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Tell me more...
(Or if this is clearly explained in your e-book then just tell me to read that. Hmmm, perhaps this noob should lurk longer and read your e-book before posting?)
Dump it Here
- Thread starter Skate
- Start date
Tell me more...
(Or if this is clearly explained in your e-book then just tell me to read that. Hmmm, perhaps this noob should lurk longer and read your e-book before posting?)
If you are trend trading it is suggested you have a trailing stop that is wide enough to allow pullbacks (temporary decline in price) before it continues up. It is a double edged sword, though. It needs to be wide enough so you don't get whipasaw'd, but having a wide stop also means giving profits back. A trend trader can be profitable from just a few trades that took off while minimizing losses on the majority (a trend following system will have a win% of 30-35%).
The other sell trigger mentioned is the 'stale exit' which is to get rid of a position if it hasn't gone up after a certain amount of time. For example, you buy a stock and it goes up 5% and after 10 weeks it's still at 5%. This isn't going to trigger a trailing stop, obviously (its +5% not -40%), but you have a position that is going no where. You don't want to manually intervene, why?, because it will set a dangerous precedent. Therefore, a sell rule can be employed that if after 'x' weeks (or days, whatever time period yo are using) if the stock hasn't gone up by 'z' amount, sell. You would rather put the money into a stock that will have moment and make money, not sit there with the potential to go further down due to loss of momentum.
And last, the 'market conditions' are the index that you are tracking. If you are buying stocks in the All Ordinaries then you don't want to be trading stocks in that universe of stocks if the index itself is going down. Case in point, in the COVID market crash, why would you buy stocks in a falling market? The stocks in the universe you are trading tend to rise with that index (since the index tracks these stocks, not surprising). Therefore, a common technique that is used is a 'market filter' that is a rule to protect capital: when the market is down (however you define that, could be a 'close' below the 20week average for example) don't trade, when the market is in an upwards direction trade. That is the essence of a market filter.
These factors change depending on the system and style you are trading. If you are a swing trader, or a momentum trader, counter-trend trader, or a mean-reversion trader, the factors of a market filter (what consitutes a 'stale' stock) or what is an appropriate stop-loss level will all depend on that style/system.
Read Radge's books as these are mentioned in some way.
The other sell trigger mentioned is the 'stale exit' which is to get rid of a position if it hasn't gone up after a certain amount of time. For example, you buy a stock and it goes up 5% and after 10 weeks it's still at 5%. This isn't going to trigger a trailing stop, obviously (its +5% not -40%), but you have a position that is going no where. You don't want to manually intervene, why?, because it will set a dangerous precedent. Therefore, a sell rule can be employed that if after 'x' weeks (or days, whatever time period yo are using) if the stock hasn't gone up by 'z' amount, sell. You would rather put the money into a stock that will have moment and make money, not sit there with the potential to go further down due to loss of momentum.
And last, the 'market conditions' are the index that you are tracking. If you are buying stocks in the All Ordinaries then you don't want to be trading stocks in that universe of stocks if the index itself is going down. Case in point, in the COVID market crash, why would you buy stocks in a falling market? The stocks in the universe you are trading tend to rise with that index (since the index tracks these stocks, not surprising). Therefore, a common technique that is used is a 'market filter' that is a rule to protect capital: when the market is down (however you define that, could be a 'close' below the 20week average for example) don't trade, when the market is in an upwards direction trade. That is the essence of a market filter.
These factors change depending on the system and style you are trading. If you are a swing trader, or a momentum trader, counter-trend trader, or a mean-reversion trader, the factors of a market filter (what consitutes a 'stale' stock) or what is an appropriate stop-loss level will all depend on that style/system.
Read Radge's books as these are mentioned in some way.
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@Linus van Pelt my suggestion is for you to read the "Dump it here" thread from start to finish (slowly, without rushing or speed reading any of my posts). I know it's a big ask & time-consuming but the learning process depends on how much you comprehend, your financial future may depend on it.
We have lost the art to memorise
We need memories for recall that's why we need to make a note of information that's important, it's the very reason why I repeat myself so others are conditioned "how to think" instead of "what to think". If you don't read my entire thread you will miss the story why a US Platoon Sergeant shouts & stresses new recruits. This passage might seem trivial but I've written it for a purpose. When you’re dealing with your own money, trading gets very complicated, very quickly! Jumping to conclusions is another bad trait, especially as a trader (these are all important points to understand & comprehend)
Platoon Sergeant
In movies, a US army Platoon Sergeant's main role is to shout & stress the new recruits, why? It's so the new recruits are conditioned to handle stress from the get-go ensuring they make calm, measured decisions under enormous stressful combat conditions, their lives depend on it.
Every question you can think of
I believe I've already covered the questions you could think of so make the "search feature" your friend to hone in on a subject. Use a [keyword] posted by [Skate] & bingo, there will be plenty to read. As an example - searching the keyword [StaleStop] by [Skate] 38 separate posts will be displayed that explains the StaleStop in detail. The eBook is for you to take as a travelling companion & contains important information that I have found useful in my trading journey. Like most traders, I've read more books than I care to remember. The important information in those books is condensed in my free eBook, saving you a tremendous amount of reading.
Respect other people’s way of thinking
6+3=9 - But so does 5+4 & 3X3
The way you decide to trade isn’t the only way to trade. Respect other trader's way of thinking & have an open mind, that's how you will learn. There are different trading methods that work. You need to find something that suits your lifestyle, schedule & personality. As traders, we can all get to the correct answer no matter how the question is posed "in my example above".
Inbuilt weakness
Simply jumping to a conclusion without bothering to assess the full range of possibilities is an inbuilt weakness we all suffer as traders.
Have a read of this post & the next: https://www.aussiestockforums.com/posts/1005992/
Summary
If you don't take the time to learn you will be in the company of most traders "LOSERS"
Skate.
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Thanks heaps. I'm slowly working my way through the "Dump it Here" thread (page 75 so far, only 80 more to go!), and finally getting the courage to post questions.
Earlier in this thread it was stated (roughly) "Ask a one-line question, expect a one-line answer". In my attempt to be terse, I fell into this trap. Although "Tell me more" is, I believe, a favourite phrase of Skate's
.What I meant to write is "Can I get more details on what these above terms mean?". You've mainly addressed that, but the biggest takeaway I got is "Read Radge's books".
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Thanks heaps. I'm slowly working my way through the "Dump it Here" thread (page 75 so far, only 80 more to go!), and finally getting the courage to post questions. Earlier in this thread it was stated (roughly) "Ask a one-line question, expect a one-line answer". In my attempt to be terse, I fell into this trap. Although "Tell me more" is, I believe, a favourite phrase of Skate's
@Linus van Pelt well done, I'm impressed that you are reading my entire thread & if you keep going you will even get to know what I look like & my background. By you repeating a few of my comments confirms that you are absorbing the information. Nick Radge's books are okay but please read my eBook at least "5 times", reading my book once won't cut it, you need to read it a few times for the words to sink in before spending money on buying other books. My posts are written in such a way to educate & condition people how to react when trading gets stressful.
Skate.
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Yep I'm doing just that. And TBH I wonder how many noobs read the thread cover to cover? But at the same time, it is MUCH MUCH more efficient to ask questions as I encounter them. To be fair, I have restrained myself for 75 pages lol
Nope I've already read that. Or perhaps it's repeated in upcoming pages? Although I'm not sure the relevance to my (poorly worded one-line) question about the definition of those technical terms?
Thanks. As a noob, I'll really try to restrain myself from posting until I've reached the end of the thread. Perhaps questions raised (to me anyway) on page 75 are answered on page 124. And I need to familiarize myself with the search features of this forum, so I appreciate the tip. I'll be sure to read those other posts defining the StaleStop in detail.
I realize I need to do my own work searching, learning, and reading, and not have you (and other gurus) spoon feed me by regurgitating the same information you've written many times before.
And I ***LOVE*** condensed, so I look forward to reading your e-book immediately after finishing this thread. Or perhaps I should pause the thread and read it first :hmmm:
Noted, but again I don't see the relevance to my post?
Yes, I certainly don't want to be a LOSER. Which is why I'm beginning my journey by reading this entire thread. The first of many, many, many steps along my learning process.
But should be fun, I love learning new things!
And I really, genuinely appreciate all the effort you've undertaken creating this thread (and continue to support the ASF community). Who knows, perhaps you'll be my Captain Black?
I hope what I wrote was useful. It should give you some context and clear things up a little.
There are certain aspects of Radge that I'm not a fan of, but his books are relatively easy to digest. I think after reading this thread, and taking into consideration my post, reading Radge's book will help to solidify things further for you. Maybe read his books, then come back to this thread, and then re-read your favourite of Radge's books. One of the biggest issues when starting out is the overwhelming about of information. Not all of it will sink in at once, and there will be a point where something will just 'click'. I also have other books that will be of use to you, but probably best that you try to absorb what you have now.
To be clear, Radge isn't the be all or end all. He provides a decent base from which you can get a decent understanding on systems, trading rules, why trend following, etc. There are some good trend followers who have written some easy books to read (Rob Carver and Kevin Davey are others).
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what I like in Radge's unholly grail is it define the key areas of a system (even if not trend):
universe, entry, exit,scoring (priority) and risk management/backtests
I hope I am not forgetting any key part..has been a long day..
once this was assimilated, the followings learnings were more refinement, but the principles are the same
It's been a while since a read it, but that was the gist of it. And they are as you say the key areas of a system. The unholly grail is recommended because of those reasons too. And the refinement is definitely where a lot of the energy is put. Just as with coding a system in Amibroker: the buy and sell rules only take up a couple of lines, and yet the pages of coding that the whole system represents is more to do with the refinement of some aspect of those you listed (making sure it is more consistent with the buy/sell rules when its in play).
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Position Sizing
I've been reminded today about the importance of "Position Sizing" which is another way of saying, "How big of a position should you take for any one trade". Position sizing is part of the Action Strategy & it relates directly to “how much” we bet in one go. Without question "Position Sizing" is one of the most important areas of trading. The $10 commission of CommSec ("Commission Rate") has a direct consequence to the profitability of the Action Strategy. Some traders ignore this concept, but position sizing counts for most of a strategies performance. Trading is best described as a psychological game rather than a game of probabilities. Position sizing should be a part of your trading system that simply tells you how many shares to buy. Poor position sizing is the most common reason why new traders decide to "pull up stumps" & quit. Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul.
Position Sizing - How much is enough?
When you start out on your trading journey it's wise to avoid the temptation of going all-in. Start by buying small positions & if they turn south it won't be too big of a burden to carry. Most new traders are so eager to have a go, logic sometimes flies out the window. The problem is that most traders have a much greater chance of losing than they do of winning when they first start out while they are in the process of learning how to trade successfully. Therefore, start small (very small) to minimize any losses, once you’ve proven that you can consistently & profitably trade over a meaningful period of time, then you can begin to ramp up your position sizing. To manage a losing streak simply reduce your position size when your account is dropping, easy peasy.
Skate.
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Amibroker
@Trav. recently posted a few Amibroker trading systems & I posted my old "Donchian Strategy" showing there are hundreds, if not thousands, of trading systems that work. Having a perfectly sound strategy doesn't mean you will follow the system as it was intended. Why not? Mainly because the system was developed by someone else thus not being suitable. Also, when a system is designed by someone else, most traders will lack the confidence in trading that system. Developing your own system is the alternative as some members have already done.
Optimising a strategy to their heart's content
It's a trait most of us suffer from, fiddling & optimising till eventually, we end up with a meaningless system that makes a fortune on paper but performs miserably in real trading. Why do we fiddle? because we are curious to know if we can achieve the perfect settings, to predict the markets perfectly, without realising the markets are "perfectly unpredictable". There is a very small percentage of traders who consistently make big money trading, that's worthy of putting in the memory bank. What these winners do is not complex, in fact, simplicity is one of the keys to making money as it all boils down to trading consistently & confidently with a trading system that fits your style. Just knowing more about the trading process is a good first step, reading my posts is another.
Skate.
@Trav. recently posted a few Amibroker trading systems & I posted my old "Donchian Strategy" showing there are hundreds, if not thousands, of trading systems that work. Having a perfectly sound strategy doesn't mean you will follow the system as it was intended. Why not? Mainly because the system was developed by someone else thus not being suitable. Also, when a system is designed by someone else, most traders will lack the confidence in trading that system. Developing your own system is the alternative as some members have already done.
Optimising a strategy to their heart's content
It's a trait most of us suffer from, fiddling & optimising till eventually, we end up with a meaningless system that makes a fortune on paper but performs miserably in real trading. Why do we fiddle? because we are curious to know if we can achieve the perfect settings, to predict the markets perfectly, without realising the markets are "perfectly unpredictable". There is a very small percentage of traders who consistently make big money trading, that's worthy of putting in the memory bank. What these winners do is not complex, in fact, simplicity is one of the keys to making money as it all boils down to trading consistently & confidently with a trading system that fits your style. Just knowing more about the trading process is a good first step, reading my posts is another.
Skate.
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Key words within the (above) post:
(i) Confidence;
(ii) Sound strategy;
(iii) Over complicating;
(iv) Simplicity;
(v) Consistency.
Confidence: is born of belief. If you do not believe, you will not (cannot) be confident. If you are not confident, you will falter when times are tough. Belief (can) be (a) synthetic a priori and/or (b) empirical. If (a) you will need to truly research your topic before entering the market. If (b) then the methodologies discussed on this thread will guide you.
Therefore if you were to adopt Mr Skate's Donchian system, you would need to research everything about the theory underpinning that strategy. You would look at its history and everything in-between. Where it is strong and where it is weak (market environments). In other words, you make it your own.
Simplicity/Over complicating: make things that are easy to understand. That are easy to verify or disprove (Popper). Because these factors will lead to a sound strategy. A sound strategy has the following important characteristic: they are easy to believe in: they inspire confidence.
Complexity cannot be understood looking at single variables and combining them. Complexity is a single variable with hidden properties. These (almost) invariably get us into trouble because when they are stress tested, they do not perform as advertised.
If the market is a complex system (some serious arguments on this point) then why advocate simple ideas? Simple ideas are fundamental truths that even a complex system must obey. That is the trick: there are probably not more than 5 or 6 big ideas (truths) in the market. There are thousands of variables, probably even more than that. 'Tinkering/fiddling' is trying to optimise variables. Some (in some market conditions) will work very well. They may never appear again.
Never underestimate pure luck.
Luck as a distribution in the market occurs at what probability? Is your methodology built on profiting from pure random luck? If not why not?
Consistency: is far easier when you combine it with confidence.
jog on
duc
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So what is luck?
Here is one version of luck. The above position was predicated on Congressional military spending that was already approved for 2020 and would likely be approved for 2021. Fine.
However, down the line (in the future) this sector might balloon into a growth story.
Space has been called the final frontier. It might also be the next frontier for investors. And one rocket stock might literally boost investors’ portfolios.
On Saturday, the National Aeronautics and Space Administration was set to launch two astronauts into orbit on a commercially produced SpaceX spaceship loaded atop one of the company’s reusable rockets. It will be the first astronaut launch from U.S. soil since 2011 and will be shown on the web as well as on major TV networks.
The launch, which was postponed on Wednesday due to bad weather, is a milestone for the country—and investors, too. Space, it turns out, is becoming big business. And new technology is creating a new, investible space race.
NASA is big. It would be a top 10 aerospace and defense company if it weren’t a government agency. Its 2020 budget—a proxy for sales—is north of $20 billion and growing. Its 2021 budget request is about $25 billion. NASA has big plans for the future.
There are about 35 publicly traded aerospace and defense companies with annual sales of more than $1 billion in North America and Western Europe. Raytheon Technologies (ticker: RTX), Boeing (BA), Airbus (AIR.France), Lockheed Martin (LMT), and General Dynamics (GD) round out the top five. NASA would rank just behind eighth-place jet-engine maker Safran (SAF.France) and ahead of tenth-place systems supplier Thales (HO.France).
SpaceX, the company at the center of Saturday’s mission, isn’t publicly traded. It’s controlled by Tesla (TSLA) CEO Elon Musk. But space is a collaborative business. And SpaceX’s pioneering development of reusable rockets and reusable spacecraft is benefiting all space players by driving down launch costs. Combined with more-powerful electronics, lower launch costs mean a greater number of smaller, lower-priced satellites. That enables more business models to be developed with space-based technologies.
It’s as if new space-based tech is the iPhone circa 2007, and the space app-store ecosystem is just getting started. Lower costs and more opportunity means space, as an investing theme, is here to stay.
So NASA, if it were a stock, might be considered a growth stock. The companies that supply it might be as well—but they’re certainly not trading that way. The 35 aerospace and defense stocks used for NASA comparisons are down about 30% in 2020, worse than comparable drops of the S&P 500 and Dow Jones Industrial Average. That’s because the coronavirus pandemic has decimated demand for commercial air travel. But these companies aren’t just about commercial air travel—they’re helping people fly to space.
So maybe yes, maybe no. If yes, then you have just lucked into a sector that could become the darling of Wall St. for gains of? In the meantime, your downside risk is covered by Congress passing into law your earnings going forward.
That is one version of luck. There are others.
jog on
duc
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I've been offloading some of my thoughts & decided to make a few general comments about trading.
Developing your own trading system
When you have enough confidence in yourself & your trading system long-term results, it shouldn’t matter what other people think or say. On the flip side, there is a trap, once you believe you have found a good strategy & become convinced that it works, you will do everything you can to avoid seeing evidence to suggest otherwise.
Ignoring material in a post
We typically trade what we perceive about the current market conditions & when our mind is made up we're not likely to change it. Despite the importance of the material in the “Dump it here” thread, some will totally ignore it while others will do exactly the opposite of what is recommended, some will distort the information to fit their way of thinking. Being dismissive or being selective with the information can be to your detriment.
Skate.
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When traders lose money
When a loss is experienced some traders will assume that they picked the wrong stock & convince themselves of the fact, where it could have been poor execution of their exit strategy. Some traders get into the habit of hanging onto a position a little too long watching it fall further without knowing what to do next. It’s very hard for traders to take losses & move on.
Do you really need to understand how markets work?
No, you don’t. You only need to understand how your strategy works. Understanding that the markets will occasionally move in very large trends & if you can catch the big moves, you’ll make a lot of money, that’s all you need to understand about the market.
Skate.
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Overthinking can sometimes be unhelpful
Overthinking can sometimes steer you away from what works & overriding your system can be a recipe for disaster. When we look at the markets, we assume we are seeing all the available information but most of the information is eliminated by our selective perception, meaning you believe what you want to believe. Sometimes it pays to take the blinkers off.
Reading the media
When you read a significant amount of information about a stock you have purchased, it's a natural trait to seek confirmation that you have just done the right thing. The more you are exposed to certain information, the more likely you are to believe it. The media normally pulls from a single source but manipulates the story in such a way to make it sound like new information so don’t fall for that trap. Some journalists simply make up the story. Repeat something often enough & people will believe it no matter how silly it sounds.
Skate.
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Wanting lots of facts
Needing lots of facts to “ad nauseam” before you buy a position is another bad trait, another is constantly chasing evidence to support the decision you have already made. Affirmations are sometimes not required but seek them anyway because it makes us feel better. Even when a decision has been made to buy we look for every excuse why we shouldn’t, sometimes by convincing ourselves that we’ve missed the move or the price is now too high. Thinking like this, you'll certainly miss the continuation if it keeps moving. Making a poor decision can manifest into frustration & anger, so don’t entertain those thoughts.
The more you understand
The more you trade you come to realise you are responsible for every trading decision you make, thus owning your own performance. You must believe that your system will make money long term or it will be all for naught. Trading requires a process & your one job is to simply concentrate on the process by following your system without making mistakes along the way.
Skate.
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Trading the bounce
Despite the ongoing concerns about COVID-19 our markets appear to be rebounding at a quicker pace than most had expected. This rapid rebound raises a problem for all of us whether we are currently in the market or sitting on the sideline. At the moment psychology (fear & greed) is directly driving the markets in one direction than in the other without rhyme or reason. It would be handy to know if the enthusiasm can finally stabilise the markets.
I've been thinking
I’m at a loss what comes next when traders become disillusioned post-COVID-19. I’ve been thinking there are limited levers left for governments to pull to keep the enthusiasm of the markets going. The markets are constantly rebounding one day only to retrace the next. Markets displaying high volatility is a market hard to trade, but at the moment that's all we have. There will be good trading days & bad trading days still yet to come, that's a given, being mentally prepared for this situation will certainly help.
Skate.
Country Lad
Off into the sunset
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One of our group has been a bit gun shy recently, concerned that the market's rise has not been all that logical. He feels that the forward looking market is not taking in to account the likely large downgrades over the coming months and is concerned that investing now could result in losses.
Lesson in this according to a Country Lad mantra is that if you are concerned about your trading resulting in losses, then either inactivity or losses will result. If the mindset is positive, looking for opportunities and trading them with normal risk assessments in place, then the likelihood is profits.
I have no doubt many of us have experienced a loss of inertia at some time or other.
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@Country Lad what a great post.
1. "A bit gun shy recently, concerned that the market's rise has not been all that logical"
To predict the markets perfectly, you have to realise that the markets are "perfectly unpredictable". The market is very emotional & illogical at times, if you are too analytical, you will be surprised often. Using logic to figure what the market might do on any given day is useless at best.
2. "He feels that the forward-looking market is not taking in to account the likely large downgrades over the coming months and is concerned that investing now could result in losses"
Fear & greed is directly driving the markets without rhyme or reason. We all wish the markets would stabilise because as traders we don't like uncertainty. (it messes with us)
Opinions
Most traders understand the markets are based on human behaviour & our perceptions about what's happening. While one person sees the buying opportunity of a lifetime, another sees the meltdown of the global financial system as we know it. Thus, it’s our perception that creates the value at any given time. The markets are a reflection of the overall beliefs of all the traders in the market at any given time.
One step further
The difference between winners & losers is their psychological outlook. Your psychology plays the biggest part when it comes to trading because it controls your perception (the drivers of your reactions).
Skate.
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