older that you wish you had of known when you were younger?
Any pearls of wisdom or just finance 'hacks' so to speak?

Many thanks,


----------



## goponcho (8 February 2017)

Is morningstars financial data super inaccurate?? Seems to be sometimes! Thoughts?


----------



## jenisa (1 March 2017)

"Is morningstars financial data super inaccurate?? Seems to be sometimes!"..this is actually a really good question. Waiting to here the thoughts as well.


----------



## tech/a (1 March 2017)

mcgrath111 said:


> Hi All,
> 
> Being a relatively young guy (25), I was wondering if you could share a light on one or two things that you've realised have an effect on building wealth.
> 
> ...




Id reply but Ive posted many posts with my hints and findings over the years
they are all in the archives somewhere. It takes a lot of time and thought to
most of my posts and to continually keep regurgitating stuff is annoying.

I've made a suggestion to Joe to help us out and supply a valuable resource to all
but so far Joe has other priorities.

Search Tech/A Threads if your interested there is a lot there!


----------



## mcgrath111 (2 March 2017)

tech/a said:


> Id reply but Ive posted many posts with my hints and findings over the years
> they are all in the archives somewhere. It takes a lot of time and thought to
> most of my posts and to continually keep regurgitating stuff is annoying.
> 
> ...




Thanks Tech/A

Truth be told, I sometimes search through your old posts (I'm a bit of a creep haha).


----------



## mick1990 (30 March 2017)

Hey guys,

Just starting out, been reading up on day trading for a little while. My question is does anyone have a preferred trading platform, I've got a bunch of mates who use commsec and one that swears by Maquarie's platform. I know all the big banks have their own - any advice on if it's makes a difference which one I choose?


----------



## Habakkuk (30 March 2017)

mick1990 said:


> Hey guys,
> 
> Just starting out, been reading up on day trading for a little while. My question is does anyone have a preferred trading platform, I've got a bunch of mates who use commsec and one that swears by Maquarie's platform. I know all the big banks have their own - any advice on if it's makes a difference which one I choose?




The newbie questions are the only ones I feel qualified to answer, especially since nobody else has done so.
As you are just starting out, the choice of platforms is the least of your problems. You're talking about day trading and mates who use Commsec. Are _they_ day trading? Commsec brokerage is *the* most expensive around. It seems unlikely, but I don't know.

If you mean just standard short-term trading, that might be o.k. Day trading is buying and selling shares within the same day, not holding over night. Either way, Commsec is the last broker I would choose.

You mention platforms and that all the banks have their own. That's true for their standard trading platforms (it's just a form you fill in for your orders) and they would all be a little different. I don't think it makes any difference which one you choose, unless the lowest number of clicks required is vitally important.

But if you are *really* talking about day trading, the standard (free) platform will be useless. You need to subscribe to the live, dynamic data platform. ANZ have their own one indeed. Westpac, NAB Trade and Commsec all use the same, WebIRESS. They will not look exactly the same, but have the same features. The cost is from $49.95 (ANZ) - $79.00 (Westpac) per month. Commsec charge '2.53 cents per minute' as well as a platform fee of $40.70 per month. You might want to verify all that.
Almost all other, non-bank brokers have better rates. There are many to choose from and none is the 'best'. They are competitive and have different features, so it depends what's important to you.

As a bottom line, here is my advice: trading can result in losses. It's safer to keep your money in a term deposit.


----------



## Smalltimeguy (3 August 2017)

Question about technical indicators and their recommendations to sell or buy.
I'm looking at au.investing.com as the only good one round (by the looks of things),
can a newbie rely or gain anything from the moving average or technical indicator recommendations?
Currently on the asx 200 the indicators are giving a sell indication...


----------



## tech/a (3 August 2017)

Very little.

Find all you can on price action 
+ Chart reading.
VSA --- Volume Spread Analysis 
Is a good start


----------



## Boggo (3 August 2017)

Smalltimeguy said:


> Question about technical indicators and their recommendations to sell or buy.
> I'm looking at au.investing.com as the only good one round (by the looks of things),
> can a newbie rely or gain anything from the moving average or technical indicator recommendations?
> Currently on the asx 200 the indicators are giving a sell indication...




Indicators are a which came first, the chicken or the egg situation.
You can use indicators to narrow the field of candidates, or to build a watchlist of potential buy candidates.

Identifying a pattern with assistance from indicators or an indicator may work provided you know what you are looking for.
I don't use an index etc filter as I find that is too generic and inhibits potential candidates, instead I use a MACD that eliminates a significant number of stocks and what remain have to then demonstrate a potential to breakout or repeat a past pattern.
A quick eyeball of a scan list that pass the parameters and you may see one or two for the watchlist.

I had a look at that site in your post, looks good but you try making money from that and you will be disappointed, much more precision is required than just a "rising tide rises all boats" approach.

My opinion, learn to look for patterns, all aspects of it including the important volume at tech/a mentioned above although I find there are occasionally times when that aspect is irrelevant.
(Don't be afraid to ask him for help in that area as long as you are displaying true effort in learning)

Below is an example of one that sat in a watchlist of mine for weeks (5) but every week was a build up in the right direction (the chart is weekly).

(click to expand, same stock QAN, two charts)


----------



## XavierRI (30 September 2017)

Hi, 

I'm just learning to paper trade at the moment. 

Does anyone know where I can find weekly/monthly/quarterly /6 months performance graph for the ASX sectors (like the graph below)


----------



## Bob111 (20 January 2018)

Sir O, What a great piece. I thoroughly enjoyed reading through the 48 pages of info. 

I especially liked the section on the economic clock. I may have missed it somewhere but it looks like dividend yields as a confirming factor where never delved into in any depth? I thought I would create some graphs on the different sectors dividend yields compared to the S&P 50 dividend yield but I couldn't find which companies where in the S&P 50 during the time frame of 03 - 07 so I just used the current 50 companies of which 42 were trading during the period. I figure this shouldn't screw up the results too badly?

I've attached the graphs below (hopefully). Is what we are looking for, the breakout of the utilities graph above the S&P 50 dividend yield line?


----------



## Bob111 (20 January 2018)

and last one....


----------



## traderace_mkt (27 June 2018)

galumay said:


> I think you can learn as much about understanding and analysing a business from following the share specific threads here on ASF, there are some very knowledgable and skilled people that share their analysis and research here and I have always found that if you ask questions to further your understanding, they are more than happy to help.



 Yes I have seen that too. People on ASF are very helpful with their analyses and suggestions. There's  always something new that I get to learn from ASF members.


----------



## BearCave (9 July 2018)

Question about LICs/EFTs. I've been reading about these and apparently there are some management fees involved. How are those fees charged to an investor?


----------



## MarketMatters (4 September 2018)

BearCave said:


> Question about LICs/EFTs. I've been reading about these and apparently there are some management fees involved. How are those fees charged to an investor?




1. Firstly you are charged on brokerage to purchase.
2. An annual management fee may be charged which is generally built into the unit price. You will see this as a % ie. 0.5% would be equal to $50 on $10,000 investment each year. 
3. Notably each investment can vary in costs with passive players averaging as low as 0.1% and up to 1%+ for active managers.
4. You will likely find a buy/sell spread meaning there is a difference between the buy price and the sell price.


----------



## john m (6 June 2019)

Sir Osisofliver said:


> Ok it's time for a lesson.
> 
> *Turning an Idea into Profit*
> 
> ...





Sir Osisofliver said:


> Ok it's time for a lesson.
> 
> *Turning an Idea into Profit*
> 
> ...




ok ive been watching a share since I have owned it for several yrs. Its obviously been shorted repeatedly as the share creeps down to around .8$ than shoots up to 1.10. this has happened several times. So I decided next time it shot up to 1.10 I was going to sell half my shares wait for the lull than buy back in. So I sold for 1.12.$ it is currently sitting 1.25$. doh. How should I have done this ? I thought I was on a winner so I never thought to position size mainly due to not reading about until recently. Its not all bad I originally bought the share for around .8$ thanks john


----------



## Zaxon (6 June 2019)

john m said:


> ok ive been watching a share since I have owned it for several yrs. So I sold for 1.12.$ it is currently sitting 1.25$. doh. How should I have done this ?



That depends on what "type" of investor you are.  As you've held it for several years, let's classify you as not a trader.   If you're a value investor, then you behavior seems possible (albeit you gave no fundamental reasons for this).  If you're a momentum investor, then no, you should keep holding while a share goes up.  If you believe in reversion to the mean, then you've done the right thing.

You need to tell us more about your investment thesis: what drives your decision making in shares.


----------



## john m (6 June 2019)

thanks for the reply I would say im a value investor but now I have retired I wouldnt mind learning more about trading. As for what drives my decision making I would say greed. From what i can make out so far its a hell of a lot like gambling.


----------



## tech/a (6 June 2019)

Gambling
Let’s take a horse race 

Once you place a bet you can’t 
Change it
You can’t cancel it
You can’t withdraw your bet half way through the race because you don’t like what you see.
You can’t increase your bet half way through the race because you like what you see.

If your trading you can do all of the above with the click of a mouse.


----------



## Zaxon (6 June 2019)

john m said:


> thanks for the reply I would say im a value investor



A value investor is someone who buys a company because the value it's currently trading at is far cheaper than what it's actually worth.  So step 1 is to work out how you want to calculate the "true" value of a company.  Look at P/E, Price to Book, Discounted Cash Flows etc.  The modern guru of value investing is probably Warren Buffett.  That should give you something to read about.


john m said:


> I wouldnt mind learning more about trading. From what i can make out so far its a hell of a lot like gambling.



Trading can be very risky if not done right.  Traders really need to be focusing on risk management: position sizing, stop-losses, drawdowns etc, much more so than a longer term investor.  Although these are good skills to have for everyone, they're essential to have as a trader.


----------



## Ann (6 June 2019)

Zaxon said:


> Trading can be very risky if not done right. Traders really need to be focusing on risk management: position sizing, stop-losses, drawdowns etc, much more so than a longer term investor. Although these are good skills to have for everyone, they're essential to have as a trader.




Excellent advice Zaxon!

A good grasp of  charting is also essential in my opinion. Learning the basics of charting and the indicators is incredibly important unless you want to be at the mercy of the markets.

Otherwise it is a simple gamble. Only fools gamble when there is a better way.


----------



## 93Ceaudist (13 June 2019)

Sir Osisofliver said:


> Hi All,
> 
> I mentioned that I was thinking of doing this in a blog to help out all the newbies who seem to have lots of questions that are constantly repeated. I'll slowly work on this when I have time - At the moment I think I have about ten chapters planned - but I'd appreciate anyone else's input, comments, pedantic spelling corrections, flames - whatever - feel free to contribute, and for the newbies - if something isn't clear PLEASE ask - because I want to make this as newbie friendly as possible.
> 
> ...





Sir Osisofliver said:


> Hi All,
> 
> I mentioned that I was thinking of doing this in a blog to help out all the newbies who seem to have lots of questions that are constantly repeated. I'll slowly work on this when I have time - At the moment I think I have about ten chapters planned - but I'd appreciate anyone else's input, comments, pedantic spelling corrections, flames - whatever - feel free to contribute, and for the newbies - if something isn't clear PLEASE ask - because I want to make this as newbie friendly as possible.
> 
> ...



I've learned a lot Sir O. Thank you very much. I'm looking forward to read useful information from you soon.


----------



## Max23B0 (19 March 2020)

the strategy looks good but is it proven ?


----------



## georgehend (16 April 2020)

Hi, I'm wondering if someone can help me understand why my shares today with GEAR on the asx are apparently down when they started off at 13.840 and ended the day at 14.360 according to commsec. GEAR shares today were -$0.330 when I look at my portfolio on commsec

Am I missing something?


----------



## peter2 (17 April 2020)

Yes you are missing something. A stock's up or down result is measured using the previous closing price not the open price. GEAR closed last night at $14.69 and today's close was 0.33 lower at $14.36.


----------



## Black Eugene (22 September 2020)

Not sure if there is a 'spot' for new questions...recently given some share options and not entirely sure whether or not to "exercise" them.....Everything I google about options comes up with PUT and Call options....
What are the pros and cons of options? Are they worth pursuing? How to I turn them into full shares?

thanks in advance


----------



## Chronos-Plutus (22 September 2020)

Black Eugene said:


> Not sure if there is a 'spot' for new questions...recently given some share options and not entirely sure whether or not to "exercise" them.....Everything I google about options comes up with PUT and Call options....
> What are the pros and cons of options? Are they worth pursuing? How to I turn them into full shares?
> 
> thanks in advance




You can buy CALL options on the ASX market, for particular stocks. If you want to take more risk/leverage, you can look at the trading houses that offer their platforms to trade through, but you will not get the underlying asset.


----------



## Black Eugene (22 September 2020)

Chronos-Plutus said:


> You can buy CALL options on the ASX market, for particular stocks. If you want to take more risk/leverage, you can look at the trading houses that offer their platforms to trade through.



Thanks for the prompt reply the 'options' in question are KAIOG I just want to know how to convert them to full price shares or if it's even worth doing before the exercise date???
Or am I completely wrong


----------



## Chronos-Plutus (22 September 2020)

Black Eugene said:


> Thanks for the prompt reply the 'options' in question are KAIOG I just want to know how to convert them to full price shares or if it's even worth doing before the exercise date???
> Or am I completely wrong




Name of the company?

Who are they?

What do they do?

What resources are they in?

Have they got a JORC?

Have they got a long-term plan?

Who are the directors?

What is the country that they are in?

Which millionaire/billionaire is backing them?


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## Black Eugene (22 September 2020)

ASX : KAI. Kairos Minerals shares

  Junior Gold Explorers (?)

 Their shares have risen steadily since I have owned them, might be pump and dump but I have got my investment back and made some money so they don't owe me anything, but feel they might still go up further


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## peter2 (22 September 2020)

@Black Eugene  If you hold KAIOG company options you'll need specific advice in order to know what you may do with them. 
I assume these options have a strike price of 0.025 and the expiry is Dec 31, 2021. 

I notice that many KAIOG options have already been exercised recently (KAI news). This is because the share price of KAI is now comfortably above the strike price of these options. 

You would have got some information when you were given or bought these options. Please read it. If you want to know more please ask the KAI company secretary. They must provide information like this. It would be wrong for me to provide any advice without knowing the exact details of the company options you hold.


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## Black Eugene (23 September 2020)

peter2 said:


> @Black Eugene  If you hold KAIOG company options you'll need specific advice in order to know what you may do with them.
> I assume these options have a strike price of 0.025 and the expiry is Dec 31, 2021.
> 
> I notice that many KAIOG options have already been exercised recently (KAI news). This is because the share price of KAI is now comfortably above the strike price of these options.
> ...



Thanks for the heads up and mini lesson on éxerciseable' options.........will send a message to KAI requesting info


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## Timejumper (15 October 2020)

Hi everyone
It is a mine field out there.
Can anyone tell me the best trading pattform for trading CFD's of the ASX stocks 
I was using CMC many years ago and ready to re-active the system I have.


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## rayb10 (25 November 2020)

Hello, First post here and have a newbie question about Depth of Market analysis using the Trading View charts and the Depth order book in  Superhero broker.

This is the first time I am trying to analyse the DOM and really need some guidance on how to interpret it. I have two Order Books available to me - Tradingview DOM which only gives one figure for the buy and one for the sell column (I assume that number is the total of all orders in the book but could be wrong). (see fig 1) I am not connected to a tradingview broker as I'm not too keen on the ones they offer (not Aussie friendly).

Can someone confirm that fig 1 below shows a larger DEMAND number that therefore has more BUYING pressure and the prices should RISE. Am I looking at it too simply??

Fig 1 from tradingview chart



The second image is from Superhero Broker  and I have absolutely NO IDEA how to interpret the Order book below. Hopefully someone can analyse it for me and give me some insight.

Fig 2 - from Superhero - What does this show - More Supply or Demand ?? - Will prices likely to rise or fall based on this order book?




Hopefully someone can enlighten me on this.

Ray


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## peter2 (25 November 2020)

MD is a snapshot that can change very quickly when the market is open. 

In Fig 1. the bid number is lower than the number offered, therefore we can assume for this moment that supply is larger than demand. 

In Fig 2. Looking at the top line there is more supply than demand. A seller with 23K shares to sell is very likely to grab those on the bid (left) before they disappear. A seller with 100K may wait for more buyers but risks selling them at a lower price. 

Adding the top 5 lines indicates that there is more demand than supply (at this moment). The large number for sale at 0.15 shows supply at this level. This needs to be overcome or withdrawn for price to go higher.


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## peter2 (25 November 2020)

Numbers like this indicate that demand is greater than supply, but this doesn't mean the price will go up immediately. It's probable that price will go higher but not right now. I prefer to have figures like these rather than the opposite when buying. 



	

		
			
		

		
	
  (*WHK*)


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## Austwide (25 November 2020)

IMO market depth means very little.
I've seen buyer sell ratios of over 10 x buyers to seller and the price still falling

It can give an indication if a price is rising or falling at a given moment  by watching if buyers or sellers are reducing at a given price.

But overall if I bid for 50.000.000 million shares at a stupid price low price, depth will show a lot of buyers but no impact on price.
As a guide, prices within 5 - 10% of last traded are serious bids excluding rapidly moving prices.


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## rayb10 (25 November 2020)

Hey thanks heaps Peter2 and Austwide. That makes a lot of sense. I suspected that the DOM is not that useful unless I wanted to trade on the very short timeframes (which I don't). It does seem only to reflect a moment in time and if an unknown trader comes in wanting a large volume of shares to buy or sell then it would change instantly and the numbers displayed wouldn't mean much.

I would assume there would also be a "How much I want these shares bought or sold" variable too. The stronger the intent to buy or sell the more flexible the price I suppose.

Thanks for your insight guys and I can now cross this one off my "To Learn"  list


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## peter2 (25 November 2020)

Additional research on the topic will lead to Order Flow trading. This is an advanced topic and is a very specialised trading style. Further research leads to volume and market profiling. These are chart based technical analysis subjects.


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## rayb10 (25 November 2020)

Yes, volume profiling seems to be something to learn to get an idea of what price has a lot of interest. Besides finding out relevant support and resistance zones through Volume Profiling is there anything else useful to get from it? I've been trying to get around watching some youtube vids and Udemy courses on it.


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## peter2 (25 November 2020)

rayb10 said:


> Besides finding out relevant support and resistance zones through Volume Profiling is there anything else useful to get from it?




Is profit useful?  
If volume profile indicates price levels that provide high probability for future price movement, a prepared trader would find them extremely useful. Very few wannabe traders do enough work to find out if they can profit consistently from the levels indicated by vol profile.


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## rayb10 (25 November 2020)

Haha . . . When I started looking at it recently (didn't have Vol Profile 10 years ago) it did seem like something I need to focus on & learn about. You just confirmed it so thanks for putting me in the right direction. Bought a Kindle book on the subject so will add it to the reading list.

Sorry about asking twice, I didn't realise it went to the next page. I will try and delete one.

Thanks for your comments Peter2


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## pozindustrial (26 March 2021)

Sir Osisofliver said:


> Shares III
> 
> OK so the standard secondary market in Australia is made up of 2195 different listed entities that are classified according to a GICS rating (Global Industry Classification Standard). New shares are entered through listings (IPO's) and some shares drop off through de-listing. (This doesn't include futures market, derivatives or CFD markets. It also doesn't include small regional exchanges which have their own listings).
> 
> ...



Several years later it is still good information, thanks.


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## pozindustrial (26 March 2021)

Sir Osisofliver said:


> "Look it's simple you just need to use a wave analysis Gann, Fibonacci, EW approach, Candlestick with a stochastic oscillator and a MACD, Bollinger Bands, and look for H&S, Double Tops, Resistance Levels, Flags, Pennants, Triangles, and Dodecahedons (that last one is a joke BTW) - they are full of it.



Love it haha


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## pozindustrial (27 March 2021)

Sir Osisofliver said:


> Nine o'clock (or there abouts) is when the market reaches the old high, so we aren't there yet by a long stretch. I'd have to say we are closer to eight than seven at the moment.
> 
> I'm focussing on the share market rather than the broader economy itself.  If you want to look for the start of the Property market...it occurs very near the 12 o'clock position, not the six o'clock position. It also *tends* to start at the highest population density areas before moving into less populated areas. So depending on where you are looking it could have occurred (and is still occuring as it moves away from higher density areas) a couple of years ago.
> 
> ...



Would be so interesting to know where you think we are now March 27, 2021?


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## pozindustrial (27 March 2021)

Sir O, or anyone else, I am a newbie just learning to trade and I feel a big crunch coming very soon. After the crunch I would like to have a portfolio (not leveraged because I am too old to use debt again) of quality stocks to sit on which I can probably select, and an opinion of the way I can anticipate and amplify returns from a fall for which I would allocate a small amount of resources. I believe futures is a way to profit from falls. Is there a link to understanding futures here? Is there anything else I could consider - generally speaking?


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## frugal.rock (6 June 2021)

pozindustrial said:


> Sir O, or anyone else, I am a newbie just learning to trade and I feel a big crunch coming very soon. After the crunch I would like to have a portfolio (not leveraged because I am too old to use debt again) of quality stocks to sit on which I can probably select, and an opinion of the way I can anticipate and amplify returns from a fall for which I would allocate a small amount of resources. I believe futures is a way to profit from falls. Is there a link to understanding futures here? Is there anything else I could consider - generally speaking?



Hopefully someone else answers you re futures, I can't help there.
Have asked about it myself in the OOO thread with no answers this far....

In relation to your delayed ASX 200 index charting question elsewhere, generally only "paid for" charts may/will provide a live chart.
"Paid for" may actually be free to you via brokers EG; West- slack, Comm-suck etc
(Note, these are fictional brokers and don't represent the names of any actual brokers that may or may not provide the service they claim to provide, but don't)

They pay for the data and the live charts are provided as a courtesy, as theoretically you trade with them.
Some brokers will charge a fee if you don't trade.
XJO is the ticker for ASX 200
XKO is the ticker for ASX 300

The ASX has a strangle hold on live data unlike the U.S. and charge for it.
Thus, whoever provides live data is paying for it and need to recoup costs somehow.

Just like @Joe Blow needs to recoup costs associated with providing this wonderful forum.
In my opinion, he does this with modern, un-invasive and generally accepted means.
Cheers


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## pozindustrial (6 June 2021)

haha, thanks


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## DaveTrade (27 July 2021)

Timejumper said:


> Hi everyone
> It is a mine field out there.
> Can anyone tell me the best trading pattform for trading CFD's of the ASX stocks
> I was using CMC many years ago and ready to re-active the system I have.



Hi Timejumper,
I would google CFD's to find out more, I remember hearing somewhere that CFD's are no good to trade anymore. Sorry I don't remember any details why. As an alternative you could learn options basics and use them instead.


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## divs4ever (10 August 2021)

6 trading pitfalls new investors should avoid when starting out​








						6 trading pitfalls new investors should avoid when starting out
					

Many Aussies have turned to trading while stuck in lockdown but there are some common mistakes made by many. Here is what you should avoid.




					au.finance.yahoo.com
				




 ridiculously basic  , but still stuff the raw novice should learn quickly ( before they start losing that precious cash  )


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## dyna (11 August 2021)

Yeah, especially the emphasis on having the right psychology  for trading. I'm convinced most people just don't have it. Certainly not me. Having admitted that ,if I was starting out, all over again, on the road to serious wealth creation, I'd not begin as an investor. That takes a long, long time and you need the gift of patience, waiting for the magic of compounding to finally kick in. Instead, I'd take the time to trawl though the miles of text on this forum's trading threads and learn how the experts, here, do it. There are a handful of truly talented people here who have, over many years now, contributed a lot of their experience and learning to helping others. And they've done it ,all for free.


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## frugal.rock (4 September 2021)

charlsie said:


> can someone explain to me if the recent notice for the proposal to list options that will mature in 2022 will have any bearing on the share price?
> I noticed the other day the listing in the afternoon after the market had closed and that my little alarm icon on commbank didn't show it the next day.....it seemed a little sneaky. Any ideas?






frugal.rock said:


> I'm also interested to understand any SP implications by this, I don't claim to understand options apart from the bare basics.



Quoted over from RMX thread so hopefully might get a response here or in the RMX thread?
Thanks.


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## frugal.rock (4 September 2021)

DaveTrade said:


> Hi Guys, options don't have any bearing on the share price, in actual fact it's the share price, the volatility and time that determine the option price. Some traders want to use long dated options for their trading strategy so this will only help those traders.



Thanks for that. Much obliged.
Dropped here also from RMX thread  for future reference.


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## DaveTrade (22 October 2021)

*Breakouts vs Pullbacks;* here's a video

*>> Click here to discover the answer*


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## frugal.rock (22 October 2021)

Can anyone explain what AXEXE as a ticker is, or could be?

I have apparently got a holding of 6842 volume of AXEXE as of this week.
I originally had thought they were the free ITM in specie shares from AXE ownership, but are not.


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## KevinBB (22 October 2021)

All I can think of is that you purchased AXE shares after the ex date for the recent SPP, or purchased them in some way in which you weren't entitled to participate in the SPP. AXE ex entitlement.
Did you purchase any after 4 October?
KH


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## willfairfax89 (29 October 2021)

Could you please recommend me on a cryptocurrency trading platform? The necessary conditions:
1) The minimum percentage for withdrawing money;
2) Possibility of financial transactions without verification;
3) Reliable protection from hackers;
4) Possibility of margin trading and fiat money;


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## Garpal Gumnut (23 June 2022)

Morgan Kelie said:


> Hello everyone, I wanted to ask experts a question about the platform. Want to start here, tell me if you know anything about her and her conditions. Both in terms of conclusions and currencies. Is it worth starting there or choosing another platform.



More than likely a scam/spam. 

Don't click on it. 

gg


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