# Picking Stocks versus timing the Market



## Darc Knight (20 April 2018)

Let me just say first of all that I respect the talent you guys show in analyzing and picking Stocks. But, wouldn't it be easier to just use Index funds and time individual (index fund) markets?

Oh, I'm not saying timing the Market is easy, just easier than picking Stocks. Thanks.


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## Joules MM1 (20 April 2018)

Darc Knight said:


> Let me just say first of all that I respect the talent you guys show in analyzing and picking Stocks. But, wouldn't it be easier to just use Index funds and time individual (index fund) markets?




does 'easier' translate to better safety or better return on your risk ?


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## Joules MM1 (20 April 2018)

if you can define all parametres for 'easier' then you'll find you already have all the knowledge to trade a broad range of stocks that will have varying levels of risk (on entry) and better return (on exit)

if you have one stock that returns you 10% in a month and an index that slogs its way higher at 3% in the same month .....how better off are you if the risks are equivalent ?

isnt the real reason most people go for indexes much to do with the "sense" of safety than it is to with actual safety?


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## greggles (20 April 2018)

Apples and oranges. An ETF or an index fund is not going to give you a five bagger in a few months. Active traders are looking for something different than hands off investors.

It's a case of whatever suits your personality. Some people love the analysis and the economics and the wild market gyrations, some would rather play golf. Different strokes for different folks I guess.


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## Darc Knight (20 April 2018)

Thanks Joules and Greggles. I understand the potential for a lot higher returns with individual stocks, I just thought it would be easier to read individual markets.

Would someone be a fool trying to time Markets (Indexes) rather than focusing on picking Stocks.

Appreciate your wisdom and input. Thanks.


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## tech/a (20 April 2018)

Many stock systems use a market index filter.
I think Pete uses one in his long term discretionary 
Method he shares here.

I use one in my Super fund longer term trading 

If you understand market movements both Fundamental and Technical you can trade indexes longer term
Just as you could trade a single stock which is out performing.


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## galumay (20 April 2018)

Trying to time markets is quite different to picking individual stocks. I think you are confusing things. You can invest passively or actively and quite separately you can try to time markets or not.

There is ample evidence for me that trying to time markets has poor outcomes, regardless of the investment vehicle. (individual companies or ETF's) So its not something I would do, but as tech/a's reply shows there are people that believe they can time markets and thereby improve their returns.


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## mcgrath111 (20 April 2018)

Darc Knight said:


> Let me just say first of all that I respect the talent you guys show in analyzing and picking Stocks. But, wouldn't it be easier to just use Index funds and time individual (index fund) markets?
> 
> Oh, I'm not saying timing the Market is easy, just easier than picking Stocks. Thanks.



Picking good stocks is a very hard thing to do on a _consistent _basis. Sure you can make 10,20, 30%+ in a year. However, doing that YOY, is a damn tough gig.
I like to pick stocks, but 90% of my cash is in ETF's, when the market flucuates and they go up and down it has no emotional effect on me. In contrast I feel emotional attachments to picking stocks. My personal opinion is that the vast majority of people should go the ETF route, but in contrast you won't get the big % increases from the ETF route.


If you're going long / fundamental investor, take market timing with a grain of salt.

(Edit: That being said, my 5 bearish full year picks are giving the folks on this forum a run for there money


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## MrChow (20 April 2018)

Comparing a bad idea to a bad idea generally doesn't lead to good results.


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## Smurf1976 (20 April 2018)

One of the “breakthrough” moments for me was realising that paying some attention to individual stocks helped me get the overall market timing right.


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## So_Cynical (21 April 2018)

Darc Knight said:


> Let me just say first of all that I respect the talent you guys show in analyzing and picking Stocks. But, wouldn't it be easier to just use Index funds and time individual (index fund) markets?
> 
> Oh, I'm not saying timing the Market is easy, just easier than picking Stocks. Thanks.




Do both, i mean for me its not just about picking a stock its also timing, for example RIC is a stock i hold and like very much but not at any price, under 1.29 like it has been for the last few days its cheap, wouldn't pay more for it.

Index funds and big LIC's that pretty much index track except pay fully franked dividends, same, buy when its cheap it you want to own one, i sold out of my 2 index funds 2 months ago.


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## Darc Knight (21 April 2018)

Thanks guys. I might just put aside some play money and have some fun trying to time things across some Share,  Property and Cash index funds.
After increasing my knowledge of course.



MrChow said:


> Comparing a bad idea to a bad idea generally doesn't lead to good results.




Confucius? Thanks for the warning but I want to try it, not betting Sheep Stations though.


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## john5 (2 July 2018)

first priority is pick the stock, then time it if you can, but picking it is the most important


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## tech/a (2 July 2018)

john5 said:


> first priority is pick the stock, then time it if you can, but picking it is the most important




Why? (Which is a leading question).


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## john5 (3 July 2018)

context is investing, not trading, trading it doesnt matter what the stock is, all that matters is timing of when to get in and out (trend), but investing has passive income as first objective, a capital gain as second objective, so nailing down an (expected) income at a "good" price is the priority, timing is a matter of patience, also, if price falls after youve bought you have the option of buying more to increase your eventual upside


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## galumay (3 July 2018)

john5 said:


> but investing has passive income as first objective, a capital gain as second objective,




Huh?


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## luutzu (3 July 2018)

tech/a said:


> Why? (Which is a leading question).




I think what he meant was that the aim is to try and find a good business, presumably selling at a good price. And if possible, if luck would have it, you can pick that good business at an even better/cheaper price.


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## sptrawler (3 July 2018)

john5 said:


> but investing has passive income as first objective, a capital gain as second objective, so nailing down an (expected) income at a "good" price is the priority, timing is a matter of patience, also, if price falls after youve bought you have the option of buying more to increase your eventual upside




Maybe what he is saying is, at the end of the day, to retire you need to replace your income.
If you have an ongoing dividend that supports your lifestyle, why would you sell the investment, chasing the capital gain?
One reason could be to buy back in at a lower price, but that risks your dividend, on the hope that a cheaper price is reached.
Like he says, if the price does take a huge dive, buy more. That is as long as you have cash at hand, I personally carry about 40% cash.
If you are fully in the market, you have to sell something, to take advantage of an opportunity.
Everyone's ideas, are a result of a mirriad of personall perspectives, circumstances and goals. That is why one size doesn't fit all, also the reason for every seller there is a buyer, at a price.


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## tech/a (3 July 2018)

I know what your getting at.
Every value investor would say similar 
But a 7% dividend and a 10% drop in price isn’t
The sort of maths year in and year out I’d want.

My point is that choosing a sound investment is as
Difficult as timing a trade or investment.
You wont know if you made the correct choice until
Years later.hope isn’t a good trading strategy.
But it’s common.


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## sptrawler (3 July 2018)

tech/a said:


> I know what your getting at.
> Every value investor would say similar
> But a 7% dividend and a 10% drop in price isn’t
> The sort of maths year in and year out I’d want.
> ...




Two shares that spring to mind are TLS and CBA.
Both give a reasonable dividend, but for long term investors, the outcomes are quite different.
It goes back to the song, know when to hold em, know when to fold em.


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## tech/a (3 July 2018)

sptrawler said:


> Two shares that spring to mind are TLS and CBA.
> Both give a reasonable dividend, but for long term investors, the outcomes are quite different.




So why would you keep TLS
Twice as much CBA would be better.
Why would you not make a call?


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## sptrawler (3 July 2018)

tech/a said:


> So why would you keep TLS
> Twice as much CBA would be better.
> Why would you not make a call?




I thought that was the point I was making, I must have missed the target.


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## tech/a (3 July 2018)

Sorry I re packaged the obvious


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## Darc Knight (10 September 2018)

A lot of smart people on this Forum. How hard would it be for ASF members to get our heads together and come up with a "close enough" market position to make it profitable?
I was reading an article which showed in hindsight how cycling from a local share index to a cash/F.I. index at set intervals worked. Then there's our property index to throw into the mix.

Just thinking out loud.


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## Danny Younes (18 September 2018)

One of the best ways to pick stocks is to find stocks that are performing stronger or weaker than the parent index. Stocks that are performing stronger indicate that there is a high probability that they are being supported by professional traders. As the market drops, these stocks don't drop as much.

If you are looking to take a long position in the market, the stocks that are going to perform for you are stocks that are showing strength in the background and the way you can identify strength is by looking at volume, the range of the bar and where the bar closes. Strength in the background is usually referred to as widespread down bars with high to ultra-high volume. 

It's not all about picking the top or bottom of a market. If you try to do this, it's like catching a falling knife, you are going to get hurt. Picking stocks is all about following the footsteps of professional traders, where most retail investors trade against them.


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## luutzu (18 September 2018)

Danny Younes said:


> One of the best ways to pick stocks is to find stocks that are performing stronger or weaker than the parent index. Stocks that are performing stronger indicate that there is a high probability that they are being supported by professional traders. As the market drops, these stocks don't drop as much.
> 
> If you are looking to take a long position in the market, the stocks that are going to perform for you are stocks that are showing strength in the background and the way you can identify strength is by looking at volume, the range of the bar and where the bar closes. Strength in the background is usually referred to as widespread down bars with high to ultra-high volume.
> 
> It's not all about picking the top or bottom of a market. If you try to do this, it's like catching a falling knife, you are going to get hurt. Picking stocks is all about following the footsteps of professional traders, where most retail investors trade against them.




You can't really make money following others. You can for a while until the tide turns and the professional all run back, crushing you long before you can get out of the way.


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## Danny Younes (18 September 2018)

You certainly can. Professional traders leave footprints on a price chart and they are very obvious. And these footprints tell us their intentions in the markets. 

The majority of retail investors don't know how the markets really work and are continually caught on the wrong side of the trade. That is why reading volume and price action is crucial to be successful in the markets. 

A lot of investors use lagging indicators and when these indicators are telling them to buy, you'll usually find that professional traders are selling in the background and the retail investors are left scratching their head wondering what just happened.


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## luutzu (18 September 2018)

Danny Younes said:


> You certainly can. Professional traders leave footprints on a price chart and they are very obvious. And these footprints tell us their intentions in the markets.
> 
> The majority of retail investors don't know how the markets really work and are continually caught on the wrong side of the trade. That is why reading volume and price action is crucial to be successful in the markets.
> 
> A lot of investors use lagging indicators and when these indicators are telling them to buy, you'll usually find that professional traders are selling in the background and the retail investors are left scratching their head wondering what just happened.




The bigger guys with more data and experience, bigger account... I guess they can. For the small fries, it's going to be almost impossible. 

There's the market manipulation, the leaving of footings to entrap and mislead etc. 

Then there's also the brain power, maths wizardry compounded with computing algorithm that let the smart money front run the trend; predict moves if x, y, z are shown etc. etc.

I guess if enough smarts and money is thrown at it, it's doable. 

Just read *The Quants*... about the geniuses who managed trillions of dollars of hedge funds. The big guys managed some tens of billions... made incredible amount of money hedging this and that... their black boxes and PhDs and computer whizzes rolled in the cash for a decade or two...

Then everything unwind in 2007 and 2008. Losing almost everything.

During the period, those masters of the universe were scratching their heads. Having no clue what's going on, why their black box isn't working as it used to. 

I guess the lesson to take away from that is that, yes, a bunch of very smart people will be able to work out a smart machine that will play the market and its traders like a  yoyo... then soon enough something unexpected happen that the model either didn't predict, couldn't predict, or put the chances of it happening as 1 in 10,000 years etc.... 

The author was quoting the smarts money how a 1 in 10,000 year event occurred 3 days in a row in the spring autumn of 2007. 

To me, this is too hard and too much work. We're capitalists... take it easy. Let the executives wrestle the politicians and slap the activists around on our behalf


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## Porper (18 September 2018)

Danny Younes said:


> You certainly can. Professional traders leave footprints on a price chart and they are very obvious. And these footprints tell us their intentions in the markets.




Would be interested in a chart depicting these "footprints" Danny. Maybe a live chart as well so we can see how it works going forward. Please, not just a link to your paid service.


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## Danny Younes (18 September 2018)

Algos work for a period of time and then they stop working. Why, because the markets do not operate in a vacuum, they are not predictable, they are random.

Market manipulation is very common, it basically happens every single day and the best time to manipulate the markets is around news announcements. Professional traders are there to mislead the retail trader. When there is a positve news announcement, the professional trader will be looking at selling their holdings, but the news will entice the retail trader to buy.

To give an example back in August 2011, gold was on a magnificent rally. Goldman sachs announces that gold will go well beyond $2000 a troy ounce. This creates a level of activity for the retail trader to buy gold. Goldman sachs is reputable, they know what they are talking about.

The price chart shows at the time of the announcement there were widespread up bars with ultra-high volume. The ultra-high volume is not created by the retail investors buying, it's mainly due tio the professional traders selling. After the announcmenet, gold did rise towards $1900, to entice more buyers, then it sold off. Since that day gold has never traded above $1923. Where is it trading today around $1,200 and eve went as low as $1,000. So clearly you can see the news was fabricated to entice retail investors to buy. Professional trader were taking profits.

This continually happens on a daily basis and it's why over 95% of investors are not successful in the markets. Understanding the predators is crucial to your success in the markets.

I have attached a chart so that you can see what I mean


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## tech/a (18 September 2018)

I like Danny
Now I see why Tradeguider!!


On altos artificial intelligence is making huge in roads to the issue of random markets 

Im on holidays so talk later!


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## barney (18 September 2018)

Porper said:


> Would be interested in a chart depicting these "footprints" Danny.




Ditto from me Danny …. You are obviously well versed in price action and will gain a good audience here if you are prepared to give a little of your knowledge …. Cheers


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## galumay (19 September 2018)

Aghh...technical traders with all the answers! Its like deja vu.Why are they always so dogmatic and certain that they know how the world works?! Its some sort of Dunning-Kroger effect I suspect.


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## tech/a (19 September 2018)

Why?

Because we do!

How do you see any reply dogmatic in this thread 
Questions have been asked so to requests for an example each delivered in a respectful, thoughtful and to some Helpful manner.

There is only one antagonist post I see and it starts with “G”

Bach to holiday


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## barney (19 September 2018)

galumay said:


> Aghh...technical traders with all the answers! Its like deja vu.Why are they always so dogmatic and certain that they know how the world works?! Its some sort of Dunning-Kroger effect I suspect.




Lol … Geez @galumay  … that's a bit harsh isn't it  (Assuming you mean Dunning-Kruger?)  

Technical analysis which is backed up by fundamental reasoning is as close as we can get to correct "real time" data in my humble opinion …… Both are pretty handy indicators but even more useful when used in tandem … 

For me the tech vs fundy scenario is not even an issue … I like it both ways  If anyone tells my wife I will be totally peeved!


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## luutzu (19 September 2018)

barney said:


> Lol … Geez @galumay  … that's a bit harsh isn't it  (Assuming you mean Dunning-Kruger?)
> 
> Technical analysis which is backed up by fundamental reasoning is as close as we can get to correct "real time" data in my humble opinion …… Both are pretty handy indicators but even more useful when used in tandem …
> 
> For me the tech vs fundy scenario is not even an issue … I like it both ways  If anyone tells my wife I will be totally peeved!




You wife probably knew already


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## Danny Younes (19 September 2018)

galumay said:


> Aghh...technical traders with all the answers! Its like deja vu.Why are they always so dogmatic and certain that they know how the world works?! Its some sort of Dunning-Kroger effect I suspect.




Everyone is entitled to their own opinions and their own style of trading. My style of analysis has been around for over 100 years and it's the analysis also used by the majority of professional traders because volume and price tells you alot about the sentiment of traders.

There is a reason why exchanges are reluctant to release volume information...

Galumay I wish you every success with your trading


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## barney (20 September 2018)

luutzu said:


> You wife probably knew already


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