# My Long Term Investment Plan



## enigmatic (16 March 2009)

Just thought I would introduce myself and get some feed back on my current Share Portfolio investment plan.
A bit of background into my investments so far would lead you to high risk long term investments, mainly speculative shares with the possiblity of high reward but at a high risk.

However this economic downturn has some what enlightened me to modify my investment strategy some what.

Current holdings i would classify as the following
36% Low Risk 
BHP
64% High Risk
FMG
AQA
BRM
LNC
Others ( Much Higher Risk)

My current plan is to position myself with the following rough Percentage of Low Med High risk shares. Low - 50%, Med - 25% ,High - 25%

with the goal to move to  Low -75%, Med -15%, High - 10%

I have a few companies in mind for my low med and high risk and it will be obvious to some that my opinion to there risk rating will differ however I was interested on people opinion of such a investment strategy.

Your help is much appreciated as I find myself day in day out finding speculative shares with the possiblity of high return filling up my potential buy list but believe it is in my best interested to maintain the 14 i have listed as potential buy.


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## enigmatic (17 March 2009)

Doesnt look like I'm going to get much feedback on developing better risk management, I'll just have to continue reading.


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## MS+Tradesim (17 March 2009)

I, for one, am not exactly sure what you want to know.

You've categorised companies you hold/are interested in, according to a definition of risk that seems meaningful to you. I can't comment on that as I don't look at risk in those terms. It doesn't make sense to me.

On the other hand what are you doing to contain risk to your capital? 
How are you determining your worst case exit strategy? 
When will you get out of a stock? 
What kind of position sizing model are you using to determine how much to invest in each stock? 
What kind of overall money management model are you using? 
What kind of time-frame and profit-taking ideas do you have?

I don't require answers to these questions. I am just posing them for you to decide if they are factors you should consider in your strategy. Even if you believe yourself to be a long-term investor you need to think about this. Things go wrong.


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## prawn_86 (17 March 2009)

How have you determined the risk?


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## nizar (17 March 2009)

prawn_86 said:


> How have you determined the risk?




I was gonna ask the same thing.


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## Bushman (17 March 2009)

enigmatic said:


> 36% Low Risk
> BHP
> .




LOL - BHP low risk!


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## JackJackJack (17 March 2009)

If only I had read a few good books on Risk Management before I dove in. 

Seriously start with the Risk Management books and build your investment strategy around them.


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## enigmatic (17 March 2009)

To reply to MS+Tradesim
I know you said you dont need answers however i will any how.

these questions which you asked.

"On the other hand what are you doing to contain risk to your capital? 
How are you determining your worst case exit strategy? 
When will you get out of a stock? 
What kind of position sizing model are you using to determine how much to invest in each stock? 
What kind of overall money management model are you using? 
What kind of time-frame and profit-taking ideas do you have?"

Are really what I am looking for, I am mainly looking at a means to have others poke holes in what i believe is sound as i personally have a limited view point and knowledge which at times may be bias so its always good to have someone else point of view.
If you or anyone else can comment on my answers to your questions it would be appreciated

1.On the other hand what are you doing to contain risk to your capital? 

Currently I haven't implemented anything in place however I am looking at a stop loss for each share based on 2 Standard deviation of the share over 21days. or 1% of my total portfolio capital depending on which is smaller.
Once the trade is positive a trailing loss will be applied however each trailing stop loss will need to be determined on an individual share basis.


2.How are you determining your worst case exit strategy? 
I believe this is answered in the above case.

3.When will you get out of a stock? 
Trailing loss or a better opportunity  comes along, although i do plan to try and stay carry free with my high risk.

4.What kind of position sizing model are you using to determine how much to 
invest in each stock? 
Not exactly sure what you mean could you explain about a position sizing model.

6.What kind of overall money management model are you using? 
Other one I'm not 100% certain what your on about

7.What kind of time-frame and profit-taking ideas do you have?
-Well long term.. Dividend based will be 15years likely
-Growth stocks time frame generally based on the market so depending on how long the market runs for.
-Speculative once I am carry free with 100% gain.
Obviously stoplosses will apply to the growth and spec stocks.
unsure how i will deal with my dividend based part of the portfolio.


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## enigmatic (17 March 2009)

To Reply to prawn_86

Currently I have been determining my risk on only a few key things however I am certain that there are many I am missing.

I currently have been looking at the following and rating each one with a value obviously the values i give them are up to me and until i get a bit more info on risk management and investment strategies the ratings i give them may be extremely out of whack however it is a start.
Dividend based Only
-Dividend Growth Rate
-Dividend Percent

All Stocks
-Total Debt/Asset Ratio
-Mkt Cap 
-Asset Growth Rate
-Liabilities Growth Rate
-Current Book Value\Share Price
-Revenue Growth Rate (Last 2years)
-Profit Growth Rate (Last 2 Years)
-Future Earnings Growth Rate(2years Forcast)

Obviously Speculative shares which have no past growth generally get a increase risk.

Can you suggest better methods of determining risk.


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## enigmatic (17 March 2009)

Bushman what would you rate BHP and for what reason, just so i can get a better picture on how others rate risk.


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## enigmatic (17 March 2009)

JackJackJack I have been trying to read as much as i can about, how to get rich, Derivatives, Risk management. 
Unfortunetly there are only so many books i can read at once If possible do you know of any good Risk Management books that you would suggest is a must have, I may not get to it now but By the end of the next 1-3months I would have read it.


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## prawn_86 (17 March 2009)

enigmatic said:


> Can you suggest better methods of determining risk.




Risk management isn't my area, so not really sorry.

I would say if your looking at holding for 10+ yrs, then you should use 10+ yrs of growth data instead of the last 2 imo...


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## nomore4s (17 March 2009)

If you are truly looking to build a solid long term investment portfolio I would suggest looking outside the resources sector as well. You need to have some balance in your portfolio with different sectors.

With this downturn there will be good opportunities with some of the blue chip stocks in different sectors that have fallen a long way and now have some good d/e yields and potential long term growth.

My , good luck


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## enigmatic (17 March 2009)

Hey Nomore4s, yeah dont worry i have definetly noticed my desire to hold only Resource stocks.

Currently i have the following which I am looking at although please no need to discuss the validity of my pick unless you notice something important.

BHP - Sorry but Strong believer of this share and a little more exposure at current prices is a must for me.
CBA
CSL
WOW
WES
WDC

Few others but not quiet sure of them yet (Alot less research into the company) - Mostly resources as i have yet to find many No resources that i can related to. 

WPL
WOR
BSL
LGL
SGP
NCM
ASX
LPL

the Speculative i wont mention as they are all specs minus a few property shares.


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## enigmatic (17 March 2009)

Prawn Ill take that into consideration, although one thing i find at looking at to long a term growth you may miss new emerging growth stocks.
however i guess it wouldnt hurt to look at both short term growth and long term growth, this way I cover both possiblities.


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## Bushman (17 March 2009)

enigmatic said:


> Bushman what would you rate BHP and for what reason, just so i can get a better picture on how others rate risk.




BHP is a high-beta stock. So if equities tank, BHP will be leading the charge. Also its cash performance is tied to commodities which are incredibly volatile. Lastly it is an incredible capital intensive industry with long-lead times between exploration, scoping and production.However, within the *listed commodity sector*, it is a relatively low-risk entity as it is a diversified producer (so not reliant on an individual commodity exposure) and has a strong balance sheet. 

Having said that, without a doubt has provided investors with *terrific returns *over a long period of time. 

If you truely want a 'low risk' stock, get out of a cyclical producer like BHP and choose some low beta and defensive options. The classic defensive stocks are Woolworths (everyone needs to eat), CSL (everyone needs to be healthy) and some brownfield utilities providers (h/e, check the gearing).

Then again, you could also hedge BHP using a CFD but this is not my strong point.  

H/E, if you truely want 'low risk', then you need to be looking outside equities in to fixed income products or bonds. Its all about correlation of returns and choosing exposure that do not behave the same way to the same 'shock' (i.e. credit markets seizing up). So if equities tank due to economic contraction, BHP will tank whereas bonds will often increase in value due to the inevitasble monetary policy response.  

PS: if you truely want 'low risk', you would be investing in treasuries. 

My 2c only ...


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## MS+Tradesim (17 March 2009)

enigmatic said:


> Currently I haven't implemented anything in place however...<snip>




Ok. But implement something until you refine your exit idea. This is just basic capital preservation. 



> 2.How are you determining your worst case exit strategy?
> I believe this is answered in the above case.




Have a think about what you will do if something changes and it still hasn't fallen to your worst case price. The initial stop, however it's determined, should be the worst case. There are times when there is no longer a reason to stay in a share but it still hasn't hit your initial stop. Will you exit straight away or wait?



> 3.When will you get out of a stock?
> Trailing loss or a better opportunity  comes along, although i do plan to try and stay carry free with my high risk.




Ok.



> 4.What kind of position sizing model are you using to determine how much to
> invest in each stock?
> Not exactly sure what you mean could you explain about a position sizing model.




There are different ways of determining how many units you will buy in each stock. 4 commonly used ones are:

1) Fixed dollar amount - eg. you might allocate $10,000 per share. 

2) Fixed percent amount - eg. 10% of total equity to each investment

3) Fixed dollar risk - you determine how much you are prepared to lose in dollars and then buy X units based on that

4) Fixed percent risk - you decide how many % of total equity you are prepared to lose then buy X units based on that.

1 and 2 are self-explanatory. 3 and 4 may need a little more explaining. They are both calculated on your total equity (cash + value of open positions) - though some traders may just use cash + purchase price of open positions.

Assume you have $50,000 cash and no open positions. With model 3 you might decide you will risk $500 per investment. Take the intended purchase price less the intended initial stop. Say, XYZ, buy at $3.00, worst case exit at $2.50 = $0.50. So if it falls by 50c you want to lose no more than $500. That means you can afford to buy 500/0.50 = 1000 shares => 1000 x 0.50 = $500 risked

Model 4 works similarly except you calculate a percent of total equity. For example, you might decide to risk 2% on each investment. To use the above example: 2% x $50k = $1000. 50c risk on each share. So 1000/0.50 = 2000 units.

In reality there are variations on these ideas and in some cases you might use more than one of them at different times. Each have advantages and disadvantages.

Sadly, many investors/traders have no idea and just throw whatever seems good at the time into the purchase.



> 6.What kind of overall money management model are you using?
> Other one I'm not 100% certain what your on about




The position sizing examples used above should be employed in the context of an overall strategy. For example, will you deploy 100% of capital if you have sufficient buy signals? Or will you always hold back a portion in cash, say 20%? Will you contain portfolio heat? Heat is the total amount of equity at risk, or how much you lose if all your stops are hit. Example, say you use a %risk position sizing model, you have 10 open trades with 1% risked on each. If all your stops are hit over say a month then your heat is 10%. You will be down $5000 in that case. You might like to calculate the worst overall hit you are prepared to take and then build your position sizing model around that. For instance say you want no more than 5% at risk at any one time. That would mean you could buy 5 different stocks with 1% risk on each. Just examples here, not suggestions. You need to figure out your risk tolerance and plan accordingly.



> unsure how i will deal with my dividend based part of the portfolio.



 In this environment especially, there is no such thing as a safe bet. IMO, you need to decide up front at what point you will accept you are wrong and exit a falling share. 

And most importantly, if you don't know how you are going to get out of an investment before you actually buy it, then you have no business entering - that is not investing, it's gambling.

Just my thoughts.


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## beamstas (17 March 2009)

I can't really be bothered reading all the above posts so if this is already covered then ignore me (im short on time right now so i'll blurt this out but i think ms+tradesim has this thread pretty much covered)

Before you go diving in you need to work out a few things. Even a long term portfolio needs risk management.

1. What are your entry criterea?
2. Are you using technical analysis or fundamentals?
3. It seems like you are sticking to mostly blue chips, im guessing you are hoping to rely mostly on divdend payments?


I'd suggest before you go and buy shares, to sit down, with a pen, and write down how you are going to trade. When you get some sort of system worked out backtest it (if you have the software). If you are happy with the results, stick to your system like a glove.


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## enigmatic (17 March 2009)

Much appreciated Both Bushman and MS+Tradesim

I think my term of Low risk maybe be incorrect, or you could say i have a high level of risk threshold, but your comments bushman about BHP and the others companies are appreciated.

MS+Tradesim, i think i will have to re read your post tommorrow however it was extremely informative and I think i will need to look at a few changes in my strategy to investing both future and current.


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## enigmatic (17 March 2009)

I'm definitely basing most of my investment on Fundamentals however the timing of my buying will also be based on TA, no point buying today if it is likely to drop down in the short term, due to broader market direction.

so far i have one position open using my current Investment Risk management.

Unlucky for me the investment is going well so not to sure i will actually learn off this one up 66% for the investment 1month 
Purchused 1.12
Trailing loss 1.36

Now my only problem with using a trailing loss is if a known annoucement is coming up do most keep there normal trailing loss or modify.
the reason i ask is if the share price drops due to market movement before annoucement date triggering the trailing loss. Then I'm out with out seeing the outcome of the reason for the investment.

Or does this just mean that it allows me to re-valuate the situation and enter in the trade again if I believe the situation makes it still viable.


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## MS+Tradesim (17 March 2009)

enigmatic said:


> Now my only problem with using a trailing loss is if a known annoucement is coming up do most keep there normal trailing loss or modify.
> the reason i ask is if the share price drops due to market movement before annoucement date triggering the trailing loss. Then I'm out with out seeing the outcome of the reason for the investment.
> 
> Or does this just mean that it allows me to re-valuate the situation and enter in the trade again if I believe the situation makes it still viable.




This is part of your overall system design. Use a stop that is appropriate for the length of time you want to be in the market while using position sizing that allows you to recover comfortably from drawdowns. And even if you do get stopped out, then you can always re-assess, like you say.


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## beamstas (17 March 2009)

If you feel the position is going against you then it's probably a good idea to sell.

Remeber it's easy to get back in all you need to do is hit buy


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## JackJackJack (17 March 2009)

enigmatic said:


> JackJackJack I have been trying to read as much as i can about, how to get rich, Derivatives, Risk management.
> Unfortunetly there are only so many books i can read at once If possible do you know of any good Risk Management books that you would suggest is a must have, I may not get to it now but By the end of the next 1-3months I would have read it.




Forget the get rich books  
Focus on the more boring text book types.

I am still learning myself and have found the following to be the best of the 30 or so books I have:


Sam Weinstein - "Secrets for Profiting in Bull and Bear Markets" 

Bennet A McDowell - "A Traders Money Management System"

Van Tharp - "Trade Your Way to Financial Freedom"

Marcel Link - "Trading Without Gambling"

Alexander Elder - "Come Into My Trading Room"

I am not big on fundamentals - so cant help you there - but these books will certainly help with capital preservation / risk management and some technical analysis.


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## IFocus (17 March 2009)

enigmatic said:


> Just thought I would introduce myself and get some feed back on my current Share Portfolio investment plan.
> A bit of background into my investments so far would lead you to high risk long term investments, mainly speculative shares with the possiblity of high reward but at a high risk.
> 
> However this economic downturn has some what enlightened me to modify my investment strategy some what.
> ...




Whats your time frame? days, months, years?

Do you see yourself as an investor or a trader?

Are you looking for capital growth solely or div return with the possibility of cap growth?

If starting with say $100K today what would define success in 2 years time i.e. whats your expectations.

Great to see you are talking about risk.


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## enigmatic (17 March 2009)

Cheers JackJackJack I will definitely search those ones out.
The get rich ones it is actually one book, was written back in the great depression actually by Napoleon Hill - Think and Grow Rich, but I do catch your drift those books generally arent worth the paper there written on.

This one just was highly recommended to me by someone.


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## MS+Tradesim (17 March 2009)

Another vote for Van Tharp _Trade Your Way to Financial Freedom_ 2nd Edition (is a lot clearer than the first edition).

He discusses, among other things, different risk management strategies that one can employ and he touches on William O'Neill's CANSLIM system as one example so you can see how risk management can work with a fundamental based system.


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## enigmatic (18 March 2009)

IFocus, I guess If I have 100k spare which is about right..
I would expecting a growth rate 10-15% want would be a whole different story.

growth rate of 15%-30% has always been in my plan for the last 2years so i dont see why that value shouldnt be aimed for but i do expect 10%-15% otherwise i could of invested else were and made similiar returns.

Although due to the down turn i do have some expectation of higher return.


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## enigmatic (18 March 2009)

I will definitely look up that book when i get back Home.

One question more related to IFocus post.
I have noticed the question before about how much growth do you expect, is it wise for me to limit my expectations to 10-15%
or should I have the attitude that I must get atleast 15%.

Surely the restriction of my goal may restrict me in my outcome.


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## enigmatic (18 March 2009)

Well I have done what a few of you suggested and have setup a few trailing losses for 20% of my current portfolio. 

Does anyone have some good examples on how to calculate a trailing loss.
right now I'm using 1.5stdev 21day MVA.
I was using 2stdev but that seemed to be a little to much for my liking.

Cheers for all your help.


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## enigmatic (18 March 2009)

Been looking arround into Option trading, and was wondering how i could use options to support longterm investment.

This could i guess be for both long term trends or for short term swings.

what are the risks involved in using options for specs compared to blue chips.
Obviously the risk with options is known at the start just like a well managed trade.


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## So_Cynical (18 March 2009)

enigmatic said:


> Been looking arround into Option trading, and was wondering how i could use options to support longterm investment.
> 
> This could i guess be for both long term trends or for short term swings.
> 
> ...




Aussie options (ETO's) are only available on blueish chip stocks, and then there's only 
decent volume on the top 30 or so.


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## enigmatic (19 March 2009)

I guess the next question for myself is how to use options in my investment strategy to compliment my risk strategy.


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## MS+Tradesim (19 March 2009)

enigmatic said:


> Well I have done what a few of you suggested and have setup a few trailing losses for 20% of my current portfolio.
> 
> Does anyone have some good examples on how to calculate a trailing loss.
> right now I'm using 1.5stdev 21day MVA.
> ...




There are a lot of different ways. Using recent support areas, the low of the most recent retracement, stdev as you say, volatility and more.

For myself, I use an average true range (ATR) multiple - ATR tracks volatility. For example, the closing price less 4 x ATR over 21 days - always moving it up or sideways but never down. I use the ATR slightly differently, but same basic principle. 

As a rule of thumb use a wider stop if you want to be in a position for the long-term and tighten the stop the shorter the intended timeframe. For long terms investments you want the stop to be unaffected by noise but still protect you when something goes really wrong.


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## beamstas (19 March 2009)

MS+Tradesim said:


> There are a lot of different ways. Using recent support areas, the low of the most recent retracement, stdev as you say, volatility and more.
> 
> For myself, I use an average true range (ATR) multiple - ATR tracks volatility. For example, the closing price less 4 x ATR over 21 days - always moving it up or sideways but never down. I use the ATR slightly differently, but same basic principle.
> 
> As a rule of thumb use a wider stop if you want to be in a position for the long-term and tighten the stop the shorter the intended timeframe. For long terms investments you want the stop to be unaffected by noise but still protect you when something goes really wrong.




I think van tharp mentions a trailing stop of 20% of the highest high since the buy. but i could be wrong 

This would be for longer trends and eliminate any noise


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## MS+Tradesim (19 March 2009)

I remember VT using 25% trails on testing some tipsheets that didn't use any.

Personally, I would not use a % trail because it treats all investments the same.

Ps. enigmatic, I forgot an obvious one which I'm not sure how many people use but it's often touted in books  - a long term moving average.


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## jackson8 (19 March 2009)

enigmatic said:


> I guess the next question for myself is how to use options in my investment strategy to compliment my risk strategy.




hi enigmatic
put options may be utilised to hedge your portfolio or specific holding against loss
call options used to make a passive income off your portfolio


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## enigmatic (20 March 2009)

*enigmatic*

MS+Tradesim Cheers for all the ideas for trailing loss.
I noticed with my current one that my trailing loss actually lowered as the Stdev become larger may need to change my tact, as i would prefer a trailing loss which tightens over time.

Concerning the Long term moving average.
This is what i will be using as an indicator to get at of the share although not a trailing loss, Both the 250day MVA of the share and the XAO. 

I guess the main Aim is to protect your profit.


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## nizar (20 March 2009)

Enigmatic.

You say you are targetting 15-30% returns?
That's well and good but remember that you don't decide how much money you make, only the market decides that.
BUT you can limit how much you can lose.
What you have to do is put yourself in a position able to take advantage of opportunity.

I think Larry Hite said it well:


> I have two basic rules about winning in trading as well as in life: 1. If you don't bet, you can't win. 2. If you lose all your chips, you can't bet




MS.

You made some good points.
You said you use 4*ATR as your trailing stop. Is that on a daily timeframe?


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## nizar (20 March 2009)

prawn_86 said:


> Risk management isn't my area




You're in trouble then buddy.
Seriously.


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## MS+Tradesim (20 March 2009)

*Re: enigmatic*



enigmatic said:


> I noticed with my current one that my trailing loss actually lowered as the Stdev become larger may need to change my tact, as i would prefer a trailing loss which tightens over time.




Just always use the highest recent value of your stop. For example, say the stdev is currently at $1.40 and the price is at $1.80, then the price drops sharply and the stdev value falls to 1.20, keep your stop at 1.40. Only ever move a trailing stop upwards or keep it the same until a new higher value is calculated. Never move it down while you're in the trade.



> I guess the main Aim is to protect your profit.




Yes, but more important is to protect your capital.


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## enigmatic (20 March 2009)

Well made my first Trailing loss so far, came out with about 7.5% profit so reasonably happy.. hoping to get back into the same share though. All your advice has been top notch protect and build your capital is the plan.


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## MS+Tradesim (20 March 2009)

nizar said:


> MS.
> You said you use 4*ATR as your trailing stop. Is that on a daily timeframe?




Hi Nizar,

Sorry, I missed your post last read through.

I just gave 4*atr as an example. However, I haven't traded my trend system since Dec 07 so I had a look at it today and I use the 4*ATR(21) days for position sizing but the actual trailing stop is based on volatility in the median price, calculated on a daily timeframe. I have two versions, one for very long trends, and a tighter one for catching short trends of 30-60 days.

-----------

Enigmatic,

Great to hear. Get your risk management working in this environment and the next bull market will reward you well.


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## enigmatic (21 March 2009)

As usual the weekend is a boring time (market is closed)

I have been diving further into investing both short term and long term.
It is obvious to me that my strategy will consist of both long and short term trades with possibly 25% of my capital used for short term trading and the rest used for long positions mainly during a Bull market..

I have still been looking at Options to increase my possible exposure in the long term as I do remain Bullish on the future 3-5 years.

However one thing i have been looking into is trading into shares which are going Ex-dividend, if i was to trade into shares which will be going Ex-dividend in a few days and then get out once Ex-dividend will it not be possible for me to pickup the reward of the dividend yield without holding the share for a long period of time. 
As long as i dont earn more then 5000 from dividends in a year i won't need to hold the shares for the required 45 days..

my next question relates to the options possibly will hold, if I exercise the option and it has a dividend I believe from what i have read that i will get all the dividend from that share over the period I have held the Call option, if this is infact I assume the dividend will go on the exercised date tax year statement.


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## beamstas (21 March 2009)

enigmatic said:


> As usual the weekend is a boring time (market is closed)
> 
> I have been diving further into investing both short term and long term.
> It is obvious to me that my strategy will consist of both long and short term trades with possibly 25% of my capital used for short term trading and the rest used for long positions mainly during a Bull market..
> ...




Normally the share price will gap down by the dividend amount


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## Julia (21 March 2009)

Enigmatic, do a search for Rozella's thread about dividends.


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## enigmatic (22 March 2009)

I couldnt actually find a thread started by Rozella however I would have to assume you ment this one

https://www.aussiestockforums.com/forums/showthread.php?t=454


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## enigmatic (23 March 2009)

Have taken some of your advice about my exposure to the resources sector sold half my BHP position and move it to WOW.

Think this will help diversify my portifolio a little.
Currently i have no desire to increase my capital with in the market just reducing my risk to my heavy exposure to the resource sector.


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## enigmatic (15 March 2010)

Well it Has been about 1 year since i Started actually Planning my investments rather then just throwing cash arround 
I have basically gone from -60% to +15% which isn't to bad however I believe I have failed to maintain my initial plan.

Currently my diversification is far greater within my portfolio which is something i have been focusing.
BHP - 14% ,  
WDC - 10%,
CFE - 7%,  AQA - 7%,  BRM - 7%,  CBA -7%
FMG -5%,  WOW -5%
GMG - 4%,  WPL - 4%,  WOR - 4%
SGP - 3%,  CSL - 3%
Others - 20%

I have a few queries and all responses will not be taken as financial advice.
My current Plan has developed into the following..

1. Have no more then 10% Holdings in any 1 Blue Chip Share
2. Allow for at most 1% loss of total capital on any one share.
3. Re-invest dividends High Paying Dividend Share Holdings with greatest believed potential for growth.
4. Maintain between 65-75% Blue Chip Companies (this is A personal decision as to what i believe is a blue chip.
5. Have no more then 5% Holdings in any 1 Non BlueChip Sha

As you can see currently my BHP holdings exceeds my Rule 1 and BRM CFE both exceed my Rule 5, has anyone else had similar rules with there risk-management Rules and if so how have they dealt with them. Are my rules to strict should the be more flexible to allow for growth of Speculative stocks.  

And having issues with 2 as currently Majority of shares share I  have sold due to loss of capital has soon recovered well, do you just learn to take it in your stride and move on do you suggest re-visiting the share you sold. 

I'm Not sure what I'm after from anyone however any suggestions or comments would be appreciated.


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## Julia (15 March 2010)

enigmatic said:


> As you can see currently my BHP holdings exceeds my Rule 1 and BRM CFE both exceed my Rule 5, has anyone else had similar rules with there risk-management Rules and if so how have they dealt with them. Are my rules to strict should the be more flexible to allow for growth of Speculative stocks.



Enigmatic, you're taking a thoughtful and considered approach so good on you for that.  
We all have different approaches but your last sentence above is one I'd be giving more thought to.  You have a couple there which are pretty flat and some which are rising well.   Maybe consider moving the funds from the not so profitable to the more profitable?  (This is not advice yada yada.)
This will throw your carefully calculated percentages out.  Only you can decide if that really matters.  I'm happy to be overweight something that is doing really well, but people who are into strict rules won't do this.




> And having issues with 2 as currently Majority of shares share I  have sold due to loss of capital has soon recovered well, do you just learn to take it in your stride and move on do you suggest re-visiting the share you sold.



Hah, I've had a couple of good examples of this recently.  Sell to protect profits when a downturn occurs and a few weeks later that stock goes on to make a new high.
You simply won't get it right all the time.  Just move on.

Revisiting :   if you sold for a good reason, i.e. significant profit downgrade, and then later the company fortunes improve, imo there's nothing wrong with buying back in.


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## enigmatic (16 March 2010)

Hey Julia,

Cheers for your comments, I'm always trying to re-evaluate how I buy,sell and Hold shares so I'm sure I will develop my plan further.

Majority of the time the shares I have done well in are the one's I'm Overweight in which will just put me even further overweight.
As much as I agree with the policy of let your good ones ride and cut your losses sooner rather then later.

I also don't like the Idea of betting on the number 5 every spin because it was a winner before, Its likely to lose at one point and the more I have in it the more I will likely lose.

Maybe I am trying to protect my capital to much now.


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## Greedy_Kev (17 December 2010)

enigmatic said:


> Bushman what would you rate BHP and for what reason, just so i can get a better picture on how others rate risk.




If u are looking for long term, u can determine ur level of risk not by share by share basis but portfolio risk, i think is easier. level of diversification, and ur portfolio beta, since u are looking at like 10-15 years, the share market has generally performed well based on past data, even with a recession, the market over a longer period of time will do well.

Long standing Blue chip companies that has good track record (ie constant EPS growth) and low debt to equity ratio, high interest cover, high liquidity can be indication of lower risk.

PS: me still a newbie


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## Sean K (17 December 2010)

Julia said:


> Enigmatic, do a search for Rozella's thread about dividends.



Rozella, where are they now?

Like me I suppose.


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## nioka (17 December 2010)

My long term investment plan is:

1. Have a short term investment plan.
2. Review it each day.
3. Research each stock and look each day for verification that the conclusions made yesterday are still valid today.
4. As time goes by the short term becomes long term and any stock held for a period becomes a long term investment.

Research also includes an assessment of what a stock may do in the longer term. Concentrating on the long term will see one miss out on great short term buys.


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