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Easy to see you were not around in the market in 1987 when it crashed and wiped out a lot of traders.Halba said:
Who know what will happen tomorrow?
Can we quit job and invest in stocks full time?
- Thread starter violet
- Start date
Who know what will happen tomorrow?
Is it not possible though to limit one's loss due to sudden market correction to always have a 'stop' in place? Hence, the only traders that lost during the last crashes were those who had no risk limiting stop on their stocks?
I'm still a learner, so please enlighten me.
I'm still a learner, so please enlighten me.
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justasx said:
During a crash, the buy price is tumbling so fast that stops get passed by (Slippage is the term I think). Stops are only good if there's buyers within the stop range !
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professor_frink said:Didn't you hear noira-it's different this time!
China?
India?
They need lots of resources.
The old economy is the new "new economy"(or something like that) Put all of your money into small cap mining shares....you can't lose!
How can the markets ever crash when China is growing so much
"IT's DIFFERENT THIS TIME", in my view, the most DANGEROUS words ever spoken in Stock Markets, and arguably, the most common after a long bull run. I heard these words first after the 1970's mining boom and repeated so often, most may have believed it. What happened? The market was shot to pieces, bombed and crushed and investors with it.
So big was the boom that some stocks rose one hundred fold in the 1970's. Monthly newsletters boomed and became weekly newsletter and one twice a week. Everything was resource stocks and not much else. The newsletter I had became monthly, after the crash, and resource stocks disappeared from its content.
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Magdoran said:
Unfortunately, like the little bell that rings at the bottom of a bear market, the end of the bull market will be signalled by just one "Ding" and few will hear it, and again, unfortunately, most will need a stick of dynamite to make them sell, at that point.
theasxgorilla
Problem solved... next bubble.
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nizar said:
Couldn't agree more. And thru this approach, running with the trend while it is in place, you'll make so much more money and hopefully prop yourself up and be happier when the "ding" comes and the music stops.
You know, I have seen some tops and falls in my time in the market. I remember people bleating during 1999 about how it was never going to end, and that this was the “new” economy, and that we’d practically abolished the downside of market cycles.
I remember the effects of the pull back in 1994.
I clearly remember the carnage of 1987, where people lost their savings, houses, jobs, and some even (horror of horrors) took their own lives.
I was even around and cognisant of the oil shocks through the 70s, and had some inkling of what was going on in the pull back in 1973 (although it was only many years later that I understood to some extent what was going on).
I remember the unbridled optimism during these times, which was often at its peak right up into the tops.
I wonder how many people have actually studied historical tops (technically)? I mean really studied them in depth?
Sure if you are a random walk theorist, then you’d believe that there is no pattern, hence trying to study trends would be an exercise in futility, and you’d see technical analysts as being involved in self deception seeing something that wasn’t there.
This view may well be true, but it is a view I don’t believe to be correct. If you believe this is so, then nothing I say will be of benefit. However, if you accept that there are tradeable patterns, and there are ways to determine probabilities that can be utilised, then maybe this perspective may be of some interest.
As for the idea of sitting back and “enjoying the good times”, many did this in 1929, 1973, 1987, and 2000 for instance. And they will again this time around. They will do exactly as those in the past did. Ignore the cycles of trend.
It is precisely the mentality that a bull or bear market will last forever that leads to the preconditions for a strong move against a major trend when it ends. Just go to a chart and study the bull campaigns that I listed above. Blank out the right hand side of the chart and gradually move through the trend to completion, and examine the patterns (this actually will be coloured by both your innate capacity and by your training and experience and style of analysis).
The art of a good trader in my view is to be prepared for any eventuality, and develop the capacity to recognise when the trend is at risk of competing, in order to reduce risk and also to potentially look to benefit from a trend change.
I’m not a doom and gloom merchant, and I don’t have a crystal ball either. What I do have is the capacity to analyse the patterns of trend, and to imagine the future, and build scenarios and assign probabilities to those possible outcomes. I’m looking for an opportunity to profit substantially from the short side when this market terminates. Knowing the patterns which precede this kind of event, and positioning correctly is the key to taking advantage of this kind of move.
That means taking action when your methods allow you to perceive a pattern that has a probability of being terminal, and determining the most appropriate strategy. Otherwise there is the potential for the blind leading the blind like lemmings over the cliff edge.
I have commented on various threads recently about the potential danger signs I see technically to this trend, if not Friday 23, then 10-14 March, and 01 April could be danger points. I have talked at length on various threads ranking how various scenarios may pan out, like a quick “ABC” (or McLaren “two thrust” pattern) ranging up to a full blown correction.
Sure, the market is so bullish right now it could easily move on up for a while. But study a few charts, and you’ll see that some stocks are looking toppy. My hunch is that we are heading for (or have reached) some kind of wave 3 top, will have a pull back, and then continue bullishly in 2008. Bull markets tend to correct to set up for the next leg, and some of these pull backs can (look at May last year) last for a few months…
Because I don’t have a crystal ball, and don’t know what the future will be, any of my forecasts can be totally wrong (as can anyone’s). The key point I am making here is recognising when the potential risk is high, and taking action, or at least setting up strategies to respond to the market as the price action pans out…
The art of bear plays is knowing when to take profits, especially for all the times it isn’t a major top but a quick pull back. But you can still profit (often better than going long) from the short side even when the counter trends are quick, because they are usually deeper than bullish moves (with the exception of bullish blow off moves). This is especially true when using options correctly (especially if you understand volatility in options).
I see a good probability of a pull back in a lot of stocks in the not too distant future. If it’s a quick pull back, this can still offer great opportunities, both shorting, then entering long if a bullish continuation is signalled. If there is a big correction, those on the short side will clean up very nicely.
Preparation and flexibility of mind is everything. Forewarned is forearmed.
Regards
Magdoran
P.S. Sceptical? Just have a look at my various posts from well before where I identified Feb 24 as a significant date (Zinc thread, trading the SPI Gann thread, ZFX thread -where I gave 6025 as the target for the 23rd Feb, and many others) Mag.
I remember the effects of the pull back in 1994.
I clearly remember the carnage of 1987, where people lost their savings, houses, jobs, and some even (horror of horrors) took their own lives.
I was even around and cognisant of the oil shocks through the 70s, and had some inkling of what was going on in the pull back in 1973 (although it was only many years later that I understood to some extent what was going on).
I remember the unbridled optimism during these times, which was often at its peak right up into the tops.
I wonder how many people have actually studied historical tops (technically)? I mean really studied them in depth?
Sure if you are a random walk theorist, then you’d believe that there is no pattern, hence trying to study trends would be an exercise in futility, and you’d see technical analysts as being involved in self deception seeing something that wasn’t there.
This view may well be true, but it is a view I don’t believe to be correct. If you believe this is so, then nothing I say will be of benefit. However, if you accept that there are tradeable patterns, and there are ways to determine probabilities that can be utilised, then maybe this perspective may be of some interest.
As for the idea of sitting back and “enjoying the good times”, many did this in 1929, 1973, 1987, and 2000 for instance. And they will again this time around. They will do exactly as those in the past did. Ignore the cycles of trend.
It is precisely the mentality that a bull or bear market will last forever that leads to the preconditions for a strong move against a major trend when it ends. Just go to a chart and study the bull campaigns that I listed above. Blank out the right hand side of the chart and gradually move through the trend to completion, and examine the patterns (this actually will be coloured by both your innate capacity and by your training and experience and style of analysis).
The art of a good trader in my view is to be prepared for any eventuality, and develop the capacity to recognise when the trend is at risk of competing, in order to reduce risk and also to potentially look to benefit from a trend change.
I’m not a doom and gloom merchant, and I don’t have a crystal ball either. What I do have is the capacity to analyse the patterns of trend, and to imagine the future, and build scenarios and assign probabilities to those possible outcomes. I’m looking for an opportunity to profit substantially from the short side when this market terminates. Knowing the patterns which precede this kind of event, and positioning correctly is the key to taking advantage of this kind of move.
That means taking action when your methods allow you to perceive a pattern that has a probability of being terminal, and determining the most appropriate strategy. Otherwise there is the potential for the blind leading the blind like lemmings over the cliff edge.
I have commented on various threads recently about the potential danger signs I see technically to this trend, if not Friday 23, then 10-14 March, and 01 April could be danger points. I have talked at length on various threads ranking how various scenarios may pan out, like a quick “ABC” (or McLaren “two thrust” pattern) ranging up to a full blown correction.
Sure, the market is so bullish right now it could easily move on up for a while. But study a few charts, and you’ll see that some stocks are looking toppy. My hunch is that we are heading for (or have reached) some kind of wave 3 top, will have a pull back, and then continue bullishly in 2008. Bull markets tend to correct to set up for the next leg, and some of these pull backs can (look at May last year) last for a few months…
Because I don’t have a crystal ball, and don’t know what the future will be, any of my forecasts can be totally wrong (as can anyone’s). The key point I am making here is recognising when the potential risk is high, and taking action, or at least setting up strategies to respond to the market as the price action pans out…
The art of bear plays is knowing when to take profits, especially for all the times it isn’t a major top but a quick pull back. But you can still profit (often better than going long) from the short side even when the counter trends are quick, because they are usually deeper than bullish moves (with the exception of bullish blow off moves). This is especially true when using options correctly (especially if you understand volatility in options).
I see a good probability of a pull back in a lot of stocks in the not too distant future. If it’s a quick pull back, this can still offer great opportunities, both shorting, then entering long if a bullish continuation is signalled. If there is a big correction, those on the short side will clean up very nicely.
Preparation and flexibility of mind is everything. Forewarned is forearmed.
Regards
Magdoran
P.S. Sceptical? Just have a look at my various posts from well before where I identified Feb 24 as a significant date (Zinc thread, trading the SPI Gann thread, ZFX thread -where I gave 6025 as the target for the 23rd Feb, and many others) Mag.
CanOz
Home runs feel good, but base hits pay bills!
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Interesting post Mag...add to this the 'toppiness' of the Shanghai markets, the US markets (although not a spectacular), Japanese, India...the staggering level of debt around the world, and like i've mentioned its a perfect storm brewing. I'm watching as much as i can as closely as i can right now...it will only take one straw to start things off i reckon.
Cheers,
Cheers,
Hello CanOz,CanOz said:
I agree, it may be that one proverbial straw that sets it all off… and it is well worth being vigilant right now…
Actually I’m divided about the US patterns, they’re either accumulating for a blow off top, or distributing in a kind of ending diagonal (wavepicker has done a lot of work on this). I’ve been watching the NASDAQ with great interest (not to mention the DOW, and the S&P 500), and thought this was about to take off, but not so sure now. The struggling pattern I think has the potential to unleash a fast move.
I don’t know if this will be an almost vertical bullish blow off move, or a strong ending diagonal sharp corrective move, but this sort of pattern when it resolves tends to be strong.
I see the same kind of pattern in the DAX, CAC and FTSE too…
Japan though is different, because of the depressed Yen, whether that market booms, or the Yen adjusts back up, in both cases Japanese stocks may maintain their value if there is some kind of bearish pull back, but there’s no guarantee.
Regards
Magdoran
P.S. Interestingly from a derivative perspective, (especially for those who have read Frank Partnoy) there could be significant (Amaranth style) exposures to complex derivatives that are not on many companies books that are hidden in a labyrinth of accounting smokescreens.
It’s too hard for me to even attempt to estimate the possible effects of a melt down in this area, but I can imagine the house of cards that has been built up over the past decade. The last big bangs were Enron and Worldcom, and the preconditions for this kind of collapse haven’t really been addressed for political reasons.
I’m not sure if this is at issue now, or will be in the future, but something to be aware of. Mag
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Mag's
What's happening baby?
Actually I've been looking at the derivative side etc in my blog for about the last two weeks odd....check it out and say hi.
jog on
d998
What's happening baby?
Actually I've been looking at the derivative side etc in my blog for about the last two weeks odd....check it out and say hi.
jog on
d998
Hey Duc!ducati916 said:
How have you been in sunny NZ??? Sure, I’ll check out your blog, I do pop in there from time to time and have a browse…
Always interesting to see what you’re up to.
I’ve been working round the clock on charts and derivative strategies, made a few breakthroughs in both areas… hence too busy to post much… (but obviously still find some time! Ha!) – been working with some gifted minds recently.
Hey, have you been researching collateralised bond/mortgage obligations (CBOs and CMOs) in your travels? This is a freaky area of structured derivatives. Still trying to understand the mechanics, they’re quite involved, but I’m sure your methodical mind would find it a breeze!
Regards,
Mag.
tech/a
No Ordinary Duck
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Reading through this thread the original question seems lost and the answer seem complicated.
The answer is YES
Here is WHY not HOW
(1) The advent of CFD's make shorting of many stocks possible.
(2) The advent of CFD's make leverage easy.(3:1 is safe and sufficient).
(3) A capital base of $200,000 would be comfortable ( No more than a standard business start up cost or capital.
(4) A return of 30% on Turnover (No more than a standard profitable business)
$200,000 x 3:1 leverage x 30% = $180,000/year.
Like any business work out the how.
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Hey Tech
I like ur answer.
Cheers
I like ur answer.
Cheers
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Magdoran said:
Mag's baby,
Yes I have, have been interested in Bank's generally, sub-prime, and the CMO's + CDO's [have a few thoughts on the blog]
I note Greenspan called a US recession by years end in a lecture he gave in HK over the weekend.
There's also been another sub-prime implosion [NFI] in the US
This market is falling apart at the seams.
jog on
d998
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