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For bottom pickers and knife catchers

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Re: Bottom pickers and knife catchers

kennas said:
Please don't have TA blinkers on when looking at this thread, there are many people who are fundamental investors who actually make money here also.
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I don't have TA blinkers on (and am surprised that you think that). Successful trading has virtually nothing to do with analysis, be that fundamental or technical.

I can spout on about technical bottom reversal signals (kangaroo tails et al) but none of them have any predictive value. They work when they work and they don't work when they don't work.

Others can spout on about the FA justification for a stock being undervalued. It also has nothing to do with successful trading.

You can make a profitable trading system out of almost any methodology, but all profitable systems have one characteristic in common; they let their winners run to more than cover the cost of their losers. For the vast bulk of profitable market participants, this happens by accident rather than by design.

Unfortunately, bottom pickers tend to do the opposite - let the losers continue to run instead of quickly admitting they were wrong and moving on to the next trade. The market proves their initial analysis wrong, and yet they refuse to admit this.

We've already seen bottom picking demonstrated in real time during a bull market to be an abject disaster and a destroyer of capital by Ducati. Did no one learn from this? Why do you think this version of the same exercise will be any different? Or is the truth that everyone thinks they are cleverer than the market?

Note: The Tech/Trader and Ducati exercises are extremely potent learning tools. Consider the basic differences between the approaches;
1. Buying in an uptrend, holding onto winners and cutting losers short, versus
2. Buying into a downtrend looking for a bottom, liquidating winners quickly and holding on to losers.
It wasn't the analysis that made the difference between the results.
 
Michael, people are allowed to sell their stocks when they want. The use of a stop has been discussed. This isn't a buy and hope activity. If people do, it's a lesson to be learnt.

FA has nothing to do with successful trading? OK. You didn't survive the falls did you. ;)

Actually, you contradicted yourself in the next sentance. I'm confused.

So, in summary, your contribution to the thread is to say you need a stop loss. Cheers. :)
 
kennas said:
I'll try and and update this every couple of days.

If any of the detail is incorrect let me know.

:)
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Yep Kennas, CIY closed on the 30/06 at 31c and opened at 36.5c on the 01/07.You have it at 30.5c.
Thanks, this could be an exercise of `i knew it and didn`t take them`.:eek:
Good ego massage anyway.
 
Wysiwyg said:
Yep Kennas, CIY closed on the 30/06 at 31c and opened at 36.5c on the 01/07.You have it at 30.5c.
Thanks, this could be an exercise of `i knew it and didn`t take them`.:eek:
Good ego massage anyway.
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So, your buy price is .365?
 
Good thread Kennas.

I gave up knife catching a while back, once I thought the global macro environment looked FUKCED (pardon the French, I was stuck for lack of a better word) and any profit forecast was about as unreliable as a political 'promise'. Too much risk for me to donate too larger % of my portfolio to investments per se.

That being said, the 2 I bought on the way down, CCP, but that doesn't really relate to this thread as it has already bounced.

The other one I like is EQN, right on long-term support, copper price remains robust, nearing production and add to that uranium looking like it is a sector about to heat up once more and some massive uranium stocks in the ground, I think it could well and truly shoot up from here.

Projected EPS in relation to current equity would see a MASSIVE ROE, with risk not being enough to cause a large enough discount for me to put this near fair value. I have a price target of $8 within 2-3 years.

Add me to that list of knife catchers you have and put my neck out there! :D
 
kennas said:
Michael, people are allowed to sell their stocks when they want.
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The problem is, they'll want to sell when they are showing a slight profit and they won't want to sell when they are showing a slight loss. The slight losses will then turn into large losses.

kennas said:
FA has nothing to do with successful trading? OK. You didn't survive the falls did you. ;)
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For Long Term Trend Following:

First fall:
Market peaked - open equity peaked - stop losses hit on the way down - good profits taken - cash taken out of system - exactly as preplanned.

First bottom:
Soon thereafter, my system began giving buy signals. I struggled psychologically, but took all the signals. I ended up with large positions in coal, oil, iron ore and fertilizers. Not from cleverness, but from following my system.

Second top:
Fully invested in market - long.

Now:
Lots of small losses as stops hit and one large profit taken from coal (MCC) which covered almost all of the losses incurred. Still 5 fully pyramided multi-R profitable trades in the portfolio (CEY, FMG, IPL, SGM, OSH) , 2 of which are hovering close to their stop losses. These are what trend following systems aim to capture and where all the money comes from.

Nett Result From the Peak:
Currently getting close to the peak's equity level again.


For My Short Term System:
7 day trades on the way down. Up 2.5%. Not much, but system is in trial mode, so small position sizes still.


A whole *world* less pain than most. No clever TA or FA. Just following the plans. Hence, no bottom drawer stocks for me - just playing the capital preservation game successfully, and learning more about the markets in the last 12 months than I have in the 3 years prior.

kennas said:
Actually, you contradicted yourself in the next sentance. I'm confused.
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Lets try expressing what I meant to say in another way;

<FA> + <Letting Winners Run and Cutting Losses Short> = <Success>
<TA> + <Letting Winners Run and Cutting Losses Short> = <Success>
<FA> + <Cutting Winners Short and Letting Winners Run> = <Blow-Up>
<TA> + <Cutting Winner Short and Letting Winners Run> = <Blow-Up>

What's the common factor?

kennas said:
So, in summary, your contribution to the thread is to say you need a stop loss.
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Using a Stop Loss is but one way of achieving the core goal of profitable trading, that of letting winners run sufficiently to cover your losses.

It is unfortunate that the term "Stop Loss" pretty much in your mind puts me in the TA camp. I am not even though I use TA in my trading.

Bottom picking with TA presumes that TA patterns are predictive of price reversal. They are not.

Bottom picking with FA presumes that fundamental valuations are predictive of a price reversal. They are not.

I will offer up one argument for your consideration;
1. Let us choose to accept for a moment that it is possible to formulate the correct valuation for a given company.
2. Let us also accept that it is possible to use this valuation to determine if a company is underpriced.
3. If we accept these two predicates, it is also reasonable to accept that those that are the best at formulating this valuation should therefore be the best at using this valuation profitably.

So why then does the average professional market fund UNDERPERFORM the index? Why then do the outperformers in one time period become the underperformers in another?

And if the professional funds UNDERPERFORM, why should an individual person with less access to information be able to perform any better?

The logical answer is that FA is not predictive of price action.


Hopefully I have now outraged both the TAs and the FAs in this thread. Good.


So then, the real quiestion becomes: how does one construct a profitable bottom picking trading system if TA and FA are no good at this task?
 
Though, one could always point to Berkshire Hathaway!

On a side note, I find that accumulation near a major support level when I have a company severely undervalued can be a very good way of picking a bottom and I have made some decent money doing this.

Accumulation can either take the form of high volume, narrow spreads within a consolidation, or high volume and a hammer. Both, taking place right near long-term support.

That being said, these have themselves, only been medium-term trades and the frequency is very low, not very often I see them, perhaps only one every few months.

Other than that, trade management (everything from initial stop, trailing stop, position sizing and pyramiding) and trading with the larger trend (at least breaking to a new 3 month high), are the same conclusions I have come to in order to make money in this environment. Doing pretty well ATM (touch wood, now the market will rape me :eek:).

Cheers
 
MichaelD said:
So then, the real quiestion becomes: how does one construct a profitable bottom picking trading system if TA and FA are no good at this task?
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Um, no it's not. You haven't actually provided any real proof that FA and/or TA can not assist in seeing a bottom, potential bottom, or near bottom. :confused:

And if FA and TA is useless, perhaps we should just consult Yogi. :)
 
dubiousinfo said:
Kennas

If its not too late to join, you can put me down for TPI
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No drama, this is an ongoing thing, the real bottom might not be found for months......:eek: If at all....:eek:

Sell it at any time, or add any others you like on the way.

TPI's had a shocker hasn't it. Looks like support around $5.50-6 ish.
 
**Off topic**

Why is it that certain members of the TA community always come out on threads like this and try to preach why their choice of analysis/method is so much better than everyone elses?

Can they not see that the market needs all different types of players in order for it to work how it does? If everyone follwed thier 'godly' method then it would be a self fullfilling prophecy.

There are plenty of TA threads out there, and you do not see FA people going on there and preaching FA. I find it that TA people must have that certain mindset where they believe there is only one way things can be achieved (ie stubborness/arrogance).

**end rant**


Please note to any TA people that read this, i am making some big generalisations. I am also not going to respond to this post in this thread. Read the first post for what this thread is about. If you wish to respond start another thread or else keep to the threads which are appropriate to you and dont preach to others!
 
I'll stop beating my head against a brick wall now. Human nature will never change.

Good luck to you all.
 
MichaelD said:
I'll stop beating my head against a brick wall now. Human nature will never change.

Good luck to you all.
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LOL Michael. :)

I really love a contrary view, but you just haven't convinced me.

Perhaps I'm beating my head up against a brick wall.. :eek:
 
OK, one last point.

I'll stick my neck out and predict the outcome of this experiment.

50% of the stocks picked will continue to fall
50% will rise

Unfortunately, the 50% that rise will be sold off fairly quickly and the 50% that fall will be bottom drawered turning the exercise into a net negative one.

Stockpicking skill will be claimed for the 50% that rise.
Unforeseeable external factors will be blamed for the 50% that fall (short sellers, hedge funds, corrupt directors, insert scapegoat de jour here).
 
I find trying to pick bottoms, or tops for that matter, is a futile exercise. My philosophy is to disregard both to some extent. I work by assessing value at any given time. If the value is there for me then I buy if it is not then I don't buy and if I hold I sell. A lot of the time it involves catching a falling knife.

It worked well with ABJ recently with a buy before the recent jump in price followed by a sell of half to recoup my outlay and a hold as a long term, free carried investment of the other half. I bought at the bottom and sold at the top. However my efforts with that method for CNP is not working out so far. At this stage I am down about 30%. I do not know where the bottom is but I have put a value on the stock and will continue to hold until I get that value or I revalue it down below it's selling price.

I trade on my perception of value. I like it when I do pick a bottom though.

I have bought EDE in the last few days at 27c and 27.5c as I suggest they are terrific value and must be at or at least near a bottom so I will nominate it as my choice today.
 
MichaelD said:
OK, one last point.

I'll stick my neck out and predict the outcome of this experiment.

50% of the stocks picked will continue to fall
50% will rise

Unfortunately, the 50% that rise will be sold off fairly quickly and the 50% that fall will be bottom drawered turning the exercise into a net negative one.

Stockpicking skill will be claimed for the 50% that rise.
Unforeseeable external factors will be blamed for the 50% that fall (short sellers, hedge funds, corrupt directors, insert scapegoat de jour here).
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Averaging is only for staticisions. Means bu*#**# all to me.
 
nioka said:
I have bought EDE in the last few days at 27c and 27.5c as I suggest they are terrific value and must be at or at least near a bottom so I will nominate it as my choice today.
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Good choice :)

I bought some of these for my old man when they were a lot higher. I intend them to hold them for my kids when he pegs it and i inherit them ;)
 
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