Dump it Here

[ducati916]

Risk management is #1. If you don't survive, you can no longer play/improve/etc.

Some (most) of the best strategies are relatively simple. Complexity provides the illusion of safety/profitability. It is usually a chimera.



Risk management is not trading bigger size than you can emotionally handle. The losses must be managed quickly before they exceed your emotional ability to deal with them.





You will seriously underestimate your ability to manage losses. Pick the number you think you can manage and then reduce it by 80%.



Something went seriously wrong with a 22% decline. Did it trade (gap) through a stop or something?

Which is a lesson in of itself: stops are not without serious issues in of themselves.



The difficulty here is excessive fiddling with a successful methodology as opposed to evolution/improvement of a methodology. It is a balance.

Interaction with other traders is (a) useful or (b) frustrating. It can be useful if there is an open(ish) sharing of ideas. It is frustrating in as much as most will not discuss details of their strategies/methodologies due to competitive pressures in the markets. That being said "The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.” Ecclesiastes. You may think you have 'discovered' the holy grail, unlikely.

So where if anywhere, is there an edge?

Technicals? Hardly. This is essentially the lazy man's route to riches. It's attractive because superficially, it appears easy.

Fundamentals? Unlikely, the levels of dishonesty in financial statements is significant. Unless you know how to break them down, a waste of time for most. The thing with fundamentals is this: assuming you can break them down, you can generally only take advantage of your analysis in a market break. Patience required is extreme.

Macro? Complicated and constantly changing.

Quant: Generally you require a ton of data and the means and knowledge to crunch it. Beyond most of your average retail.

Tech? Which is situating your computers/etc within the exchanges and front running trades. Good luck with that.

As @Skate has alluded, whichever methodology or (ies) you employ, you will need to put in a significant amount of time watching/researching/reading about markets.

Something not mentioned in the plethora of posts: timeframe(s).

Along with 'risk management' the timeframe that you trade is (probably) your next most important decision. Mechanical systems IMO really struggle here. A weekly system that takes prices (exits) mid-week...is that a weekly system or a daily system? A day-trading system that holds overnight (now and then) is not a day-trading system.

The speed at which you need to manage trades is actually a pretty good indicator of the type of market that you are in. Bear markets require grabbing profits quickly before they disappear (long or short). Bull markets tend to reward sitting still doing nothing, read Reminisces. Rangebound markets also necessitate higher frequency trading.

Leverage: If you can use it, it is fantastic. If you can't, it will blow you up. To use it, your drawdowns must not really exceed 2%. Possibly 5% if you have an otherwise high win/loss ratio, but 5% is getting pretty out there. It also needs a decent risk/reward, 2:1 at least. Worthless if you have a 95% win/loss but a 0.1:3 risk/reward. You will blow up.

Profits are lumpy: thinking that you can give up work and earn a weekly income from trading is setting yourself up for a lot of pressure, which will impact your risk tolerance significantly. Needing to make daily/weekly profits, virtually guarantees you will lose money. The thing with trading is that you earn: nothing, nothing, nothing, lose a little, kapow, huge profit.

Compounding: If you are a solid trader, then this works for you. However, it is always prudent to take a little off the table and put it away for a rainy day, other than any other expenses (living if this is your sole income) that need to be taken.


No Boss: trading is very attractive, no boss, no clients, no commute, etc. It's only fun if you are winning. Losing is a soul destroying affair.

Markets/Instruments/Time Zones: trading only stocks can be very limiting. Trading only 1 market can be very limiting. Trading only 1 type of instrument can be very limiting. The best market is the US. The time zone is not friendly for Aus/NZ. It can be traded utilising certain strategies and contingent orders.

jog on
duc

 

[Skate]

Your" Profit Trades Strategy " should be thrown overboard

I'll take that as a comment.

Not enough PROLONGED GREEN in the Ribbon Chart for my liking
I know you can do better!

@Captain_Chaza, thank you all for your feedback. I understand your concerns about the lack of prolonged green periods in the lower ribbon on the price chart, it's also a concern for me as well. I'd like to provide some additional context and explain my thought process behind the "Percentage Up Filter".

Firstly, I chose to use the "Percentage Up Filter" because it's a powerful tool that works in real-time as a buy timing filter, nothing more or nothing less. However, I understand that it may not be the best approach for everyone, and I'm always looking for ways to improve this "timing mechanism".

Additionally, I've found that the "Percentage Up Filter" has helped me avoid entering positions during periods of high volatility, which has helped me minimise my risk.

Skate.

 

[Skate]

As @Skate has alluded, whichever methodology or (ies) you employ, you will need to put in a significant amount of time watching/researching/reading about markets.

@ducati916, thanks for sharing your thoughts on risk management and trading. I appreciate your insights and can relate to many of the points you've made. Like you, I've learned the hard way that risk management is crucial for success in trading, and I'm always looking for new ways to improve my trading. Risk management is a pivotal element for sustainable trading success.

I must admit that I've never been one to plan out my ideas and post them in chronological order, as my thoughts often come to me more randomly and spontaneously. However, I do try to ensure that my ideas are well-organised, measured and easy to follow, even if they don't necessarily follow a strict order format.

Incorporating technical analysis and a "Buy Filter" has allowed me to achieve consistent returns over the long term, while also exposing me to the short-term volatility of the market. Technical analysis plays a huge role in my trading by helping me identify potential opportunities, but I've found that over-reliance on it can lead to a situation where the tail is wagging the dog, ultimately hindering my trading performance at times.

In light of your comments, I recognise the importance of continually assessing and refining my trading ideas to achieve optimal results. By sharing my ideas and experiences, in a collaborative learning environment others can benefit from diverse perspectives posted to enhance their trading.

My current thinking - "There must be a better way"
I'm currently exploring the idea that there might be a better way to invest my time and energy, and I'm considering passive investing as a potential solution. This approach could free up my mind to focus on other pursuits and allow me to break free from the constant stress of trying to beat the market.

Skate.

 

[Sean K]

I'll take that as a comment.

LOL. Not sure why anyone would bother responding at all.

 

[Sean K]

My current thinking - "There must be a better way"
I'm currently exploring the idea that there might be a better way to invest my time and energy, and I'm considering passive investing as a potential solution. This approach could free up my mind to focus on other pursuits and allow me to break free from the constant stress of trying to beat the market.

Skate.

Is there a long term system that would do the trick?

Or, could it be a 'buy thematic ETFs in the dips' strategy?

 

[divs4ever]

In light of your comments, I recognise the importance of continually assessing and refining my trading ideas to achieve optimal results. By sharing my ideas and experiences, in a collaborative learning environment others can benefit from diverse perspectives posted to enhance their trading.

from an investor's point of view trading and investing often only differ in time-frame to crystallizing gains and losses

My current thinking - "There must be a better way"
I'm currently exploring the idea that there might be a better way to invest my time and energy, and I'm considering passive investing as a potential solution. This approach could free up my mind to focus on other pursuits and allow me to break free from the constant stress of trying to beat the market.

i will answer the 'passive investing ' as buying a stock ( or small group of stocks ) at a very low price say sub $15 BHP and letting fate and inflation do a lot of the work , with the occasional glimpse at the markets to check for important news and the progress of your investment(s) , this sometimes isn't as 'hands off ' as intended WOW demerged SCP/RGN and EDV , BHP divested WDS and S32 as examples of what can happen in less than 15 years , the main danger is opportunity loss an exaggerated drop over unpleasant news ( or is that drop the last gas of a mortally wounded company , if not currently familiar with the held stocks minutes ( catching up ) can make a big difference , looks easy and simple but that little extra effort can be very profitable

now index investing ( with ETFs and/or managed funds ) that is where your mathematical and analytical skills might give you an edge

an index fund is a constantly moving target ( even if the changes are usually minor ) but the index changes , take-overs company failures/delistings , demergers , and even the same stock might lose ( or gain ) 5% of the index weighting in minutes ( and sometimes just on speculation ) , how much you care about such gyrations depends on you

can you use that time and focus better well that is a personal question ( for instance world travel ,or working long hours in a well-paid job are options , now closed to me )

 

[Skate]

Is there a long term system that would do the trick?

'passive investing '

@Sean K, living off dividends is a potential strategy for me at least. I've been considering an investment strategy living off dividends, particularly after reading @divs4ever's insights over the last year. The basic idea is to generate sufficient dividend income to sustain my retirement without depleting my capital. With high dividend yields and the benefit of franking credits, this approach can be effective, especially during the pension phase of superannuation when dividend income is tax-free.

While dividend yields can fluctuate, large companies tend to maintain their payout levels as a priority. Although dividends may be reduced or increased, the variations are usually minor compared to the overall dividend income.

To make this strategy work, it's important to do the sums and ensure that your dividend income will cover your expenses and well exceed your annual withdrawal limits, meaning your funds will continually grow. This may require some calculations and planning, but it's a straightforward process. With proper planning and diversification, this approach can provide a sustainable source of income in retirement without lifting a finger.

Hint: Reading @Belli posts will keep you updated with all things super.

Skate.

 

[divs4ever]

@Sean K, living off dividends is a potential strategy for me at least. I've been considering an investment strategy living off dividends, particularly after reading @divs4ever's insights over the last year. The basic idea is to generate sufficient dividend income to sustain my retirement without depleting my capital. With high dividend yields and the benefit of franking credits, this approach can be effective, especially during the pension phase of superannuation when dividend income is tax-free.

While dividend yields can fluctuate, large companies tend to maintain their payout levels as a priority. Although dividends may be reduced or increased, the variations are usually minor compared to the overall dividend income.

To make this strategy work, it's important to do the sums and ensure that your dividend income will cover your expenses and well exceed your annual withdrawal limits, meaning your funds will continually grow. This may require some calculations and planning, but it's a straightforward process. With proper planning and diversification, this approach can provide a sustainable source of income in retirement without lifting a finger.

Hint: Reading @Belli posts will keep you updated with all things super.

Skate.

when considering this strategy , study 2020 , and that shook me up , yes i was lucky i had a fair position in 'reverse index ETFs ( instead of a pile of cash in the bank ) i had been stashing since September 2019 i was in the right place ( adequate liquidity ) for all the wrong reasons ( i was expecting a credit crunch , not a supply-chain shock )

without the disability pension as a back-stop ... things might have been much rougher

another fly in the ointment is companies that cease to be listed ( take-overs , delisting etc etc ) even top 100 ones , you are on a winner and in comes a whale and you are on the pavement with a wad of cash ( and desperately trying to find a good replacement ) for say OZL where i was VERY nicely up before the punch-bowl vanished

a nice compromise might be a solid LIC ( i class WES , SVW and SOL as LICs as well as the usual ones )

cheers

 

[Captain_Chaza]

 

[Skate]

Clarity
It's a given that we are all tribal. Rather than agree to disagree, a large number of members are increasingly caught up in a kind of tribal fight where both sides make the sense of anger worse by reacting to everything. When a member from our tribe express a view we tend to elevate their position because of what we perceive.

It's a reminder that this thread is not a contest of ideas, but a thread that allows alternative ideas & views to be freely expressed

@Captain_Chaza, Charles Mackay's statement highlights the tendency of people to think and behave in groups, or "herds", which I believe is akin to the concept of "tribal" behaviour. Our (ASF) community is centred around trading and is a prime example of how people with a shared passion can come together to learn and grow.

The phrase "they go mad in herds" suggests that people can become swept up in a shared delusion or obsession, but it also implies that they can learn something new when information is presented engagingly. This is one of the main goals of this thread, to provide a platform for members to learn and grow, not by telling them "what to think", but by teaching them "how to think" critically and independently.

The second part of Mackay's statement, "while they only recover their senses slowly, and one by one," suggests that individuals tend to come to their senses gradually, as they break free from the influence of the group and begin to think for themselves again, which is the "end game of this educational thread".

The "Dump it here" thread aims to facilitate that process by encouraging members to question their assumptions, challenge their beliefs, and think outside the box. It's a gradual process, but one that ultimately leads to a deeper understanding of the markets and better decision-making abilities.

Thank you @Captain_Chaza, for making such an inspirational post.

Skate.

 

[Captain_Chaza]

For those who like a good read

"Extraordinary Popular Delusions and the Madness of Crowds
By Charles Mackay 1st Published in 1841

He has a great read on BUBBLES

PS: The first volume begins with a discussion of three economic bubbles, or financial manias: the South Sea Company bubble of 1711–1720, the Mississippi Company bubble of 1719–1720, and the Dutch tulip mania of the early seventeenth century.

 

[Skate]

For those who like a good read

"Extraordinary Popular Delusions and the Madness of Crowds
By Charles Mackay 1st Published in 1841

He has a great read on BUBBLES
View attachment 167016
PS: The first volume begins with a discussion of three economic bubbles, or financial manias: the South Sea Company bubble of 1711–1720, the Mississippi Company bubble of 1719–1720, and the Dutch tulip mania of the early seventeenth century.

@Captain_Chaza, thanks for the free eBook. It will be the next book I read.

The synopsis
“Memoirs of Extraordinary Popular Delusions and the Madness of Crowds” by Charles Mackay is an early study of crowd psychology. The book is a comprehensive exploration of various forms of societal delusions and aberrations in human behaviour and mass hysteria.

The book is divided into three volumes
1. National Delusions: This volume covers mass movements and crazes in nations, such as economic bubbles like the South Sea Bubble and the Tulip Mania.

2. Peculiar Follies: This volume explores unique and bizarre trends and fads.

3. Philosophical Delusions: This volume delves into erroneous and misleading beliefs in the field of philosophy.

Skate.

 

[Skate]

Well, this is interesting
Being a quiet moment, I asked three questions using Microsoft Copilot. @Joe Blow and others might be interested. As you can guess, the questions revolved around the forum, myself and the "Dump it here" thread.

QUESTION 1. What can you tell me about https://www.aussiestockforums.com/
"Aussie Stock Forums is an online platform dedicated to discussions about the Australian stock market. It features a wide range of topics including general market commentary, individual stock discussions, trading strategies, and investment resources. The forum has a substantial number of threads and posts, indicating an active community of users sharing insights and information. Here are some key points about the forum:

# Latest Activity: The forum includes recent discussions on various topics such as Sovereign Gold Bonds, interviews for finance positions, company listings, and cryptocurrency predictions.

# Forum Statistics: As of the latest data, there are over 27,372 threads, 1,216,647 posts, and 51,864 members.

# Market Data: The site provides access to market data and has a feature called Spark, which offers streaming ASX market info, real-time charts, and news.

# Community Engagement: The forum has sections for beginners, trading diaries, medium/long-term investing, and even non-market related general chat.

It’s a resourceful site for anyone interested in the Australian stock market, whether they are beginners or experienced traders and investors. For more detailed information, you can visit their website directly at Aussie Stock Forums."

Skate.

 

[Skate]

QUESTION 2. What can you tell me about forum member Skate from https://www.aussiestockforums.com/
"Skate is an active member of the Aussie Stock Forums, having joined the community on December 28, 2013. With a substantial number of posts totaling over 5,262 and a high reaction count of 21,344, Skate is a well-regarded contributor to the forum.

Skate engages in various discussions across the forum, providing insights and reactions to different threads. Skate has shown interest in topics such as trading strategies, market analysis, and general investment discussions. Skate’s contributions reflect a deep involvement in the community and a commitment to sharing knowledge with other members."

Skate.

 

[Skate]

QUESTION 3. What can you tell me about the "Dump It Here thread" from https://www.aussiestockforums.com/
"The “Dump It Here” thread on Aussie Stock Forums is a space where members can share a variety of content, ranging from personal insights to trading strategies. It was started by the forum member Skate on December 17, 2018.

Here are some key aspects of the thread:

# Purpose: The thread serves as a place for members to “dump” anything they wish to share, whether it’s to help others, unload thoughts, or share valuable “gems” of information.

# Engagement: Skate, the creator of the thread, is highly active and contributes a range of posts discussing psychological aspects of trading, market analysis, and personal trading experiences.

# Content: The thread includes discussions on topics like confirmation bias, perception in trading, and the psychological challenges traders face.

# Community Value: It provides a platform for members to express themselves freely and engage in discussions that may not fit into other specific forum categories.

The “Dump It Here” thread reflects the forum’s commitment to fostering a supportive community where members can exchange diverse ideas and experiences related to the stock market."

Skate.

 

[Belli]

I'll put the point of view passive investing as described by one certain poster is not passive investing.

Passive investing at it's core refers entirely to a buy-and-hold concept. It does not involve assessing the state of the market or trading in any way. It requires a long-term (40 years plus) view with the regular placement of funds into the market or when you have funds to invest. It can be achieved through LICs if you wish or through buying and holding broad based low cost ETFs (not thematic and generally not sectoral) based on your preferred Home country/International allocation. You buy then not bother with the market until you buy again.

It does not involve assessing the merits or otherwise of individual companies.

With LICs you outsource that task to the managers (and possibly achieve some degree of active management) and with ETFs you understand you are prepared to accept the market average - mainly because around 90% or more of investors are average but don't have the necessary skill set to be able acknowledge that fact.

In regard to superannuation, it is better to always seek professional advice and not the views of some random posting on a forum. There are nuances which could trip you up in your thinking. An example of this is step-children. You may have excluded them from your assets under your Will. However, the definition of children under the SIS Act does include step-children so it could be they have a claim on your superannuation when you shuffle off this earth. That is only one example. There are likely to be more which I have not fully explored.

 

[Skate]

You buy then not bother with the market until you buy again.

@Belli, this is the plan, "Buy then not bother with the market until I add to the positions I decide to buy". Thank you for your detailed response.

Skate.

 

[ducati916]

from an investor's point of view trading and investing often only differ in time-frame to crystallizing gains and losses



i will answer the 'passive investing ' as buying a stock ( or small group of stocks ) at a very low price say sub $15 BHP and letting fate and inflation do a lot of the work , with the occasional glimpse at the markets to check for important news and the progress of your investment(s) , this sometimes isn't as 'hands off ' as intended WOW demerged SCP/RGN and EDV , BHP divested WDS and S32 as examples of what can happen in less than 15 years , the main danger is opportunity loss an exaggerated drop over unpleasant news ( or is that drop the last gas of a mortally wounded company , if not currently familiar with the held stocks minutes ( catching up ) can make a big difference , looks easy and simple but that little extra effort can be very profitable

now index investing ( with ETFs and/or managed funds ) that is where your mathematical and analytical skills might give you an edge

an index fund is a constantly moving target ( even if the changes are usually minor ) but the index changes , take-overs company failures/delistings , demergers , and even the same stock might lose ( or gain ) 5% of the index weighting in minutes ( and sometimes just on speculation ) , how much you care about such gyrations depends on you

can you use that time and focus better well that is a personal question ( for instance world travel ,or working long hours in a well-paid job are options , now closed to me )

jog on
duc

 

[Skate]

I've made a switch to the dark side
I've recently acquired 6 investment positions, and I'm excited to see where this new journey takes me. My decision was a snap decision yesterday, but I had been thinking about the switch for a while.

I based my investment decisions on three key principles
1. Dividends - I wanted to invest in companies that offer consistent and attractive dividends, providing me with a steady income stream.
2. Franking Credits - I looked for companies that offer franking credits, which can increase my overall returns.
3. Capital Gains - I also considered the potential for capital growth, investing in companies with a strong track record of increasing their share price over time "that are currently under pressure or simply out of favour at the moment".

I'm happy that my investment portfolio is now a healthy mix of stability and growth, focusing on the long-term. I'm excited to see how these investments perform.

Skate.

 

[ducati916]

I've made a switch to the dark side
I've recently acquired 6 investment positions, and I'm excited to see where this new journey takes me. My decision was a snap decision yesterday, but I had been thinking about the switch for a while.

I based my investment decisions on three key principles
1. Dividends - I wanted to invest in companies that offer consistent and attractive dividends, providing me with a steady income stream.
2. Franking Credits - I looked for companies that offer franking credits, which can increase my overall returns.
3. Capital Gains - I also considered the potential for capital growth, investing in companies with a strong track record of increasing their share price over time "that are currently under pressure or simply out of favour at the moment".

I'm happy that my investment portfolio is now a healthy mix of stability and growth, focusing on the long-term. I'm excited to see how these investments perform.

Skate.

And how did you select these 'out of favour or under pressure' companies?

Care to list any of them, I have some time off coming up over Christmas, I'd love to break 1 or 2 of them down fundamentally.

jog on
duc