The stock market is a gamble

[r34ztune]

Hi all,
I don't think there is any secrets for a trader.
To me it comes down to 1 thing LUCK
IMO any stock is a gamble
The reasons for my statements are as follows-
1. Correction/crash predictions
Can anyone on this forum honestly say they predicted the last correction/crash 6 months ago? In many cases the signs are hard to read, with little to no time to react. I own property and the signs of a slowdown are much easier to read also you have more time to act.
2. Disclosure
How many of us have been burnt by so called "blue chip" shares like ABC,Centro,AMP ect in the past? The fact is by the time the bad news is released the directors have sold out and jumped ship, leaving the mum and dad investors out of pocket.
3. Sector price movements
It only takes 1 heavyweight stock for it's own reasons to fall, then the rest of the sector will take a hit.
4. Speculation price rises
Companies rise on speculation, without any earnings or evidence to support.
FMG reported net loss of 68.43m last year and is a $10 dollar stock. Aoe trading @ 72.27 PE ratio....
5. Good news/stock drop
Companies can report good news and earnings guidance only to see the stock price drop. An example here - I own WOW which reported a jump of 20% EBITgrowth and is on track to meet full Yr guidance, it has dropped $5 in the last 2 weeks for no APPARENT reason!!

I tried to pick stocks on fundamentals like P.E ratios, EPS, LFL growth, meeting budgets ect but many times you fail, the s/market doesn't operate on evidence!!
IMHO the stockmarket operates on the following 1.Greed 2.Fear 3.Confidence
By the way I'm only an intermediate trader, and this is my view only and would like discussion to my above points.

 

[explod]

The stock market is an excellent trading arena and for the wary a very good place to make money.

The crash. There have been many good economists who predicted the crash and the events unfolding. Two I follow have warned of it since 2002.

W0W is moving only with the rest of the market. If you are a long term holder it will serve you ok, food will be the last thing people stop buying.

Read the "Imminnent and Servere Market correction" thread back 12 months and you will find plenty of ASF members aware of the current situation to unfold.

 

[professor_frink]

Hi all,
I don't think there is any secrets for a trader.
To me it comes down to 1 thing LUCK
IMO any stock is a gamble
The reasons for my statements are as follows-
1. Correction/crash predictions
Can anyone on this forum honestly say they predicted the last correction/crash 6 months ago? In many cases the signs are hard to read, with little to no time to react. I own property and the signs of a slowdown are much easier to read also you have more time to act.
2. Disclosure
How many of us have been burnt by so called "blue chip" shares like ABC,Centro,AMP ect in the past? The fact is by the time the bad news is released the directors have sold out and jumped ship, leaving the mum and dad investors out of pocket.
3. Sector price movements
It only takes 1 heavyweight stock for it's own reasons to fall, then the rest of the sector will take a hit.
4. Speculation price rises
Companies rise on speculation, without any earnings or evidence to support.
FMG reported net loss of 68.43m last year and is a $10 dollar stock. Aoe trading @ 72.27 PE ratio....
5. Good news/stock drop
Companies can report good news and earnings guidance only to see the stock price drop. An example here - I own WOW which reported a jump of 20% EBITgrowth and is on track to meet full Yr guidance, it has dropped $5 in the last 2 weeks for no APPARENT reason!!

I tried to pick stocks on fundamentals like P.E ratios, EPS, LFL growth, meeting budgets ect but many times you fail, the s/market doesn't operate on evidence!!
IMHO the stockmarket operates on the following 1.Greed 2.Fear 3.Confidence
By the way I'm only an intermediate trader, and this is my view only and would like discussion to my above points.

Hi, if fundamentals aren't working for you, perhaps it's time to try something else

 

[wayneL]

Hi all,
I don't think there is any secrets for a trader.
To me it comes down to 1 thing LUCK
IMO any stock is a gamble
The reasons for my statements are as follows-
1. Correction/crash predictions
Can anyone on this forum honestly say they predicted the last correction/crash 6 months ago? In many cases the signs are hard to read, with little to no time to react. I own property and the signs of a slowdown are much easier to read also you have more time to act.
2. Disclosure
How many of us have been burnt by so called "blue chip" shares like ABC,Centro,AMP ect in the past? The fact is by the time the bad news is released the directors have sold out and jumped ship, leaving the mum and dad investors out of pocket.
3. Sector price movements
It only takes 1 heavyweight stock for it's own reasons to fall, then the rest of the sector will take a hit.
4. Speculation price rises
Companies rise on speculation, without any earnings or evidence to support.
FMG reported net loss of 68.43m last year and is a $10 dollar stock. Aoe trading @ 72.27 PE ratio....
5. Good news/stock drop
Companies can report good news and earnings guidance only to see the stock price drop. An example here - I own WOW which reported a jump of 20% EBITgrowth and is on track to meet full Yr guidance, it has dropped $5 in the last 2 weeks for no APPARENT reason!!

I tried to pick stocks on fundamentals like P.E ratios, EPS, LFL growth, meeting budgets ect but many times you fail, the s/market doesn't operate on evidence!!
IMHO the stockmarket operates on the following 1.Greed 2.Fear 3.Confidence
By the way I'm only an intermediate trader, and this is my view only and would like discussion to my above points.

The roll of luck should never be underestimated in investing, sport, life etc.

This does not make the stock market a gamble any more than sport or life.

I agree with the professor, try something else, you can succeed despite the factors you mention. Be the casino, not the punter.

 

[ans25]

Like maybe looking at a graph and jumping on the wave and getting out when the wave peters out.

 

[Trembling Hand]

Hi all,
I don't think there is any secrets for a trader.
To me it comes down to 1 thing LUCK
IMO any stock is a gamble.

Then find a way to manage your luck

Correction/crash predictions
Can anyone on this forum honestly say they predicted the last correction/crash 6 months ago? In many cases the signs are hard to read, with little to no time to react. I own property and the signs of a slowdown are much easier to read also you have more time to act.

Many here did. Many more don't worry about predictions they just act on what the market gives them. Some times its running stocks sometimes it ain't. Either way they make sure they don't get taken the the cleaners.

 

[Temjin]

I would like to see how one can contribute LUCK to traders out there who have consistently made profit from trading the markets over many years and over many thousands of trades. From a statistical point of view, they probably have a much better chance of winning a gold lotto (and perhaps several times over) than if they were trading the market in a random fashion on pure luck.

You already said it, the stock market operates on "1.Greed 2.Fear 3.Confidence". These are all human psychological factors. Without them, trends wouldn't exist in the first place. The so called "Market Efficient Theory" are only for pure arrogant theorists only and is useless in the real world.

If these are your beliefs with the market, then you better change it if you really want to succeed in this field. My advice for you is to try to read some of the threads in this forum related to trading first. Make sure you bring an open mind to it.

By the way, what do you mean by being only an "intermediate" trader?

 

[tech/a]

IMHO the stockmarket operates on the following 1.Greed 2.Fear 3.Confidence

Put perfectly.

Just trade that!
Many here do.

 

[nioka]

Hi all,
I don't think there is any secrets for a trader.
To me it comes down to 1 thing LUCK
I.

There is an element of luck,sure there is, but you make your own luck most of the times by making informed decisions. Whether by using t/a or f/a you guide your luck and if you are unlucky then you take action to reduce it's effect and if you are lucky you take action to maximise it"s effect. That makes the "luck" portion only a small part of the overall picture.

 

[sardines]

Depends on your timeframe - most people will agree that time in the markets is better than timing the markets so this idea of a 'gamble' becomes less apparent over the long-run.

There's plenty of academic research which supports focusing on choosing the right strategic asset allocation as opposed to short-term returns. However, it's understandable that one can become frustrated with recent bearish markets. I have converted to sitting on the sidelines much since the ASX200 was around 5900 but with earnings season soon approaching, you have to wonder whether too much negativity has been priced in now. Anyway, none of this is advice and I tend to go off on a tangent, but it's just my

 

[wayneL]

Depends on your timeframe - most people will agree that time in the markets is better than timing the markets so this idea of a 'gamble' becomes less apparent over the long-run

They do???

If so, it is only from watching muppets like Paul Cli...whatever his name is, on that stupid "Money Show".

Of course good timing may be more of a function of circumstance and luck, than skill, but nevertheless, the mathematics of timing is irrefutable.

 

[Kauri]

The market/markets/horse races/footie/... whatever/, are ALL like the weather... follow them accordingly... and gambling doesn't come into it... much...

Thanks Frontiersman..
..........kauri

 

[Family_Guy]

Here is my take.
Followed the markets since we got 3rd in a schools thing some 22 years ago. Paper traded my way thru life since. Recently sold a house and bought into a new suburb and had a spare $200k left over, no debts. Sat on the money for 6 months before i turned to the missus in April and asked "what are you doing with the money in the bank?""

I HATE property to make money......seriously. I stand here and say right here and now, that it's the GREED of the real estate agents that have got this country into a mess, the sheep followed other sheep into making money in houses and before you know it, no-one can afford the repayments because the prices are to high, the economy ****s itself..... and i sit back and laugh silently.

So i thought, rightly or wrongly, that the market had fallen enough by the end of April. So i took $20k and going on something i read once (have no more than 5% of your cash into one stock) i set out buying what i thought were cheap stocks for value. My goal.......a 10% profit and pull out. That first day, i bought 6x$1k parcels, that i still have and are all behind the 8 ball still. I've made some good buys, but i have 11 parcels i still hold that have bought me back to an unrealised loss of combined $4k.....ironically, the profit i sold for up until EFY07. I have one parcel in front currently, ANZ, and money in the account for something that tips me over the edge to buy........and there are lots of watches...........i have 41 i watch atm and want to buy, i have not committed and wont, any more than the $20k i 'gave' myself.

If the $20k was all i had, then i would call what i do, a gamble. The thing i like about trading is that it is different from other forms of gambling.....horses, footy games etc. And by that i mean, if you throw $50 on a horse to win, and it comes 2nd, you lose. If you throw $1k on a solid foundation stock and the price drops and you sell......you lose. If you don't sell or panic, then you will eventually win. You need to BE THE BALL. Be the ball and it's not a gamble.

PS.....google BE THE BALL.

 

[It's Snake Pliskin]

Everything in life is a gamble so yes the markets are a gamble. An educated gamble, speculation, thanks to the romans and their lovely language make it quite clear.

 

[brty]

Family Guy,

From my understanding of what you posted, you have a plan to take a 10% profit, but no plan to take any losses?!?

Your plan could theoretically make money if shares occillated like a pendulum around a fixed point. Unfortunately they don't. Any company can go below a certain level and stay there for a long time (or never recover) and this includes what are known as 'bluechips'.

Putting it bluntly, your plan sucks. It is not a gamble, but a guaranteed loser in the long term. If your parcels are $1k, then your profit of 10% is only $100 before your exit the position. Brokerage alone will eat 40% of your profit, then there is slippage. I must have this wrong, nobody would undertake such a plan with such a guaranteed loss.

Perhaps you could look/study/research, at doing the opposite??

brty

 

[CoffeeKing]

Family Guy,

From my understanding of what you posted, you have a plan to take a 10% profit, but no plan to take any losses?!?

Your plan could theoretically make money if shares occillated like a pendulum around a fixed point. Unfortunately they don't. Any company can go below a certain level and stay there for a long time (or never recover) and this includes what are known as 'bluechips'.

Putting it bluntly, your plan sucks. It is not a gamble, but a guaranteed loser in the long term. If your parcels are $1k, then your profit of 10% is only $100 before your exit the position. Brokerage alone will eat 40% of your profit, then there is slippage. I must have this wrong, nobody would undertake such a plan with such a guaranteed loss.

Perhaps you could look/study/research, at doing the opposite??

brty

I agree with you brty - I started out in the same manner, a 10% gain but soon realised that the parcels would need to go up 10 cents to get my $100 less the brokerage which didn't leave much left.
I went the " look/study/research, at doing the opposite " idea and have'nt looked back, I have my bad days, but a lot of better one's come along now.

"Make the most ON what you have - not have the most of what you can"
would that be a fair comment? my

 

[son of baglimit]

So i took $20k and going on something i read once (have no more than 5% of your cash into one stock).

something i read once - and who wrote that, a broker or a fund manager i guess.

i am in a similar situation to you family guy, but i have learnt over time that diversification (with that level of investment) is for schmucks.
5% maximum per stock - you are therefore asking yourself to study, learn, absorb and consider maybe 20 companies, maybe more (41 on watch).

considering the level of investment you are making ($20k, being 10% of the $200k) and the remaining free cash you have, i suggest simply keeping track of only a few, and ensure they are companies that you not only have time to study, but also you are able to absorb their psychology, their brand, to the point that every piece of news they deliver you can react sensibly to, and not feel the need to buy or sell more simply on what you initially read. get to know these companies. maybe choose companies who's product interests you, or are your employer, simply to make the study more bearable.

fwiw, i tried investing in media, health, debt collecting, retail, and a few others - i made money but its just too hard to keep up with the ups & downs of so many sectors. i had most cash in gaming (TAH) cos thats where i worked and had an interest in. my sole interest is now in O&G services, and specifically NMS, and as such i am able to understand and react to every event that occurs, not only to that company, but the whole sector.

 

[Family_Guy]

"If your parcels are $1k, then your profit of 10% is only $100 before your exit the position. Brokerage alone will eat 40% of your profit,"

Don't know how to do the quote box. I am using Bell, so $15 in and out and i include that as part of the cost of the package, so in theory the parcel needs to be worth $1130 before i sell it. I know it's not much profit and i have not set any losses. Why? Because $100 is $100. I'm in no hurry, so if the stock drops and sits there for 3 or 5 years, it's no biggy to me.

The other thing is that because i am so new to trading, i need to read and read and read. I'm using this site, a couple of books that have been recommended thru this site and any research i can find on the web. When i work out a trading system i'd like to use, then i'll play with that. In the meantime i don't think what i am doing is a gamble. It may suck as a plan, but i'm in, i'm learning the ropes and i'm having a hell of a lot of fun. Cheers for the comments above, there was something else i wanted to reply to above, but i have to go for a run first.

 

[explod]

something i read once - and who wrote that, a broker or a fund manager i guess.

i am in a similar situation to you family guy, but i have learnt over time that diversification (with that level of investment) is for schmucks.
5% maximum per stock - you are therefore asking yourself to study, learn, absorb and consider maybe 20 companies, maybe more (41 on watch).

.

I agree. Diversification to me means, a percentage in the stock market, some in property, some in say physical gold and silver and perhaps a couple of named paintings. So now with 25% in the stock market, I split that about three ways perhaps 4 some times and study the socks off those few stocks, that's nearly down to 5% but the best formula I can come up with at the moment.

Having said that I drift higher or lower depending on the fundamentals and sentiment for each segment.

The sentiment on stocks is very bad at the moment so am down in that area but am confident that the ones I do hold are sound and will go back up and beyond in due course.

I do not consider this gambling.

 

[Sean K]

The roll of luck should never be underestimated in investing, sport, life etc.

Life is a gamble.

We take a calculated risk getting out of bed in the morning.