Invest or Trade?

beerwm · 30 January 2009

I'm guilty of be being abit close minded about investing.

I've run some very basic entries and exits through amibroker, and found that 9/10 a simple strategy vs. a buy and hold strategy comes out on top.

moreover, sometimes in vast sums.

I'd like to hear from some investors, on their approach?

I can only think of consistant income from dividends [which a likewise return can be achieved from trading.] and also a personal preference to be separated from the market.

so, do u invest or trade, and why?

CanOz · 30 January 2009

beerwm said:
so, do u invest or trade, and why?

Even "Investors" have labeled this a trader's markets. Heck, even the swing traders have abandoned that method in favor of shorter times frames.

What does that say about this market?

CanOz

beerwm · 30 January 2009

Hi Canoz,

i was refering to all market conditions,

not just the current, when i was backtesting in amibroker, even the boom period performed better with trading tactics.

And in the recovery period to come [if there is one,] many of people are talking about investing at such low prices, yet i cant see the advantage. If you're dealing with the market, you are going to play the percentages, and trading carries a higher percentage.

I'd like to be proved wrong though

MRC & Co · 30 January 2009

beerwm said:
Hi Canoz,

even the boom period performed better with trading tactics.

I'd like to be proved wrong though

Check out the performance of trading funds on average, in comparison with longer term index investments, over the boom period.

So_Cynical · 30 January 2009

beerwm said:
And in the recovery period to come [if there is one,] many of people are talking about
investing at such low prices, yet i cant see the advantage.

U cant see the advantage?

The one big example that comes straight to mind is the 100% plus turn
around in the Australian (producing) gold sector.

I mostly invest and trade a little...i buy value...wait till it comes good and
depending on factors i sell (trade) or keep (invest) or a bit of both.

The recovery will come u know.

beerwm · 30 January 2009

So_Cynical said:
U cant see the advantage?

The one big example that comes straight to mind is the 100% plus turn
around in the Australian (producing) gold sector.

I mostly invest and trade a little...i buy value...wait till it comes good and
depending on factors i sell (trade) or keep (invest) or a bit of both.

The recovery will come u know.

I can't see the advantage in terms of the alternative.
Say you invest in XYZ stock for 3 years, it may go up 100%, a buy hold strategy would give you a 100% return... not bad hey!!

but that stock will retrace, move up , move down, and trading may turn that into 150% return,

both still great, but the later is better.

My firm basis is upon my amibroker backtest, where the buy and hold strategy was out-performed by some basic entries and exits.

I'm not saying Investing is Bad, but im viewing trading as a better alternative.

CanOz · 31 January 2009

beerwm said:
I can't see the advantage in terms of the alternative.
Say you invest in XYZ stock for 3 years, it may go up 100%, a buy hold strategy would give you a 100% return... not bad hey!!

but that stock will retrace, move up , move down, and trading may turn that into 150% return,

both still great, but the later is better.

My firm basis is upon my amibroker backtest, where the buy and hold strategy was out-performed by some basic entries and exits.

I'm not saying Investing is Bad, but im viewing trading as a better alternative.

So, the backtest you refer, can you describe how it was constructed and what results it produced?

Cheers,

CanOz

beerwm · 31 January 2009

MA 15 entry, MA 10 exit, it might have been EMA, also with wider day counts
something along these lines,

basically taking advantage of upward moves,

my 1 concern with investing is it is based on fundamentals. Even if a price goes lower there is no trigger to get out aslong as fundamentals remain.

I dont know why everyone is fighting my logic, trading takes the good runs, investing takes all runs.

PS: refering to EOD trading, not intraday

So_Cynical · 31 January 2009

beerwm said:
but that stock will retrace, move up , move down, and trading may turn that into 150% return,

both still great, but the later is better.

agreed...simple buy and hold don't do as well as in and out and build.

Still the super 2000%+ returns only come from buy and hold.

beerwm · 31 January 2009

I must confess, my backtest was not that thorough, i only have the trial version of amibroker.

I was really just trying to get views on why people like/prefer/find more profitable trading or investing.

beerwm · 31 January 2009

So_Cynical said:
agreed...simple buy and hold don't do as well as in and out and build.

Still the super 2000%+ returns only come from buy and hold.

could u elaborate more on these 2000% returns?

MRC & Co · 31 January 2009

So_Cynical said:
Still the super 2000%+ returns only come from buy and hold.

Trading leveraged products with tight stops, you can far superceed 2000% returns.

So_Cynical · 31 January 2009

beerwm said:
could u elaborate more on these 2000% returns?

If u look at some of the spectacular charts of the last 5 years...u have to come
to the inescapable conclusion that the only way to get the specular returns without
high risk leverage is to.

1 buy very close to bottom
2 hold during all retracement's
3 sell at near top.

Very hard to do....and yet super simple...FMG 4 year chart is a good example.

Buy at 40 cents in 05 sell in late 08 at $10.40 Plus...the only tactical way to do it
is buy and hold...any sort of trading mentality will take u out at the retraces..and
perhaps u will get distracted and buy into something else...or for whatever reason
miss the re buy....the main thing is to NOT SELL at the falls on the way up.

And that goes against all trading mentality's.

wayneL · 31 January 2009

So_Cynical said:
If u look at some of the spectacular charts of the last 5 years...u have to come
to the inescapable conclusion that the only way to get the specular returns is to.

1 buy very close to bottom

2 hold during all retracement's

3 sell at near top.

Very hard to do....and yet super simple...FMG 4 year chart is a good example.

Buy at 40 cents in 05 sell in late 08 at $10.40 Plus...the only tactical way to do it
is buy and hold...any sort of trading mentality will take u out at the retraces..and
perhaps u will get distracted and buy into something else...or for whatever reason
miss the re buy.

Can I have the number of your clairvoyant?

So_Cynical · 31 January 2009

wayneL said:
Can I have the number of your clairvoyant?

If u look at all the buyers of FMG in 05 and consider how many held to the top, u would
imagine that its a tiny fraction of the majority....still the basic premise remains...buy at
bottom for what ever reason, and hold (do nothing) then sell at spectacular profits...is
only possible if u buy and do nothing.

My point is that the trader mentality will take u out all the time...the specular returns
only come from not embracing the "never let a profit turn into a loss" mantra.

beerwm · 31 January 2009

So_Cynical said:
If u look at some of the spectacular charts of the last 5 years...u have to come
to the inescapable conclusion that the only way to get the specular returns without
high risk leverage is to.

1 buy very close to bottom

2 hold during all retracement's

3 sell at near top.

Very hard to do....and yet super simple...FMG 4 year chart is a good example.

Buy at 40 cents in 05 sell in late 08 at $10.40 Plus...the only tactical way to do it
is buy and hold...any sort of trading mentality will take u out at the retraces..and
perhaps u will get distracted and buy into something else...or for whatever reason
miss the re buy....the main thing is to NOT SELL at the falls on the way up.

And that goes against all trading mentality's.

I did that test with the 15MA entry, 10MA exit. - basic

date start 05 - end 07 [didnt have 08 data]

buy and hold- 119,158
my portfolio- 65,914

exposure- 54%
starting capital - 10,000

so i guess in this case there is some merit, allthough the return on money/time with trading is actually better.

but how many stocks out there are suited to "investing" contant rise month/month. if i included all of 08 data, im sure our results would favour trading tactics.

trading in this case is what i would deem safer, buy hold showed drawdowns from 86,000 - 55,000,[-31k] while trading gave only 64,000-47,000 [-17k] and a more constant equity curve.

see a slight advantage in some aspects, but still not convinced

wayneL · 31 January 2009

So_Cynical said:
If u look at all the buyers of FMG in 05 and consider how many held to the top, u would
imagine that its a tiny fraction of the majority....still the basic premise remains...buy at
bottom for what ever reason, and hold (do nothing) then sell at spectacular profits...is
only possible if u buy and do nothing.

My point is that the trader mentality will take u out all the time...the specular returns
only come from not embracing the "never let a profit turn into a loss" mantra.

Depends on the time frame. Some long term trend following systems may have held through the retracements. On the other hand how does one know the drop from the top is not a retracement... or indeed still a retracement. This could go on to $20, $50, $100.

On the other hand, systems that were chopped out of that stock, had that capital allocated somewhere else.

I get what you're saying, but it's the bottom line that counts, not individual wins.

Wysiwyg · 31 January 2009

Yeah it`s pretty hard to watch large gains slip away.Though nothing wrong with the free carry I suppose.

So_Cynical · 31 January 2009

beerwm said:
see a slight advantage in some aspects, but still not convinced

Look at the real time trading blogs...trend following still gets down to a decision,
at some point the trader makes a (trader) decision and takes the profit, and goes
on to something else...sure it "locks in the profit" but also (in the worst case
scenarios) locks out the future potential.

This is the trade off, of the trend following mentality....taking whats in front of u,
and forsaking what may come....the unknown.

johenmo · 31 January 2009

So_Cynical said:
This is the trade off, of the trend following mentality....taking whats in front of u, and forsaking what may come....the unknown.

If you are the sort who sets a profit target and takes it, then you forget what happens after that - you were happy to take the profit.

I got OXR with a view to buy & hold - had worked before (but the market wasn't the same, was it!!!). And it went down the slippery slope, I stayed with the buy/hold/long term view that it will recover etc. So now my OZL shares are locked away and really all I can do is hold until it comes out of suspension.

So I have devised a short term trading system and am paper trading it mechanically. In the past two weeks I would have recovered the losses from the OZL (if I'd put money in).

As I learn I can see this being a short/very short term market. I won't buy and hold until things seem a lot better in the market (and I learn more).

Buy, hold and closely MONITOR - as a few people have been saying - is about as good as you'll get investing.

Invest or Trade?

beerwm

CanOz

Home runs feel good, but base hits pay bills!

beerwm

MRC & Co

So_Cynical

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beerwm

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The Contrarian Averager

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