Is it Possible to pick Bottoms or Tops - consistently?

[wayneL]

MichaelD has "Not fooled by randomness" in his profile.

I believe it, and I believe there are others in this thread equally not fooled by randomness. But I wonder what Taleb might make of the others.

Confirmation bias anyone?

 

[wayneL]

BTW, there seems to be varying perceptions of what a top/bottom is; and the timescale.

Let's define.

 

[tech/a]

Do i wish i had held on to all the shares...hell yes, but then i wont have capital to recycle

Take capital from a winning trade which has gained momentum and look for another trade that may---gather momentum??

It is true that a top or bottom is not known in any time frame until after it has happened. In my experience, picking tops or bottoms consistently is not possible. The first sentence gives a clue

You'll see a top/bottom in ALL LOWER timeframes.
I agree picking tops and bottoms well before they appear is not consistently possible.
BUT recognising that a top--current top is---(or Bottom) Is firming and likely to remain in place for enough time to trade it---and if there is a good deal of confluence over a number of charts (Not timeframes) then major turning points can be identified---perhaps not to the tick but enough to place you in a position of minimal risk to purchase or minimal risk of loss of profit.

And of course a statement by anyone else claiming the ability to
Recognize when price action is indicating strongly that a top or bottom is
forming.
(1) To possibly take profit or
(2) Open a new position with minimal risk
would have been met with demands for real time screen shots and broker statements.

Its a generic thread not a thread where I'm puffing up how great I am!!
I've asked a question and the response is a resounding NO

Great---I'm at right angles to the crowd. Fabulous!

I've given you a screenshot and got this poodle barking like mad.
Why the hell would I spend 3 hrs. of time I don't have right now feeding the poodle with more fodder.

If you ARE reading this, you're involved in risk management whether you like it or not. You need to understand it.

But then again you don't NEED to do or agree or investigate anything.
Just be fooled by randomness!!

 

[craft]

Confirmation bias anyone?

Confirmation Bias on steroids I would say.

If you really want to know if tops and bottoms can be called consistently, just go and have a look at how some of the legends in their own lunch boxes have posted in the XAO technical analysis or ASX is tanking threads on numerous previous highs and lows.

Help for others - highlighting that anyone claiming to be able to pick tops and bottoms are full of crap in the hope that a newbie isnt temped to try it.

I had the pleasure of spending a couple of hours watching Jimmy Carr last week in his first Australia tour, for the pittance of $73 including booking fee. Google him. He is a very funny man who makes his living from exquisitely delivered profanity and describing body fluids.

His best joke of the night was his cleanest:-

"I have a special way of working out whether your house is haunted or not.

It isn't.

Grow up"​

This thread needs to learn from that.

Almost randomly, I culled these sentiments from it so far:-

• every now & then
• i've heard this sort of thing
• you will never find it
• all down to luck and probability

Does that fill you with confidence?

Several of you have skirted around the important bits of the argument, and the rest ought to take notice imho. Trade Management is everything. Nobody will ever pick tops and bottoms consistently. Ever. The best that the very best trader will ever do is figure out when an extreme is approaching, and either get in or out close to that number. Stocks, indices, commodities, exchange rates, whatever. Doesn't matter. That truth remains just as true.

The people who make a career from this game (not just a few bucks or a few fortunes along the way) are those who rigidly control their risks and have thought beyond the binary win/lose equation. They dribble money at a winning trade until it stops being profitable, and bleed money from a losing one until it again becomes attractive to others. They never ever bet the farm on a single play unless they're Nathan Tinkler or an idiot or both.

I saw a Substantial Shareholder notice from Blackrock [or maybe Kinetic?] recently that graphically described their approach to this issue. If somebody is interested, I'll dredge up my notes and tell you who the target was.

If you want to deal in certainties, you won't be reading this at all, because you'll be on a beach in the Seychelles having fun, enjoying your monthly cheques from some term deposit or equivalent. If you ARE reading this, you're involved in risk management whether you like it or not. You need to understand it. Either that or you're just sick of Keno and there are lots of us who would be pleased to relieve you of your remaining savings.

Snap

Snap (ditto).

 

[skc]

"I have a special way of working out whether your house is haunted or not.

It isn't.

Grow up"​

The people who make a career from this game (not just a few bucks or a few fortunes along the way) are those who rigidly control their risks and have thought beyond the binary win/lose equation. They dribble money at a winning trade until it stops being profitable, and bleed money from a losing one until it again becomes attractive to others. They never ever bet the farm on a single play unless they're Nathan Tinkler or an idiot or both.

Great post! To sum it up...

Is is possible to pick bottoms or tops - consistently?

You can't and you don't need to.

 

[skyQuake]

I know of 1 person that seems to be able to call certain stocks (at least short term) with alarming skill



Mad skillz

 

[tech/a]

Great post! To sum it up...

Is is possible to pick bottoms or tops - consistently?

You can't and you don't need to.

Ok Lets accept that You don't need to.

You just buy and sell at random?
When you think a valuation is undervalued you buy---at anytime after you discover this.
and you sell when you think the valuation is over valued---at anytime after you discover this

Other than that how do you buy and sell?
In general terms.

 

[Valued]

I thought we were past the age of "It can't be done". It's a bad attitude to have. Technically swing trading is picking tops and bottoms too, just on a different time scale. By entering a swing, are you not picking the bottom of the reaction (or the top in downtrends)? With momentum trading you're saying it's not the top.

Is it possible to get in a trade prior to a breakout? Is that picking a bottom or top then? What if you enter on a retest of a new support line? Is that picking a bottom?

 

[Caveroute]

Ok Lets accept that You don't need to.

You just buy and sell at random?
When you think a valuation is undervalued you buy---at anytime after you discover this.
and you sell when you think the valuation is over valued---at anytime after you discover this

Other than that how do you buy and sell?
In general terms.

1. Determine if in your time frame, we are trending or in a range.
2. Have a playbook for each option.
3. If a 'play' is triggered, does it meet your risk parameters.
4. If so enter, exit using other predefined criteria.
5. If it's trending, you can buy anytime and still make a profit - if your prepared to accept the associated risk.
6. Likewise if its trending up, but falling, you can add on knowing it will come good, again, if your prepared to accept the associated risk.

Count me out for the last two btw.

Nothing to do with tops or bottoms as they will never trigger a buy/sell, but clearly they will form part of the analysis, it's the price action post the event that matters as this is where the play unfolds and the signal is generated.

 

[skc]

Ok Lets accept that You don't need to.

You just buy and sell at random?
When you think a valuation is undervalued you buy---at anytime after you discover this.
and you sell when you think the valuation is over valued---at anytime after you discover this

Other than that how do you buy and sell?
In general terms.

Well there's a few definitions missing in the topic of this thread so it's open to different interpretations... but here's how I defined some of the terms:

Top and bottom - within 10% of the range over the time frame of your trading.

So if I want to hold a stock for 1 day, and in hindsight it travelled from $1 to $1.20 (20c range). Any buying under $1.02 would be a great bottom picked, and any selling above $1.18 would be a great top sold.

Consistent - say over 60-70% correct.

As far as I am aware, a lot of the profitable technical chart traders operate on <50% win rate and make their dough on high win/loss ratios. So they don't fit my definition of being consistent.

Picked - having acted (traded or called) on the top/bottom either before or as it happens.

Picked is very different to "called" in hindsight. E.g. Today I am calling a top in XJO (5383 on 2 Jan) for the next 2 months. I haven't picked it... I merely pointed it out. The XJO is already 300 points below that level. So based on the above definition, unless XJO falls another 2700 points in the next two months (making a total range of 3000 points and hence me picking a top within 10% of the range), I did not "pick" a top.

Based on these definitions - I believe few can claim that they pick tops and bottoms consistently. If anyone is willing to display their top and bottom picking skills based on similar definitions to the above, I'd be very eager to read such thread.

As to how do I buy and sell in lieu of picking top and bottom?
- If I was trading quantitative methods (e.g. means reversing spreads) it's purely based on historical statistics.
- If I was trading news - purely based on my interpretation of the news and my prediction of how market would react to the news.
- If I was trading short term (i.e. minutes) price action - mostly on the DOM and support and resistance levels.
- If I was investing in fundamentals - I will buy when the stock is undervalued enough and the risk / reward is in my favour.

Sure.

But firstly I think I got the top pretty spot on.
Weeks ago.

https://www.aussiestockforums.com/forums/showthread.php?t=17461&page=81
Post #1615
#1619

If you go to a post and click on the actual post number, you can get the link to that specific post (instead of link to the thread).

 

[Boggo]

1. Determine if in your time frame, we are trending or in a range.
2. Have a playbook for each option.
3. If a 'play' is triggered, does it meet your risk parameters.
4. If so enter, exit using other predefined criteria.
5. If it's trending, you can buy anytime and still make a profit - if your prepared to accept the associated risk.
6. Likewise if its trending up, but falling, you can add on knowing it will come good, again, if your prepared to accept the associated risk.

Not sure what all the kerfuffle is about, its as simple as that above.

It may be the bottom but you may not know that it was the bottom until the trade continues your way.

KISS principle works best.

Chart example below (I do hold in my SMSF)

(click to expand)

 

[tech/a]

https://www.aussiestockforums.com/forums/showthread.php?t=736&p=808543&viewfull=1#post808543


CBA
Theres a drink in that.
$77-72 and now a lower low.

 

[So_Cynical]

When first I saw the chart I thought "WT?"

But then it dawned on me that you do the "low cost averaging" strategy.
By the way this is a strategy any newb can Google and learn from.

Low cost averaging is something that i came up with myself, its a variation on "Dollar cost averaging" where instead of buying every month or whatever regular interval, the investor would try and pick bottom (and usually fail) at intervals where the share price falls significantly enough.

So only buying at significant low points in the share price cycle thereby "low cost averaging" and ending up with many parcels of the same stock bought over years at all or at least most of the low points in the price cycle...i was a newb when i started following this strategy in Feb (perfect timing) 2009.

Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work? Anyone up for doing this?

Ok Bought some Graincorp today 7.59, already missed the very bottom time will tell all.

 

[beachlife]

https://www.aussiestockforums.com/forums/showthread.php?t=736&p=808543&viewfull=1#post808543


CBA
Theres a drink in that.
$77-72 and now a lower low.

Yep very helpful. Too bad you didnt answer the question that followed about how to trade it back then.

Anyway I'm calling a bottom on XJO and CBA based on 50% retracement and my orders are in. I will be long tomorrow with usual if...maybe...probably...might...USA...China... short term...bullish...overall...sometime...bearish... fingers crossed...long term...confirmation...wave...leg...ratio...not sure...might be wrong

I think that covers it. So I can claim super trader status if it reverses and dig this post up for months to come, if not I have my excuses in place, still a super trader. Awesome!

 

[Boggo]

Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work? Anyone up for doing this?

An example of my idea of entering after what has likely been a bottom, also note the value of recognising the tops.

In the case below I am waiting for confirmation of just that, another bar is likely to be all that is needed so I am looking at next week for confirmation.

(click to expand)

 

[burglar]

... still a super trader. Awesome!

Amusing!

 

[tech/a]

Cant be done!!!

Note the time stamp.

Click To Expand.



Note the Time Stamp.

Click To Expand



A drink in that as well.

My intention was to work through what I believe to be important characteristics in identification
but as usual the poodle factor have just continued barking.

 

[Julia]

Ok Bought some Graincorp today 7.59, already missed the very bottom time will tell all.

OK, noted, SC. What I was hoping for, however, is demonstration from those who are assured they can pick bottoms (or very close to it) on the index rather than an individual stock.

Anyway I'm calling a bottom on XJO and CBA

Whacko! Thank you. May I count this as a definite call, ignoring all the rationalisation that followed?

 

[Julia]

An example of my idea of entering after what has likely been a bottom, also note the value of recognising the tops.

In the case below I am waiting for confirmation of just that, another bar is likely to be all that is needed so I am looking at next week for confirmation.

(click to expand)

Good, thanks, Boggo. Will you update us with the confirmation?

Anyone else prepared to call a bottom, whether now or later?
Or alternatively to offer reasons why we're nowhere near a bottom at this stage?

No one has mentioned the US debt ceiling issue almost upon us again. From news.com.

US President Barack Obama is facing a second crisis over the debt ceiling with temporary measures set to expire at the end of...

US President Barack Obama is facing a second crisis over the debt ceiling with temporary measures set to expire at the end of the week. Source: AFP

US TREASURY Secretary Jacob Lew has warned that the United States will exhaust its borrowing authority on Friday without action by Congress to lift the debt limit.

"Time is short. Congress needs to act to extend the nation's borrowing authority, and it needs to act now," Lew said in to prepared remarks on Monday at the Bipartisan Policy Center, a Washington think tank.

"In just a matter of days, the temporary suspension of the debt limit will end, and the Treasury Department will have to start using extraordinary measures so the government can continue to meet its obligations," he said.

Lew noted that the automatic reinstatement of the cap on borrowing after February 7 comes at the beginning of tax filing season, when tax refunds cause net cash outflows "that deplete borrowing capacity very quickly."

Add this to the poor manufacturing figures from the US just out.
Hardly a positive outlook, and erratic behaviour from our own government doesn't assist imo.

 

[beachlife]

My intention was to work through what I believe to be important characteristics in identification.

Myself and probably a few others are waiting for you to start explaining.

I too have some charts with good trades. Here's a couple from last night and tonight. Nothing clever about the entries, I just followed the MA down after a pause in what was a long run up, and then did it again at the same top - clever huh. Do they count as picking tops? I dont think so. There was nothing guaranteeing a top, just a MA based entry with a logical stop above what now looks like a top. No big deal.



That one was exited based on the MA.


This one I might let run a bit because of the double top.

Whacko! Thank you. May I count this as a definite call, ignoring all the rationalisation that followed?

Yes. Its a point I have been waiting for, not a call for the sake of this thread. My order to buy 1000 CBA on stop is in and stops on my open shorts have been tightened. Whether or not all or some will trigger remains to be seen.

Good, thanks, Boggo. Will you update us with the confirmation?

No one has mentioned the US debt ceiling issue almost upon us again.

Debt ceiling will be raised again, after some huffing and puffing.