Dump it Here

[peter2]

Trading the leading stocks on the ASX presents unique challenges

The first challenge is to recognise and deal with the fact that these stocks are highly correlated to the movement of the main index.

The second challenge is to be in sync with the rotation of demand that flows between these stocks. Currently of the top20 only 8 are going up while the others are falling or flat. The challenge is holding the ones that are going up most of the time as they will be different throughout the year.

 

[Skate]

The first challenge is to recognise and deal with the fact that these stocks are highly correlated to the movement of the main index.

The second challenge is to be in sync with the rotation of demand that flows between these stocks. Currently of the top20 only 8 are going up while the others are falling or flat. The challenge is holding the ones that are going up most of the time as they will be different throughout the year.

@Garpal Gumnut raised some insightful points about the market leaders BHP and CBA. The spotlight was on BHP's robust dividend profile, while the possibility of further upside for CBA was noted.

@peter2, your observations about the key challenges in trading the top ASX companies are excellent. The high correlation to the broader market index poses a significant hurdle, as it can make it difficult to generate consistent outperformance trading this small section of companies.

Developing a robust and adaptable trading framework that incorporates system flexibility is essential to generating reliable returns in the highly competitive large-cap space - and this is currently my primary focus.

Skate.

 

[Skate]

The advantage of using a signal generator in trading
In my earlier posts, I emphasised the importance of having a signal generator, especially for traders who don't know the market well. My suggestion to use free software with a pre-made trading strategy was one practical approach, highlighting the value of trusting signals and trading them methodically rather than emotionally.

While this exercise may not have resonated, I remain committed to developing a system that others new to trading can evaluate and potentially adopt, without having to pay anything. Sharing the system and the system's actual trading results will be invaluable for those seeking a proven, transparent strategy to consider.

Skate.

 

[qldfrog]

The first challenge is to recognise and deal with the fact that these stocks are highly correlated to the movement of the main index.

The second challenge is to be in sync with the rotation of demand that flows between these stocks. Currently of the top20 only 8 are going up while the others are falling or flat. The challenge is holding the ones that are going up most of the time as they will be different throughout the year.

But then wouldn't it be a lazy and not so different idea to just go for the asx 20 etf which should rebalance automatically..aka wo our own intervention.
We get dividends, franking benefits, all computed in one ato ready report ..sure you will have had the stock going from 15 to 21 as well but hey, for the sake of simplicity.
Soon driving away, so from top of my mind i do not remember the code, but there is such an etf as i took some for my super: ilb? Something like this?

 

[Skate]

But then wouldn't it be a lazy and not so different idea to just go for the asx 20 etf which should rebalance automatically..aka wo our own intervention.
We get dividends, franking benefits, all computed in one ato ready report ..sure you will have had the stock going from 15 to 21 as well but hey, for the sake of simplicity.
Soon driving away, so from top of my mind i do not remember the code, but there is such an etf as i took some for my super: ilb? Something like this?

@qldfrog, I appreciate your excellent suggestion, but there is an important distinction to consider. Some traders are drawn to the hands-on excitement and personal growth that active trading can provide, rather than a pure investment approach.

While investing in index funds or other passive vehicles may offer a simpler path, active trading allows individuals to develop a deeper understanding of market dynamics and hone their skills as traders. This process of continual learning and adaptation can be immensely rewarding for those seeking a more engaged role in managing their capital.

Ultimately, the choice between a trading or investing approach comes down to personal preference and risk tolerance. Neither is inherently better or worse - they simply cater to different trader profiles and objectives. The key is finding the approach that aligns the best.

Skate.

 

[Skate]

Trading Systematically with a Signal Generator
@qldfrog, for those wishing to trade, I'm suggesting using a signal generator is a far better approach than trading blindly or letting others do it for you. By relying on a mathematically derived signal, you can take the guesswork out of deciding "what to buy and when" as it offers an objective, rule-based framework to follow.

To illustrate how these signals work in practice, I'll walk through examples using the BHP and CBA charts that @Garpal Gumnut referenced previously. By following this structured approach, you can build confidence and discipline as you develop your trading skills.






Understanding charts
I understand that charts can sometimes be confusing for others to understand the displayed colours, lines, boxes, and overall information leaving others feeling mystified. To understand these charts, I've explained them in 4 previous posts found here:

https://www.aussiestockforums.com/threads/dump-it-here.34425/post-1283515

https://www.aussiestockforums.com/threads/dump-it-here.34425/post-1283516

https://www.aussiestockforums.com/threads/dump-it-here.34425/post-1283517

https://www.aussiestockforums.com/threads/dump-it-here.34425/post-1283518

Skate.

 

[DrBourse]

FYI...

 

[Skate]

FYI...
View attachment 179457

System Trading
@DrBourse, your chart nicely illustrates the potential of system trading when applied with sufficient experience. To provide a practical example, the three strategies I've been evaluating recently generated exit signals on June 25th and again on June 27th.



Skate.

 

[DrBourse]

FYI...
View attachment 179457

 

[DrBourse]

System Trading
@DrBourse, your chart nicely illustrates the potential of system trading when applied with sufficient experience. To provide a practical example, the three strategies I've been evaluating recently generated exit signals on June 25th and again on June 27th.

View attachment 179459

Skate.

Does your system produce an entry for GMG as at COB 27/6/24

 

[Skate]

@Garpal Gumnut said: "CBA continues to advance despite the recommendations from brokers to sell. I see no reason to doubt it will fly further."

Signal Confirmation
When trading systematically, the key is to follow the signal, not what your own convictions are telling you. As an investor, @Garpal Gumnut's words may ring true. But for a trader operating within a defined system, the signals provided by the trading strategy take precedence. I'm pleased that @DrBourse displays similar recommendations to exit.




Skate.

 

[DrBourse]

Yep, agree M8, Exits are almost exact....
I will keep the CCI as my "Early Warning Indicator"..
Keep tweaking the MACD System, there has to be a way to replicate the CCI Signal....
Cheers

 

[Skate]

Does your system produce an entry for GMG as at COB 27/6/24

Signals for GMG
@DrBourse, as a matter of interest the MACD-sv entry signal was generated on the 11th of June, while the MACD-Dot strategy produced an entry signal on the 14th of June and the MACD-Cross strategy signalled entry a day later on the 17th of June.

The conflicting signals of the three strategies are the result of the different mathematical approaches used to generate them. Each strategy relies on its own set of indicators, calculations, and rules to identify opportune entry points.

However, the more critical question is: Which approach will prove to be more accurate and profitable over the longer term? This is the current evaluation I mentioned previously in determining which one (or potentially a combination) offers the most reliable and consistent results.



Skate.

 

[Skate]

Keep tweaking the MACD System, there has to be a way to replicate the CCI Signal....

@DrBourse, that's my intention.

Skate.

 

[DrBourse]

Actually M8....
I wish you would STOP the MACD Experiment - I know you will crack the code eventually - BUT, after you do break it, we will all be chasing the same stocks - So perhaps you had better STOP NOW.....

 

[Skate]

Actually M8....
I wish you would STOP the MACD Experiment - I know you will crack the code eventually - BUT, after you do break it, we will all be chasing the same stocks - So perhaps you had better STOP NOW.....

@DrBourse, I've previously stopped posting about the MACD trading strategy, as I didn't want to keep posting information that others found uninteresting.

Whenever I'm approached for help, I've simply replied that I promote trading ideas but don't supply code that can be evaluated. However, I've recently reconsidered this approach. Using TradingView and a MACD strategy allows me the opportunity to give those who ask something they can evaluate for themselves "cost-free". This provides a starting point, rather than politely refusing to share anything.

Skate.

 

[Skate]

In an attempt to improve the trading performance of the trader(s) I sent them to a beginners' trading workshop

@peter2 is onto something here. By embracing timeless principles, you can cultivate a sustainable, long-term approach to investing and trading, ultimately achieving your financial goals.

As investors and traders, we are often bombarded with the promise of overnight riches and get-rich-quick schemes. However, the path to true, lasting wealth is paved with a disciplined, patient, and realistic approach. With perseverance, hard work and determination the opportunities for success are limitless.

Skate.

 

[Skate]

10 Timeless Principles for Beginners
As beginners embark on their investment and trading journeys, it's crucial to establish a solid foundation built on timeless principles. The following 10 key principles offer a starting point to help guide us towards sustainable financial success.

1. Never trade or invest with money you can't afford to lose. Protect your capital and maintain financial stability by only allocating funds you're comfortable parting with.

2. Investing and trading is not a get-rich-quick endeavour but a long-term process. Building wealth takes time, dedication, and perseverance.

3. Wealth creation is about increasing your contributions as your income grows. Slow and steady contributions, coupled with the power of compounding, can cultivate significant wealth over time.

4. Investing and trading requires patience. A slow, steady, and disciplined approach is better than going all in. Rushing into decisions can often lead to costly mistakes. Never react quickly, as it's more important to respond. Responding allows you time to think carefully and consider the appropriate course of action.

5. Never let your emotions run the show. Greed, fear, and overconfidence can lead to irrational decisions. Cultivate a disciplined, unemotional approach to investing and trading.

6. Failure to accept capital losses before they spiral out of control separates the successful from the rest. Having the courage to cut losses and move on, rather than clinging to losing positions, is key to success.

7. Part of your job as an investor or trader is to separate the wheat from the chaff by educating yourself. Continuous learning and critical analysis are essential for making informed decisions.

8. Before you begin, you should have an investment or trading plan. This plan will guide your decision-making and help you stay on track, even in turbulent times.

9. Past performance is not a reliable indicator of future results, as markets can be inherently unpredictable. Historical data alone does not guarantee that a particular investment or trading strategy will continue to perform the same way going forward.

10. Start your investment journey by selecting companies with a history of consistent performance and then allow your portfolio to "drift with the market", as this can be a powerful first-up approach.

Remember
Your investing and trading approach ultimately decides your financial results.

 

[investtrader]

@Skate Even though I agree with most of your points, I think the interchangeable use of investing and trading could be quite misleading to a 'beginner'.
This is a definition of investor from Investopedia " Investing also differs from speculation, as evidenced by the investor's timeframe. Speculators are typically looking to gain from short-term price fluctuations that occur in weeks, days, or even minutes. Investors usually consider that a greater period of time, like months or years, is needed to generate acceptable returns".
Point 1 I really don't agree with - in relation to investing as opposed to 'trading'. Most Australians begin investing from the first day of their first job via a Super Fund. You don't have to be an investment expert as the funds you invest in are run by professionals. As you have time to ride the investment waves it is actually way too risky to not invest e.g. just leave your retirement funds in a depreciating bank account. The largest super fund in Australia has a CAGR of about 9.8% over the last 10 years. So the statement about only investing money you can afford to lose implies pretty much no one should even start.
Similarly, a lot of Australian buy investment houses - hardly something they 'can afford to lose'.

 

[Skate]

One piece of advice that is commonly overlooked is to "only trade with money you can afford to lose". If you can trade will money you can "truly afford to lose" trading will be less emotional and to some extent "stress-free", but it's rarely the case.

Many people never start trading because they’re worried about losing their money. With that said, it is critical to make smart trading decisions. You can learn as you go by trading small positions & if you make a mistake small loses are bearable.

"Dipping your toe" in is half the fun of trading, having a go with money you can afford to lose. (trading is an exciting & emotional past time)

Sometimes new traders can lose more than they can afford - in such a small period of time. So, it’s only reasonable you must plan to lose & be the best loser you can possibly be.

As a reminder, successful trend trading requires the willingness to adjust as market conditions change & it is essential to manage your risk effectively & never risk more than you can afford to lose.

Point 1 I really don't agree with - in relation to investing as opposed to 'trading'. Most Australians begin investing from the first day of their first job via a Super Fund. You don't have to be an investment expert as the funds you invest in are run by professionals.

@investtrader, your recent post makes a valid point that allows me to provide some additional clarity on the key principles I outlined today.

So the statement about only investing money you can afford to lose implies pretty much no one should even start.

1. Never trade or invest with money you can't afford to lose.
Like most worthwhile endeavours typically requires a level of upfront savings. Trading with savings you can "genuinely afford to lose" can help make the process less emotionally charged and, to some degree, more stress-free. However, this ideal scenario is rarely the reality for most. The crucial consideration is to ensure that savings allocated to trading do not jeopardise your financial stability or disrupt your current standard of living.

In today's post, I outlined 10 key principles that can provide a valuable starting point, particularly for a beginner looking to understand how they can actively participate in the markets, rather than solely relying on a mandatory superannuation fund.

Skate.