Beginning an Investment Journey...

herzy · 23 April 2012

craft said:
For me the problem is that you can’t have two masters. Who do you obey when the action that each demands is different. I think this is the crux of so many TA vs FA debates. For me both are excellent tools but I have never been able to mix them with any success.

I know plenty of people say you can combine, so you will have to work out for yourself what your truth is. Only having exposure when both agree might be one answer – but the market doesn’t seem to pay well for consensus, in my view you are likely to get needlessly whipsawed on your correct FA calls and miss some of the best TA signals – because speculative or highly leveraged / cyclical business that FA doesn’t lend itself to tend to give some of the best short/medium term trends when they go.

Thanks for the reply: What I meant to ask though, is that even if you make a fundamentally sound decision, surely there is merit in the idea of not staying invested in a share when sp dips significantly (even if the fundamentals are the same)? Assuming you're good enough of course, couldn't you sell out and then buy back in lower? Why wait till a purely fundamental change in the company if the share price is tanking anyway? I assume Tech/A would mention opportunity cost at this point: even if sp will eventually go up due to the solid fundamentals, isn't there a danger in waiting and riding it out, ups-and-downs, warts-and-all?

tech/a · 23 April 2012

herzy said:
Thanks for the reply: What I meant to ask though, is that even if you make a fundamentally sound decision, surely there is merit in the idea of not staying invested in a share when sp dips significantly (even if the fundamentals are the same)? Assuming you're good enough of course, couldn't you sell out and then buy back in lower? Why wait till a purely fundamental change in the company if the share price is tanking anyway? I assume Tech/A would mention opportunity cost at this point: even if sp will eventually go up due to the solid fundamentals, isn't there a danger in waiting and riding it out, ups-and-downs, warts-and-all?

As a technical trader this is my argument.

If I buy a stock I want it to go NOW and KEEP GOING.
I can trade short term INITIALLY and convert to longer term if price action warrants.
If you take a look at the OST thread you'll see a trade I have posted there.
My stop is now close enough to Break even.
Its around 30% up since I purchased so at B/E I'm happy to keep longer term
as I'm not trading for income. Why would I let it fall past B/E ???
If you want to survive in this industry then zero risk takes you a long way.

Question.

Why would you buy back into a company at a lower price if its dropping.
Wouldn't it make sense to see it reversing before committing.

craft · 23 April 2012

herzy said:
Thanks for the reply: What I meant to ask though, is that even if you make a fundamentally sound decision, surely there is merit in the idea of not staying invested in a share when sp dips significantly (even if the fundamentals are the same)? Assuming you're good enough of course, couldn't you sell out and then buy back in lower? Why wait till a purely fundamental change in the company if the share price is tanking anyway? I assume Tech/A would mention opportunity cost at this point: even if sp will eventually go up due to the solid fundamentals, isn't there a danger in waiting and riding it out, ups-and-downs, warts-and-all?

surely there is merit in the idea of not staying invested in a share when sp dips significantly

Yes there is - please tell me when these dips are starting and I will get out of my sound business and buy them cheaper later.

Assuming you're good enough of course, couldn't you sell out and then buy back in lower

following momentum the good guys are right around 40% of the time - they make their money by cutting loses.

FA makes its money from the return from the underlying asset. implementing a MOS on the buy price means there is a possability of some price/value arbitrage. but overtime that is overwhelmed by the retun from a good asset. I would rather be exposed to the best assets that can produce my minimum CAGR over time with one buy decision, then putting that at risk by second guessing market moves.

I do not feel the need to have the market verify my opinion of a businesses value. Acceptable buy prices generally only come around when we are in disagreement.

tech/a · 23 April 2012

craft said:
Yes there is - please tell me when these dips are starting and I will get out of my sound business and buy them cheaper later.

Give me a list of your "sound Businesses and Ill post up "When " when it is seen.

But I personally wouldn't be looking at buying at a "cheaper" price.
Id be looking for a clear return to an upward trend.

You can of course sell out at a point and if it goes say 5% higher buy back in ---if price continues and proves your decision to protect profit to be wrong.

following momentum the good guys are right around 40% of the time - they make their money by cutting loses.

Depends of Time frame can be much higher for shorter term.
They actually make money from constantly working on their reward to risk.
Over their whole portfolio NOT a single stock.

FA makes its money from the return from the underlying asset. implementing a MOS on the buy price means there is a possibility of some price/value arbitrage. but overtime that is overwhelmed by the return from a good asset. I would rather be exposed to the best assets that can produce my minimum CAGR over time with one buy decision, then putting that at risk by second guessing market moves.

All good if in profit or at no risk.
Not so good if you trading below your buy point.

I do not feel the need to have the market verify my opinion of a businesses value. Acceptable buy prices generally only come around when we are in disagreement.

Generally?? 40%??

Hell I sure as hell do.
So will you.
Id like to know how you profit if both dont align?

craft · 23 April 2012

tech/a said:
As a technical trader this is my argument.

If I buy a stock I want it to go NOW and KEEP GOING.
I can trade short term INITIALLY and convert to longer term if price action warrants.
If you take a look at the OST thread you'll see a trade I have posted there.
My stop is now close enough to Break even.
Its around 30% up since I purchased so at B/E I'm happy to keep longer term
as I'm not trading for income. Why would I let it fall past B/E ???
If you want to survive in this industry then zero risk takes you a long way.

Question.

Why would you buy back into a company at a lower price if its dropping.
Wouldn't it make sense to see it reversing before committing.

As a technical trader this is my argument.

for a technical trader your argument is fine. FA works on different rules. Why didn’t you sell your business before this last down turn?

Why would you buy back into a company at a lower price if its dropping.
Wouldn't it make sense to see it reversing before committing

I've had a go at explaining this here.

https://www.aussiestockforums.com/forums/showthread.php?t=9854&p=686441&viewfull=1#post686441

craft · 23 April 2012

tech/a said:
Give me a list of your "sound Businesses and Ill post up "When " when it is seen.

But I personally wouldn't be looking at buying at a "cheaper" price.
Id be looking for a clear return to an upward trend.

You can of course sell out at a point and if it goes say 5% higher buy back in ---if price continues and proves your decision to protect profit to be wrong.

Depends of Time frame can be much higher for shorter term.
They actually make money from constantly working on their reward to risk.
Over their whole portfolio NOT a single stock.

All good if in profit or at no risk.
Not so good if you trading below your buy point.

Generally?? 40%??

Hell I sure as hell do.
So will you.
Id like to know how you profit if both dont align?

Tech

I have done my best to explain my FA approach over many posts over the past few months. However people like you who have a mind set that only their way is the right way - never get it and to be blunt you annoy me and I give up.

I'll leave you to show everybody the light.

I'm going back under my rock to save myself the agitation.

tech/a · 23 April 2012

craft said:
for a technical trader your argument is fine. FA works on different rules. Why didn’t you sell your business before this last down turn?

I sold my entire portfolio in 2008
My own business I own.
F/A doesnt actually work on different rules.
Although you seem to think it does.
Ill have a read and report back when better educated.

I've had a go at explaining this here.

https://www.aussiestockforums.com/forums/showthread.php?t=9854&p=686441&viewfull=1#post686441

tech/a · 23 April 2012

craft said:
Tech

I have done my best to explain my FA approach over many posts over the past few months. However people like you who have a mind set that only their way is the right way - never get it and to be blunt you annoy me and I give up.

I'll leave you to show everybody the light.

I'm going back under my rock to save myself the agitation.

Not right.
More less risky.
I could say exactly the same about your approach to your trading.
My posts in answer to your posts arent necessarily directed at you---but more comments from my side (Just as you comment from your side) for others to weight up in their consideration.
Whether you or anyone else finds my posts helpful is entirely the readers.
Im not here to convince anyone.
Just present---as you have---what works with least stress and maximum profit for me.

McLovin · 23 April 2012

tech/a said:
Hell I sure as hell do.
So will you.
Id like to know how you profit if both dont align?

Do you really not get it or are you being deliberately obtuse? I suspect the latter. You're buying an earnings stream. You're "my way or the highway" attitude is excruiatingly boring not to mention you look rather foolish in your assertion that FA doesn't work. I have no interest in getting into a p!ssing competition on a public forum, or anywhere really, so I will only go as far as to say that I make enough money doing this to support myself. Some of us can get through a day without reminding everyone else how great we think we are and how much money we make, not to mention the preaching and self-aggrandizement.

I'll let you in on a little secret, most of what passes on ASF as FA is not really FA. It's just speculation. I'm sure the same is true of TA.

Apologies to Vader for ranting in his thread. I try and steer clear of this sort of TA v FA rubbish, and this will be my only comment on it.

craft · 23 April 2012

tech/a said:
Not right.
More less risky.
I could say exactly the same about your approach to your trading.
My posts in answer to your posts arent necessarily directed at you---but more comments from my side (Just as you comment from your side) for others to weight up in their consideration.
Whether you or anyone else finds my posts helpful is entirely the readers.
Im not here to convince anyone.
Just present---as you have---what works with least stress and maximum profit for me.

Tech

I have always emphasised the risk in FA.

I have always acknowledged the risk control potentially available in TA and prompted people to consider it.

Whether you realise it or not – your posts are so combative and un-acknowledging of other approaches that they really put me off.

Undoubtedly there is a fine line between confidence and arrogance. You have taught me one thing. It’s time to stop posting before I step across it, if I haven’t already.

Hopefully what I leave behind will be of some use to somebody.

tech/a · 23 April 2012

McLovin said:
Do you really not get it or are you being deliberately obtuse? I suspect the latter. You're buying an earnings stream. You're "my way or the highway" attitude is excruiatingly boring not to mention you look rather foolish in your assertion that FA doesn't work. I have no interest in getting into a p!ssing competition on a public forum, or anywhere really, so I will only go as far as to say that I make enough money doing this to support myself. Some of us can get through a day without reminding everyone else how great we think we are and how much money we make (under the assumption it's more than everyone else).

Yes I do get it.
I dont wish to trade that way and there may be a few who read this who would prefer not to---right from the beginning---if its not presented then it cant be considered.

I'll let you in on a little secret, most of what passes on ASF as FA is not really FA. It's just speculation. I'm sure the same is true of TA.

I absolutely and whole heartedly agree on BOTH.

Apologies to Vader for ranting in his thread. I try and steer clear of this sort of TA v FA rubbish, and this will be my only comment on it.

Why is it T/A V F/A.
If the case for each is being presented from exponents from either side---why cant we present our views.
If your happy as can be doing it with F/A fine.

I only post in answer to others posts.

odds-on · 23 April 2012

Vader,

There are a couple of key investment points to be noted from how your thread has started the path of another ASF FA vs TA debate.

1. Predictable. Do not underestimate how much this helps an investor make money.
2. Humans. They make the market and they tend to disagree with each other!

Enjoy the game and keep reading.

Cheers

Oddson

CanOz · 23 April 2012

I say we leave Vader to his thread....while remembering that FA and TA can both be applied successfully by many traders/investors the world over....

Even more so, perhaps commonly, they both can be applied unsuccessfully with disastrous consequences.

Lets hope that we see something here that represents the former rather than the latter.

Waiting...

CanOz

kermit345 · 23 April 2012

CanOz said:
I say we leave Vader to his thread....while remembering that FA and TA can both be applied successfully by many traders/investors the world over....

Even more so, perhaps commonly, they both can be applied unsuccessfully with disastrous consequences.

Lets hope that we see something here that represents the former rather than the latter.

Waiting...

CanOz

I'm not sure why the debate has to be FA v TA and you've summed it up well here that both can work and both can't and its almost totally up to how the individual applies them.

The funny thing is you read the posts of a lot of FA guys around here that are trying to help, and they never once attack the TA style and readily admit that it works, but that it just isn't for them. Yet you have the TA guys attacking (whether they realise it or not) the FA way of doing things and will not even admit it has the potential to work.

Best of luck Vader, as CanOz has said i think its time we left Vader's (And Robusta's) threads to discussing their actual approach, portfolio and strategies. Vader is here seeking some assistance on his 'journey' not to start a 5 page debate in a matter of days on the merits of TA v FA - there are plenty of threads on here and on the internet in generaly that explain these to the full.

Trembling Hand · 23 April 2012

kermit345 said:
Best of luck Vader, as CanOz has said i think its time we left Vader's (And Robusta's) threads to discussing their actual approach, portfolio and strategies. Vader is here seeking some assistance on his 'journey' not to start a 5 page debate in a matter of days on the merits of TA v FA - there are plenty of threads on here and on the internet in generaly that explain these to the full.

Out of all the post above hope this one from SKC doesn't get lost,

skc said:
$30k is more than enough capital to learn on the fly. Whatever amount you think you are comfortable losing now, half that, and half again, and that would still hurt twice as much as you think it would now.

Ditch the LOC. Or at least delay it by 6-12 months. The market will always be here when u get good at it. I don't know your financial circumstances but you wouldn't buy a $100k car with borrowed money just to learn driving, would you?

herzy · 23 April 2012

Sorry to to Vader, I'm afraid my (on-topic) question may have been a catalyst for yet another TA / FA debate. Hopefully the answers (especially one above from Craft) were useful to beginners such as me and Vader in answering the question of whether to apply a tech-style stop loss to a value-based trade.

Boggo · 23 April 2012

kermit345 said:
The funny thing is you read the posts of a lot of FA guys around here that are trying to help, and they never once attack the TA style and readily admit that it works, but that it just isn't for them. Yet you have the TA guys attacking (whether they realise it or not) the FA way of doing things and will not even admit it has the potential to work.

I believe that in an uptrending market the use of FA and TA together work very well, even using EW analysis on the ASX 300 seems to have a more consistent and predictable reliability than applying the same to speccies etc.

As someone who prefers TA over FA especially in the current environment what I find hard to watch are statements such as this one of yours on the TGA thread which really is just a hopeful stab in the dark based on what management told you six months ago, it just doesn't have any qualifying substance and the stock going nowhere...

kermit345 said:

Bought some today at $1.54 with a target price between $2.00 and $2.20 following an estimated EPS of $0.195 or above in the upcoming full year results.
I think the stock deserve a P/E of approx 11 hence my target price range. It was about this time last year where TGA achieved this P/E and beyond.
Either way even if TGA hovered at the same P/E it currently trades at, with an EPS of around $0.195 your still looking at a price increase to approx $1.80 which is a healthy gain in itself.
Guess we'll have to wait and see how this one plays out.

Click to expand...

Trembling Hand said:
Out of all the post above hope this one from SKC doesn't get lost,

Agree entirely.

herzy said:
Sorry to to Vader, I'm afraid my (on-topic) question may have been a catalyst for yet another TA / FA debate. Hopefully the answers (especially one above from Craft) were useful to beginners such as me and Vader in answering the question of whether to apply a tech-style stop loss to a value-based trade.

I still don't see a debate exists or is necessary, justify why a stock (any stock) that is falling is "a bargain at these prices" is any form of analysis other than hoping, guessing, I bought it and I can't be wrong, or I will be right eventually even if I have to wait for years until the dollar is worth 80 cents.
Being asked to justify why a stock is referred to as "underpriced" is not an attack, don't take it personally. Look at all the attacks on TA comments on the RED thread, some FA's eventually conceded that they were wrong by just giving up rather than discussing some obvious reality.

Have a look at this part of the TGA thread and the response I got when I stated the obvious and you will see what I mean (its even more "underpriced" today ).
https://www.aussiestockforums.com/forums/showthread.php?t=18617&p=696730&viewfull=1#post696730

To lighten this up a bit here is a humurous example of the difference between FA (potential) and TA (reality).

A kid asks his father for help on a writing assignment. "Dad, can you tell me the difference between potential and reality?"

His father looks up thoughtfully and says, "I'll demonstrate. Go ask your mother if she would sleep with Robert Redford for a million dollars. Then go ask your sister if she would sleep with Brad Pitt for a million dollars. Come back and tell me what you've learned."

The kid is puzzled, but asks his mother. "Mom, if someone gave you a million dollars, would you sleep with Robert Redford?"

"Don't tell your father, but, yes, I would."

He then goes to his sister's room. "Sis, if someone gave you a million dollars, would you sleep with Brad Pitt?"

She replies, "Omigod! Definitely!"

The kid goes back to his father. "Dad, I think I've figured it out. Potentially, we are sitting on $2 million bucks, but in reality, we're living with two sluts."

Vader · 23 April 2012

Trembling Hand said:
Out of all the post above hope this one from SKC doesn't get lost,

I'm sorry TH/SKC, but that is without doubt the worst piece of advice possible... not only would it be higher cost (mingling investment with mortgage would mean money going into that account would reduce the investment balance first reducing the tax claimable amount and therefore costing me more), but it would also be SIGNIFICANTLY higher risk.

If I did just use that 30k and didn't setup the line of credit - what happens if I were to both lose that 30k and also lose my job? If that were to happen then my house would most certainly be at risk. That 30k liquidity is the essential part of this strategy, it's the safety net, it allows for a good six months breathing space if the absolute worst was to happen... I would be completely insane to put that at risk.

Ves · 23 April 2012

Boggo said:
I still don't see a debate exists or is necessary, justify why a stock (any stock) that is falling is "a bargain at these prices" is any form of analysis other than hoping, guessing, I bought it and I can't be wrong, or I will be right eventually even if I have to wait for years until the dollar is worth 80 cents.

Not always the case. Go have a look at some "special circumstances" buys like JIN or AGI recently. Some of the F/A guys were buying these up.

In a lot of other cases, the market is short-sighted. Big instos sell out (in periods of stagnation, dividend cuts, changing circumstances, "better" opportunities, window dressing... the list goes on). Most F/A investors seem to be earnings orientated (but only for the next year or two into the future) so quite often you will get announcements that provoke a massive gap down. See Cochlear, which bottomed at $45 and is now $60+.

Ves · 23 April 2012

Vader said:
I'm sorry TH/SKC, but that is without doubt the worst piece of advice possible... not only would it be higher cost (mingling investment with mortgage would mean money going into that account would reduce the investment balance first reducing the tax claimable amount and therefore costing me more), but it would also be SIGNIFICANTLY higher risk.

If I did just use that 30k and didn't setup the line of credit - what happens if I were to both lose that 30k and also lose my job? If that were to happen then my house would most certainly be at risk. That 30k liquidity is the essential part of this strategy, it's the safety net, it allows for a good six months breathing space if the absolute worst was to happen... I would be completely insane to put that at risk.

Save up another six months buffer then. Some times short term sacrifices must be made for longer term gains!

Beginning an Investment Journey...

herzy

tech/a

No Ordinary Duck

craft

tech/a

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craft

craft

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odds-on

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Home runs feel good, but base hits pay bills!

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herzy

Boggo

Vader

Ves

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