How to turn $9,500 into $550,000+

[dj_420]

Substance is what we humans love to add to life, just to make ourselves feel important and in control.

If we add a chart and a theory, then we are in total control of a stock!

Not so...the monkey could also achieve the same results with no substance, no chart, and no theory.

Lets just say X stock rose $5 in 1 year...It was $1 and rose to $5

The monkey buys in on day 1 and sits on it...he goes about his daily business and checks it 1 year later, to find he is 5X more wealthier.

The human buys the same stock on day 1...charts it this way, charts it that way, sells it a few times over that year and buys it again a few times. Discusses the stock on a few forums, and anayalsis it to the nth degree.
Then 1 year later the human checks the account balance and alas...he is 5 X more wealthier too.

But who is the smarter of the 2, most would say the human, because he is in control....wrong....the monkey is cause the stock didn't control him, he got on with his life while the human wasted it by mulling over it, discussing it, charting it etc etc. Thats my theory!

your starting to talk about two different things TA and FA.

yes in theory you could pick any stock and hope that a rising tide lifts the sp, but you could use both FA and TA to help increase your chances of selecting a stock that will increase in multiples.

i think if you combine your theory with some sound research you are talking about what is called "long term investors".

take your FMG eg, if three years ago, you researched and though FMG has some great iron ore grounds, future forecasts would have indicated strong future demand, sound mgt etc then you could have bought long term.

same goes with PDN, 5 years or more ago borshoff predicted a future demand for uranium he acquired many uranium assets cheaply and went about business. you could have bought PDN at 5 cents also if you did this research.

now because there is such great demand for mining stocks, selections have to be a little wiser and smarter as many sp have already increased by multiples. i just dont buy your "buy any stock" theory and it will go up.

what if you bought onetel, hih, telstra 2 float, westpoint.

 

[Magdoran]

Cleary some are missing the point, and that is when I traded on FMG, I used no T/A or F/A, to be quite honest I had no idea what that all meant, as I was a few weeks into learning how to trade. I just simply read the announcement on the ASX website and bought in.

FMG was still an explorer at the time that I bought in, so who ever said that only mining companies that produce, will make you squillions? There is one big fat lie which I have exposed.

The rest comes down to luck, the Chinese, resource profit upgrades and the mining boom.

Yep my only mistake was either selling in the first place or not re-entering at a later stage.

I sold out losing $950 which was more than enough for me, knowing what I know now, that is called a stop loss, and I placed it at a pretty good point (10% loss is acceptable).

But I must stress again that I used no T/A or F/A in an intentional way, the buy and hold approach would have worked a treat

Let’s look at the logical extension of STC’s argument – Here’s his essential proposition:

• Everyone has a chance of making a billion dollars if a series of favourable outcomes occur to yield it. True.
• Further, that if you enter at the right time in the right stock, and exit at the right time that you can make millions. True.
• Additionally, that you can succeed without any kind of cohesive analysis/method/system. True.

The conclusion drawn from these premises is that using a random method is superior to using technical or fundamental analysis and implies system approaches such as using a positive expectancy model are a waste of time - therefore you should pick a sector you think for whatever reason (rumour, hunch, media report, tip, random dice roll), and then buy and hold a stock without monitoring it, and reject trend or fundamental styles. False.


This perspective is naïve and ill-conceived. It has a glaring assumption at its core, and that is that financial markets are completely random, and that market action is necessarily unpredictable all the time. The real question then is if markets are random or not, and if it is possible to develop and edge using various methods.

If markets are random, then you may as well forget ever reading ASF again or reading anything about stocks or markets and just buy lottery tickets regularly like the average punter, and/or go down to the casino:

I once knew a guy when I was at University who had this ambitious (but not very original) idea to make a fortune. You make a bet with a defined stake (position size), if you win you keep betting the same amount, but if you lose you double your stake. If you keep losing you keep doubling until you win.

He continued to do this for a few months and raked in some good returns. Each time he lost he kept doubling till he won, then returned to his original stake and continued till he’d made enough profit.

Then one day I saw him and asked how the betting scheme was going. He became evasive, and I think his the colour in his face drained a bit. I don’t know exactly how much he lost, but put it this way, there were quite a debtors around looking for him.

What STC is unwittingly venturing is in part the “random walk” school, and is along the lines of the now banned poster “onemind”; that gaining wealth is completely random and based purely on luck, and that essentially any attempt to develop an edge is necessarily fruitless. It’s kind of a fatalistic perspective on life, that in effect that we have no real input into the course of our lives, verging on a deterministic model of sorts.

Have a look both at the thread, and especially at the article arguing this random market line for a perspective on the logic behind this:

http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm

https://www.aussiestockforums.com/forums/showthread.php?t=6580

I reject this random view of not only financial markets, but the way the world and our universe works. I believe that the world and markets are ordered (especially if you know how to look at them the right way). Einstein for instance was able to distil some quite involved notions into a simple formula – E=MC2. This for me constitutes evidence that there is a distinct order to the universe, and consequently in markets.

I regularly see order in the markets with my style of analysis, and believe in Mark Douglas’ axioms (just read through my many posts on this subject for evidence of market order – look at wavepicker’s work too for that matter).

Hey, of course I accept could be totally wrong and be totally deceiving myself since we’re dealing with a subject at the philosophical end of the spectrum, and what actually exits may diverge from my perceptions (and even the concept of existence in itself - especially if you really want to be an existentialist – has some involved question marks over it).

This quadrant of thought I think is so far above humanity in its complexity and far reaching nature that all any of us can do is to make our best shot guess and play our hunch, so ironically I accept that “anything is possible” one level.

However, that doesn’t mean that we should abandon everything we believe in or hold to be true on a whim, and be ruled by the notion that it’s all too hard, or accept defeat and become passive in life. This is an option, but not one I personally choose to take like STC has embraced. I choose to forge my destiny, especially in the face of adversity, and am determined to rise to each challenge, win or lose as it comes. But this is a personal choice. I choose to research, reappraise, consider, experiment, question, listen, probe, reflect, imagine, formulate, act, develop, refine, and to think for myself independently.

All of us must be guided by our conscience. To an extent I think the scientific model (prove disprove), and an attempt to be objective in observation/analysis/experimentation/theory has distinct advantages over non scientific approaches, but with some qualification. There is an “art” to most pursuits, and because the world is so complex, sometimes gifted people can break new ground and challenge orthodox thinking at the brink of knowledge. Knowing or guessing where these break throughs may be and when they will occur is part of the challenge.


Things to consider:

There is no argument that “buy and hold” approaches can and in many cases are successful and profitable approaches. There is also no argument that effective Fundamental Analysis can constitute an edge. STC seems to be arguing that fundamental analysis does not constitute an edge. He rejects the notion that gifted people defied the odds consistently.

I agree fully with wavepicker’s argument that the challenge is to develop consistent methods. I can’t see how STC’s model does this. It is the antithesis of positive expectancy. It is a buy and hope strategy. It embraces the idea that you may as well put a blindfold on and throw a dart at a board, and that this is equal to all other methods in its chance of success.

People like George Soros for instance had incredible success just by looking at the flaws in financial and economic systems by analysing them and exploiting the weaknesses in various systems. Just read though his works on the “Alchemy of finance” and “Soros on Soros”, especially concepts such as “reflexivity” and “dynamic disequilibrium” for example. Add to that the successful formula ventured by Buffett and Graham for instance in the fundamental quadrant of analysis.

If you accept the logical extension of STC’s (random walk) notions that these people become millionaires randomly on pure luck alone, then please disregard everything I say or have said. If however you do think that their methods contributed even a scintilla to their success, this puts serious question marks over the life casino proposition at the heart of the poorly constructed deterministic styled philosophy being pedalled by STC right now.


Regards


Magdoran

P.S. At some stage I intend to really assault onemind’s and other random walk exponents notions that life the universe and markets are random.

 

[disarray]

At some stage I intend to really assault onemind’s and other random walk exponents notions that life the universe and markets are random.

not random, chaotic

 

[Magdoran]

not random, chaotic

No, random walk theory was what I was referring to.

Chaos theory is a radically different model, and one I pretty much subscribe to. I hold random walk theory is not of this discipline. In fact some of the logic of chaos theory I would venture actually conflicts with random walk notions.

Just read through my posts on the subject; especially consider my reference to Heisenberg’s uncertainly principle which I subscribe to.

Mag

P.S. thanks smarty pants!

 

[disarray]

oh i agree completely with what you are saying. just pointing out the nature of the beast is all.

p.s. you're welcome

 

[CanOz]

STC's theory can be tested, using a random program in AB. I'm not exactly sure how to do it, and not inclined to waste my time on it given my focus on trying to develop a profitable system....sheesh...talk about losing focus.

You could ask AB to pick 5 stocks randomly 10 years ago, say investing a set amount, and then hold.

Cheers,

 

[Magdoran]

to be fair to the guy, there are some blindingly obvious choices which you know almost HAVE to take off. when i was 17 years old they privatised the commonwealth bank and i didn't know the first thing about the markets, but i knew it was going to make a pile of money. i even told my old man to buy some shares. same with MYOB. same with T1 and T3 (T2 was an obvious dud). some companies just have a stable, successful model as well as the support of the public. charting is irrelevant in this case, buy on fundamentals and public/market sentiment.

people saying "just wait till a sideways market" seem to be missing the point STC is making that buy and hold means "buy and hold". sideways markets are irrelevant, bear markets are irrelevant, because the overwhelming trend for markets is UP, and as more of the world modernises and more money is flowing through the economy, the stronger this upward trend will be.

for smaller stocks, spec stocks or whatever then T/A and F/A are vital, but for something that starts in a strong (almost dominant position as was the case with MYOB) then you have an almost guaranteed money tree if you invest with a modicum of sense.

but yes, i agree, the "get rich quick" crowd do love these sorts of threads to encourage each other. if they make money, good for them.

Complete sophistry at its worst. You’d have been the guy buying Just before the 1929 Crash at the peak and holding for decades as wavepicker pointed out to get your money back.

How did you know T2 was a dud by random dart throwing? Many people got caught in that little venture and are still sitting on losses.

 

[mark70920]

I played day trader for a couple of weeks after sitting on a good stock for a year (VRE) on which I made a tidy profit , gave most of the profit back in the couple of weeks of impatient madness. If I stay patient I would have done well as VRE started to fly when I sold.

I lack both the time and knowledge to day trade , so I have gone back to the long investment game. Put my chips AAR this time , plan to hold for 2 to 5 years , I brought in at 5.8 and 7.2 so already in the black. I will not try to obsess to much about it and hopefully it will pay off in few years time

 

[disarray]

Complete sophistry at its worst. You’d have been the guy buying Just before the 1929 Crash at the peak and holding for decades as wavepicker pointed out to get your money back.

not really. i'm not advocating the theory of

1. buy a random stock
2. wait
3. ???
4. profit

what i am pointing out is that opportunities come along which have an extremely high probability of success attached to them. buying into these opportunities (bank floats, infrastructure floats etc.) and holding is often a very safe and profitable venture. going on the original premise of "turn $10k into $500k", purchasing shares in these "golden opportunity" stocks and holding is a good way to achieve this outcome.

How did you know T2 was a dud by random dart throwing? Many people got caught in that little venture and are still sitting on losses.

once again i don't subscribe to randomness. the market is a chaotic system (like the weather) with a range of indicators demonstrating probabilities of a certain outcome. what we do is analyse the probability and go with the risk / reward profile that suits us best.

as for T2 i didn't need any indication, it just felt overvalued. the offer price was obviously too high for what it was worth, there was too much euphoria and spin and the sheeple were clamouring to get on board. thats a big fat warning sign to me. as many people on this board are fond of saying, psychology does (and should) play a major part in every investment decision you make.

 

[motorway]

STC's theory can be tested, using a random program in AB. I'm not exactly sure how to do it, and not inclined to waste my time on it given my focus on trying to develop a profitable system....sheesh...talk about losing focus.

You could ask AB to pick 5 stocks randomly 10 years ago, say investing a set amount, and then hold.

Cheers,

Well If your system is random entry + Buy and hold

You would have to test every possible combination of 5 stocks in the total universe,,,,,,,,,,,,,,,,,, And the results would be ?

A) better than the XAO
B) worse than the XAO
C) Same

What ever it was ... I am sure it would be less than satisfactory..

It is really an equal weighted whole mkt portfolio..

............

You have to buy the whole universe because there are no defining entry criteria.. ( No TA & No FA )

So the benchmark you would want to beat is an index fund...

motorway

 

[Magdoran]

not really. i'm not advocating the theory of

1. buy a random stock
2. wait
3. ???
4. profit

what i am pointing out is that opportunities come along which have an extremely high probability of success attached to them. buying into these opportunities (bank floats, infrastructure floats etc.) and holding is often a very safe and profitable venture. going on the original premise of "turn $10k into $500k", purchasing shares in these "golden opportunity" stocks and holding is a good way to achieve this outcome.



once again i don't subscribe to randomness. the market is a chaotic system (like the weather) with a range of indicators demonstrating probabilities of a certain outcome. what we do is analyse the probability and go with the risk / reward profile that suits us best.

as for T2 i didn't need any indication, it just felt overvalued. the offer price was obviously too high for what it was worth, there was too much euphoria and spin and the sheeple were clamouring to get on board. thats a big fat warning sign to me. as many people on this board are fond of saying, psychology does (and should) play a major part in every investment decision you make.

Ahhh, now that’s a different proposition…


Fully agree with high probability strategies ala Douglas’ notion of having a “probabilistic” mindset.

Ok, I misread your argument then, I thought you were defending STC’s line of argument.

I tend to think there is a lot of merit in the chaos model, but with some refinements. I certainly agree with taking into account risk to reward.

Agree with the notion of “feeling” the market out at times, I’ve found that when that intuition warning flashes to sit up and listen to it. Sure, psychology is a central element in the mix from where I sit.

Torpedo withdrawn (hahaha).


Mag

 

[CanOz]

Well If your system is random entry + Buy and hold

You would have to test every possible combination of 5 stocks in the total universe,,,,,,,,,,,,,,,,,, And the results would be ?

A) better than the XAO
B) worse than the XAO
C) Same

What ever it was ... I am sure it would be less than satisfactory..

It is really an equal weighted whole mkt portfolio..

............

You have to buy the whole universe because there are no defining entry criteria.. ( No TA & No FA )

So the benchmark you would want to beat is an index fund...

motorway

You only have to buy until your capital is gone. So you pick 5 random stocks that have prices 10 years ago. You allocate the same amount of capital to each of them. Once your money is gone you cannot buy any more.

If you could figure out a scan to pick the stocks using the random number function, you could scan the ASX 10 years ago. It picks 5 stocks and then do the math. Do this 10 times and work out the average P/L....

Cheers,

 

[wavepicker]

I personally subscribe to the notion that there is order to the markets. That is not to say there is always ACCURACY, but certainly order. How can this be proven??

Simple, various patterns/patterns of the trend REPEAT at various timeframes. These same patterns that appear on 1 minute bar charts also appear on the larger timeframes too. There can be subjectiveness in terms of interpretation of these patterns, and sometimes they simply don’t work, and other times they have an uncanny way of alerting you to the probability of future direction of the market. But they are there.

They can be looking at you in the face, not all the time but they are there. Fibonacci Trading Day/Calendar counts forming Symmetrical formations are there too. Such that very often each side for example of a pattern forming a symmetrical triangle can be counted in terms of Fibonacci numbers or multiples of Fibonacci numbers:-

1,1,2,3,5,8,13,21,34,55,89 ……etc

It’s there, it’s always been there, and hidden so well that most don’t even bother to look and somehow integrate it within their own methodology.
Pick up a chart, use some imagination and look at all the possibilities

Cheers

 

[nizar]

You only have to buy until your capital is gone. So you pick 5 random stocks that have prices 10 years ago. You allocate the same amount of capital to each of them. Once your money is gone you cannot buy any more.

If you could figure out a scan to pick the stocks using the random number function, you could scan the ASX 10 years ago. It picks 5 stocks and then do the math. Do this 10 times and work out the average P/L....

Cheers,

10 times would not be statistically significant.
Not even close.
MonteCarlo it and do it 10,000 times IMO.

 

[disarray]

Ok, I misread your argument then, I thought you were defending STC’s line of argument.

i am in no way defending his "pick a stock! any stock!" proposition, however his point that buying and holding negates the need for constant T/A is valid, as is his point that patience is definately a virtue in the investment game.

however ignoring F/A in this investment scenario is madness. buying into a random company running around in the middle of assend nowhere looking for minerals then leaving it alone for 3 years is just asking for a tax writeoff.

picking a solid stock for long term investment purposes requires F/A (or blindingly obvious "buy me" signs) or you are just pissing your money up against the wall. but i am just preaching to the choir here

Torpedo withdrawn (hahaha)

appreciated

 

[CanOz]

10 times would not be statistically significant.
Not even close.
MonteCarlo it and do it 10,000 times IMO.

 

[krisbarry]

I personally subscribe to the notion that there is order to the markets.

What a load of tripe...the markets are chaotic and make very little sense.

How for 1 minute can you define the actions of millions of traders.

Some buy, some sell and some hold, for all types of reasons...to simply say the market is ordered is foolish IMO.

Lets say 5 holders of 1 stock, sell for a number of reasons...but all reasons had nothing to do with the stock, nor the fundamentals...they all sold for personal reasons.

stock seller number 1: Got into a car crash and needed funds to repair car

stock seller number 2: Lost their job and needed to pay bills

stock seller number 3: Sold as they needed funds to buy a new car

stock seller number 4: Needed to fund back surgery

stock seller number 5: Died and shares were sold on their behalf.

How is all of the above ordered....its not...the world if full of chaos

 

[>Apocalypto<]

Substance is what we humans love to add to life, just to make ourselves feel important and in control.

If we add a chart and a theory, then we are in total control of a stock!

Not so...the monkey could also achieve the same results with no substance, no chart, and no theory.

Lets just say X stock rose $5 in 1 year...It was $1 and rose to $5

The monkey buys in on day 1 and sits on it...he goes about his daily business and checks it 1 year later, to find he is 5X more wealthier.

The human buys the same stock on day 1...charts it this way, charts it that way, sells it a few times over that year and buys it again a few times. Discusses the stock on a few forums, and anayalsis it to the nth degree.
Then 1 year later the human checks the account balance and alas...he is 5 X more wealthier too.

But who is the smarter of the 2, most would say the human, because he is in control....wrong....the monkey is cause the stock didn't control him, he got on with his life while the human wasted it by mulling over it, discussing it, charting it etc etc. Thats my theory!

Stop the clock

if you pay no attention to the direction of the market how do u know which way to trade you are full of holes!

just buy you saying go long is based on the fact of you knowing there is a bull market right now which is information you have picked up.

it all good and easy to do that now, i would love to see your strategy in action when we have a bear market. you will not even know which way to go, your a true gambler.

let me tell you anyone that thinks they are in control of any market will end up broke damn quick.

TA is a guide to understanding what people are thinking. gives you awnsers to questions you ask the market.

P.S I would love to see a monkey open a account!

 

[>Apocalypto<]

What a load of tripe...the markets are chaotic and make very little sense.

How for 1 minute can you define the actions of millions of traders.

Some buy, some sell and some hold, for all types of reasons...to simply say the market is ordered is foolish IMO.

Lets say 5 holders of 1 stock, sell for a number of reasons...but all reasons had nothing to do with the stock, nor the fundamentals...they all sold for personal reasons.

stock seller number 1: Got into a car crash and needed funds to repair car

stock seller number 2: Lost their job and needed to pay bills

stock seller number 3: Sold as they needed funds to buy a new car

stock seller number 4: Needed to fund back surgery

stock seller number 5: Died and shares were sold on their behalf.

How is all of the above ordered....its not...the world if full of chaos

STC,

you say markets move in no direction with out any meaning so how do u make money if they move all over the place. they have to move up (in a direction) for you to make money!

if this is truly what you think i wish u all the best

look at this chart and tell me if it random clutter with no direction.

if prices move with out direction what hell is that price doing? it must only be a once off hey................

 

[motorway]

10 times would not be statistically significant.
Not even close.
MonteCarlo it and do it 10,000 times IMO.

exactly


You could buy stocks until you run out of money
But what stocks ?

And how would that be representative ?

Hardly inform Us to the merits of the "system"

People who believe mkts are random or life is just random.
That random entries and actions are optimal
Is a good reason why there is as much opportunity as there is..



What People Buy and sell is Perceived risk
Though many might not realize it

The right risk automatically
generates the return

No Perceived risk No return


motorway