DrBourse General Help for Beginners

[DrBourse]

All 3 “DrBourse Help For Beginners” forums contain a series of “RANDOM POSTS” on subjects and items that may be of interest to beginners…

My intention is to lodge numerous posts to start with, then enter into “CONSTRUCTIVE DISCUSSIONS” that are geared toward assisting with beginner’s education in the various aspects of Share Trading….

These posts are not intended to be in any logically presented format….

Experienced Traders will gain little from my posts….

 

[DrBourse]

Sorry, but I do not provide Buy/Sell Reccos - I have never suggested that ppl should buy “a particular stock”, that’s not my style – I only ever get involved if someone throws a Q into the room, or when someone asks me a direct Q - When asked, I always put my TA or FA thoughts into the arena, obviously it’s open for criticism, that’s everyone’s prerogative – the only other information I put forward is my “Educational Help”.

 

[DrBourse]

Share Trading is such a complex subject that no “one Seminar” could possibly cover all aspects - it would take far too many days or months, and be far too expensive for any individual to attend - remember that seminar teachings may not be exactly correct, they usually all have a ‘hidden agenda’ that is usually related directly to what their individual business needs to sell you (eg: a Software Trading Program, or a periodical publication, etc, etc.)…..

Personally, I’m not a fan of those expensive seminars - but obviously it’s a very personal choice - remember that TA & FA are often interpreted in differently by each individual - also All the information they explain to you during those courses is available from other sources…..

It just involves a lot of individual discipline and effort…..


Share Trading is a very intense occupation - traders are continually learning something new every day - so why not learn everything by yourself, starting NOW……

 

[DrBourse]

There are a lot of Trading Systems available, “Individuals” with their own particular slant on the Market Mechanics.... Guys like Fibonacci, Gann, Lincoln, Nison, Gramza, Elliott, Buffett, Ben Graham, Williams, etc, etc, - I think anybody wanting to make something out of this Trading Profession needs to at least understand what these guys are saying.... Having said that though, I think anyone that relies solely on any one persons ‘Theories’ is crazy.... Take it all ‘on board’ then mould the best bits into your particular style of Trading/Investing....

A lot of people are relying too much on things like the ABC Trading System, Gann, Elliott etc - none of us expect those systems to be exactly right every time, it's just not possible, IMO those theories are interesting but not always correct - same as my Indicators, I occasionally read them incorrectly – use the info that they produce, take notes, then add a bit of commonsense to the mix & ALWAYS DYOR.....

 

[DrBourse]

In my opinion any bit of Information is valuable and significant - if you omit the bits that you personally don't like you won't last long – HOWEVER some traders use only Market Depth, some traders use Volume & Market Depth, some others use Financial Data only, some others use Technical Analysis only, etc, etc, and they all do very well at this profession, because they understand what their chosen method of research can tell them.

 

[DrBourse]

IMO we, as traders, need to read as much as we can such as newspapers, Broker & Analyst Reports, etc - BUT the trick is not to just read and try to understand the reports, but to 'work out what the sheep reaction will be to those reports etc' - then we need to trade off that understanding of what the sheep will do.

 

[DrBourse]

Trading Strategy ---- I occasionally adopt an approach similar to Fund Managers, etc when buying into this Market ---- DURING THE FIRST HOUR, Watch, from the Opening, for Stocks that Rise then Fall ---- DURING THE NEXT HOUR, Only Buy into Stocks that Rise 2 Ticks above the First Hours High – Stop Loss will be the First Hours High Point. ---- This system has worked quite well in Past Volatile Markets ---- It's just something for ppl to think abt --- you would need to do your own backtesting on this strategy.......

I have never suggested that ppl should buy “a particular stock”, that’s not my style – I only ever get involved if someone throws a Q into the room, or when someone asks me a direct Q - When asked, I always put my thoughts into the arena, obviously it’s open for criticism, that’s everyone’s prerogative.

 

[DrBourse]

In this Profession the idea is to Trade when there is a Trade to be made, and even then, you should 'Play the Trade' (like playing a Fish), you should NOT trade the $$$'s - get the trades right and the $$$'s will automatically follow, buying stocks just because you have to 'Make Money' is the wrong reason to buy ... Unfortunately, there are a lot of ppl in that situation - they are usually the ones that get burnt.

One of the problems traders continually have trouble with is, "To Sell, or not to Sell ???" - Traders should as themselves one Question - "If I did not own this stock right now, would I buy it", - If the answer is that you would buy, then you should probably hold - HOWEVER, if the answer is that you would not buy now, then you should probably Sell ASAP...... BUT DYOR.

This is not a game – this is a Profession - it is called share trading not shareholding.

 

[DrBourse]

HOW WILL YOU PLACE YOUR BUY/SELL ORDER’S ?

“Buy/Sell @ Market” means you will immediately get the Nr of Shares that you want, the main problem here is that there could be some slippage (either way)..... This option can only be used DURING TRADING HOURS.....



“Buy/Sell @ Price” means that you may NOT get the Nr of shares that you want for that price, in which case you would need to Amend your order to get the remainder of your quota.... basically Traders like myself always use @ Market as we need the shares NOW because we may want to sell them in a few minutes, we need to turn our money over quickly..., Investors or longer term traders usually use @ price....



“Buy/Sell @ Good for Day” means that your order can only be processed TODAY, basically Traders like myself always use @ Good for Day, as we need the shares NOW because we may want to sell them in a few minutes, we need to turn our money over quickly..., Investors or longer term traders usually use @ Expiry Date....



“Buy/Sell @ Expiry Date” means you nominate the future date you want your order to expire, this way you may accumulate the shares over a period of time, right up to your nominated Expiry Date.



Here is an example of WHY I don’t use “Buy/Sell @ Expiry Date” – Let’s assume your Buy Order is placed, but only partially filled, at the end of the day you will receive a Trade Confirmation for the shares bought and for the standard Brokerage Fee, if your order completes tomorrow you should not be charged additional brokerage, and you will receive an updated Trade Confirmation... The only scenario that you will be charged extra brokerage is if the total order value goes to the next brokerage level, that is to say if the total order value exceeds $10,000.... If your Buy Order was to expire and you placed a new order, you would then need to pay a second brokerage amount as it is a new order. If you are worried your order may expire before it is fully executed, you can amend the expiry date of your order online.

 

[DrBourse]

For Newbies and anyone else trying to relate the Overnight DJIA to our "Market or Individual Stocks", here is a method To calculate the ASX200’s rise or fall for the day, it's never perfect, but it is usually pretty close, it's what most of the so called "Experts" use each morning here in OZ........

Use last night’s Dow Jones figure, Divide by 3, then Divide by 2.- SO - IF DOW JONES was UP by 190, then our ASX200 should be UP by about 32, that is, 190 divided by 3 = 63.33, then 63.33 divided by 2 = 31.66......... there are other options to this formula, but I will let the mathematicians of this world show them to us.

SO.......

If BHP was up by $2.41 on the DOW, we would divide $2.41 by 3, then divide again by 2 = 0.4016666c, so our ASX BHP should be up by about 0.40cents.........

There are various ways of calculating/guessing how our Market or Individual Stocks will react to the DOW's results each day, Remember, as there are several other factors involved, it's never perfect, but it is usually pretty close........

Other Factors you need to add in like our Domestic Economic Climate, and our relative Australian problems and Announcements that may occur between the DJIA Closing time, and the End of Our Trading Day, then obtain news of any of those factors that occurred in the "US of A" during their Trading Day..... Not easy accessing all that info, but can be done with the help of some American contacts, in other words I try to get the American version/explanation of What Caused the Rise or Fall....

It's not an EXACT Science, but it usually works for me....

 

[DrBourse]

As a Technimental Trader (I rely on 60% Fundamental’s AND 40% Technical’s), I just love the Stock Market Players with the “I DONT BELIEVE CHARTS” philosophy…..

They all make my job so much easier – my Bank Balance Applauds them all, as we Technimental, or Technical Traders, benefit from their uneducated outlook on this profession……

Then there is the argument of Financial Analysis vs Technical Analysis - Remember Balance Sheet Financials & Financial Analysis are issued, “As At a certain Date”, so as time progresses it becomes less relevant - but Technical’s & Technical Analysis (which = share price movements) actually reflects CURRENT NEWS, CURRENT ANNOUNCEMENTS, CURRENT VALUES & CURRENT MARKET SENTIMENT - your stock selection should be based on both FA* & TA, not one or the other……

TA was created a thousand years ago to help Fundamental Players understand exactly what was happening in the real world of Share Markets - I think it began in Japan & China, then during the Tulip Boom they added some more EASY TO UNDERSTAND INDICATORs & CANDLESTICK info for the Fundamentalists to follow……

To all the unbelievers out there - PLEASE keep the flag waving …..

 

[DrBourse]

This Post relates to what I call, "Minor Irritants".

Volume Weighted Average Price - VWAP is a trading benchmark particularly used in pension plans. It is calculated by adding up the dollars traded for every transaction (price times shares traded) and then dividing by the total shares traded for the day. The theory is that if the price of a buy trade is lower than the VWAP, it is a good trade. The opposite is true if the price is higher than the VWAP.......

VWAP & VWMA are not as popular as you may think.....



"Minor Irritant" Traders use VWAP to their detriment - Serious Traders & Technical Analysts have several other Volume based Indicators at their disposal, A Weighted Moving Average set @ 1 is almost the same as VWAP (htc3), But a WMA setting of 2 or maybe 3 provides a safer option.....

Those other Volume based Indicators give the Technical Trader a big advantage, because we know what the Minor Irritants next moves are before they actually do.....

The following is a copy from Investopedia.com -"Volume weighted average price (VWAP) and moving volume weighted average price (MVWAP) are trading tools that can be used by all traders to ensure they are getting the best price. However, these tools are used most frequently by short-term traders and in algorithm-based trading programs"........



Option Traders, Algorithmic Trading, ABC Swing Traders, FTMC Traders, Direct Market Access (DMA), VWAP Strategy Traders, etc, are all classed as "Minor Irritant Traders", purely because they are a Minor Irritant to serious ST & LT Share Traders.......



TWO of the many problems facing the "Minor Irritants" are:- .....

1- The speed of order execution, an advantage in ordinary circumstances, can become a problem when several orders are executed simultaneously without human intervention…. Recent past “flash crashes” have been blamed on algorithmic trading......

2- Another disadvantage of algorithmic trades is that liquidity, which is created through rapid buy and sell orders, can disappear in a moment, eliminating the chance for algo traders to profit off price changes. It can also lead to instant loss of liquidity. Research has uncovered that algorithmic trading was a major factor in causing a loss of liquidity in currency markets after the Swiss franc discontinued its Euro peg in 2015......

Don't really want to list the other problems that Minor Irritant Traders have - I need to keep my advantage over them....

 

[DrBourse]

Sheep are, in my opinion, people/traders/Mums & Dads etc, that do not understand much about the ASX and how it works, they blindly follow a Favourite Stock for no valid reason, they blindly follow Chat Room Ramps without doing their own research, they blindly buy on the 'Taxi Drivers Tip" without doing their own research - they blindly follow whatever Stock is suggested without doing their own research...

IMO we, as traders, need to read as much as we can such as newspapers, Broker & Analyst Reports, etc - BUT the trick is not to just read and try to understand the reports, but to 'work out what the sheep reaction will be to those reports etc' - then we need to trade off that understanding of what the sheep will do.

 

[DrBourse]

We all went through the trauma of trying to Locate a Software Trading Platforms – looked at dozens of Software Trading Platforms, most were far too expensive. You need to work out what level of access you need - then keep shopping for the best value for that ‘level of access’. I guess it depends on how much you want to pay per mth, and what type of Data Feed you want or need... The actual Software Programs can cost many thousands of dollars (most range between $100 to $900) - Live Data can cost hundreds p/mth – End of Day Data costs $30-$50 p/mth... The idea with any Trading Software is that “The Individual must Drive it”. So, the biggest thing to watch out for is what’s known as “Black Box Systems”. Any software pre-programmed to produce decisions for you is known as a ‘Black Box System” - They are Software Programs that have “Set, and Unknown” formulas within, that identify certain signals, like Buy & Sell Points, or Chart Patterns, ABC points, etc. Some are Good, most are pretty useless and you end up paying for a feature that does not really work. Brokers, Fund Managers & Bankers do not use them, so why should we use them. You need to gain the Technical & Financial knowledge, then apply that knowledge to your chosen software – what you don’t need is some software package telling you what to do. Then you have to consider just ‘how user friendly’ each Software Platform is...Incredible Charts is Basic, has most of the Bells & Whistles, AND IT’s FREE for ‘next day data’... www.incrediblecharts.com ..... another is TradingView – Track All Markets it’s also FREE for 20 min delayed data ..

 

[DrBourse]

Had a few people recently ask for my thoughts on "Stock Scanning Software"....

After a short discussion with each of them I realised they were approaching the Scanner with the wrong information input....

Most were just punching in random parameters, and getting garbage results....

SO, thought I would show how I approach setting up of Scan Parameters......

This does not work for all Software Scanners, nor does it work for all types of stocks, but with a little bit of tweaking, it usually produces the goods.....

The following snapshots are from my old Seminar days, but the theory will still apply in any economic environment....



My approach is shown in the first snapshot, in that I look at a Basic Candlestick Chart, and then decide where I think Entry Signals should be given by the Scan Software, then I experiment with various Scanner Software Settings until I get a result that is confirmed by several other independent Indicators, the Scan results are shown in the second snapshot.....

Remember that different stocks react differently to different indicators.... So this approach is suspect with a minority of stocks, particularly "Penny Dreadful Stocks"....

Remember that this approach works for me because of my knowledge of Indicators, anyhow I thought it may be of help to someone....

 

[DrBourse]

If you are not competent with your own Analysis Skills, then you may pick up some clues by trying to get some Free Analysis from the following sources….

Here are a few suggestions for any Suicidal Newbies that want to play in the ASX Share Trading Sandpit... ….



1/.. Select a Stock (by whatever means) that you think you may like to buy….

Then check that company’s list of Top 20 Shareholders…..

Those Top 20 have obviously done their analysis and are comfortable holding your chosen stock….

It would be good if those Top 20 players were reputable companies such as Banks, LIC’s, etc….

I would not be happy if the Top 20 were say, Family Trusts or individuals I did not know anything about….



2/... Check your companies’ announcements for “Ceasing to be a Substantial Holder” or “Becoming a substantial Holder” announcements… That will tell you who, ‘in the know’, is Buying/Selling your company’s shares….

If the Banks etc are selling, then there must be a good reason, good enough for you to take notice of, and maybe not to proceed with your selection….

On the other hand, if the Banks, etc are Buying, then maybe you are on the right track….



3/… Do NOT however be bullied by anyone’s particular pet trading system….



4/.. You need to understand the effects of “Algorithmic Trading Systems” and “Short Selling” etc but you do not need to be frightened by them – Once you understand the world of Share Trading you will realise there are ways of avoiding those Minor Irritants…



5/ Finally… Remember that it is your money – You must make your own decisions – hence the usual disclaimer - DYOR…

 

[DrBourse]

The Topic here is Mergers & Takeovers.....

IMO, the first thing to look at is the history of the Predators and Who Else is involved as Backers - How successful have they been in the past, some have a great record of success, others have a great record of failures - Then I would look at the Financial Standings of Prey, and Predator as totally Separate Entities - Then I would look at which one of the 2, Predator or Prey is best suited to the Merger - that is, would the Prey be more likely to drag the Predator into Oblivion, or is it Probable that the Predator would end up with a Bigger, Better & more Profitable Business - Also I would need to obtain all the Gossip on the likely Merged Board Structure, ideally there would be a minimum of 75% Predator Members on the New Board, and 25% (Max) of the others on the New Board - Reasoning for that is pretty obvious IMO, don't really want anything or anyone from the Failed Company to carry too much sway within the New Enterprise......



Then after all that I would look at how the New Business Plan intends to deal with any lingering Prey Problems, Will they Break up, and Sell the Non-Performing parts of the Prey Company, or will they try to maintain all aspects, if they decide to keep everything from both sides will they have enough Resources and Internal Knowledge to do what needs to be done - that would then lead to Evaluating the proposed Merged Company Financials......



Mergers very seldom start with a SP Spike, so after a reasonable time, Analysing TA would come into play....



So with all that ammunition you should be able to make an Informed decision on the Merged Company's Future Prospects.....



Good luck with all that - It's never easy evaluating Mergers, mainly because we don't know how much trouble the Prey really are in.....And they are not going to let the Average Punter have access to that sort of info....

 

[DrBourse]

Opening Prices (Market Depth and Orders) are pretty useless, because The Fundies & other Big Players don't 'hit the boards' till approximately 9.55am each day…..

Then they start manipulating the Indicative Price while they ‘jockey’ for what they consider the prime position within the Depth Stack that will entice others to place their orders…..

Then they change their Bids in the last few seconds just to confuse those punters that are unaware of how they operate…..

Sheep & Newbies are their primary targets…..

Personally I only ever trade ‘live’, that is, I only trade when shares actually trading according to their individual “Start Times and 4pm Closing Time” – I always use “At Market, and Good for the Day” as I am prepared to take a chance on any ‘Slippage’, I am not prepared to play Stupid Games with the so called “Experts”…..

Cash market trading hours (asx.com.au)

 

[DrBourse]

Everybody needs to get up to date with “OLD SAYINGS” – They are just that – “USELESS OLD SAYINGS”……The fear everyone has about May & October each year is RIDICULOUS - most are Great Months – Particularly since the year 2000…..

OCTOBERS for 2000, 2001, 2002, 2003, 2004, 2006, 2007, 2010, 2011, 2012, 2013, 2014, 2015, 2017, 2019 & 2020 were all UP.....

OCTOBERS for 2005, 2008, 2009, 2016 & 2018 were down.....

MAY, 2001, 2002, 2003, 2004, 2005, 2007, 2008, 2009, 2014, 2016, 2018, 2019, 2020 & 2021 were all UP.....

MAY 2006, 2010, 2011, 2012, 2013, 2015 & 2017 were down.....

Now I need to clarify something about the May/October Theory, it all depends on which school you went to....

Some say that the calculation is "that a particular month is either Up or Down in relation to the previous month" (not really sure what part of the previous months data they would use - High, Low, 1st day, Last day, etc)...

Most Analysts/Brokers say the calculation is "that a particular month is either Up or Down from Close Of Trading on the 1st day of the month to Close Of Trading on the last day of the month...

Others suggest the calculation should be from "the opening price on day one to the closing price on the last day of the month...

The May/Oct Theory dates back to the early to mid 1900's when Company Reporting Rules revolved around the now obsolete March & September Reporting Timetables.....

They are old "Share Trading Rules" that belong to a past era, and as such have outlived their usefulness - Smart Brokers are using scare tactics and misguided fear to make profits at your expense.. WAKE UP AUZZIE..... Savvy Brokers are setting you up AGAIN......

When you think about it, it really is a form of Ramping......

All I can suggest is that you must DYOR if you are relying on this OUTDATED THEORY....

 

[DrBourse]

Beginners’ should prove to themselves that they can trade successfully by Longs only - after that it might pay to look at Derivatives - far too many ppl dive straight into Derivatives only to lose the lot because they "Tried to Run B4 they could Walk" - unless you have a 'Direct Phone Line' to the Fundies, Merchant Banks, Broking Houses and other Market Manipulators, the odds are really stacked against you - Buffett, and numerous other Commentators refer to Derivatives as WMD's (Weapons of Mass Destruction)