Newbie Lessons - All your questions answered

[ChaoSI]

okay.. so after 2 gruelling, mind melting weeks of working my way through this thread monster *nods at Sir O in thanks* i'm now a vegetable

self-pity aside.

so that graph with the open close prices... what's that actually called? i'm guessing it's something REALLY simple

okay just some questions to clarify some things,
1/ for the summaries (i use commsec too) there's a column labelled "volume" i'm guessing this means the number of shares being shifted around? either bought or sold? (if not please clarify for me)
2/ trades.... im' just going to guess this refers to the number of transactions (buy or sell) that have been made thus far today?




thanks heaps Sir O. for all your efforts and to all of the contributors on this thread you guys are a fountain of knowledge analogous to an oilrig striking black gold =)

my brain is now much mushier than it was some weeks ago haha

happy belated Chinese New Year to you all too =)

 

[Julia]

okay.. so after 2 gruelling, mind melting weeks of working my way through this thread monster *nods at Sir O in thanks* i'm now a vegetable

self-pity aside.

At least you're being sensible enough to take advantage of the resources offered. Soon it will feel like second nature.

so that graph with the open close prices... what's that actually called? i'm guessing it's something REALLY simple

At this stage you could either buy a book like Stan Weinstein's "How to Profit in Bull and Bear Markets" to learn a bit about charting, or if you have signed on with Etrade (and I presume Comsec also offers some education), they have a reasonable Education section which gives you the basic about how to understand charts.

okay just some questions to clarify some things,
1/ for the summaries (i use commsec too) there's a column labelled "volume" i'm guessing this means the number of shares being shifted around? either bought or sold? (if not please clarify for me)

Yes. But don't think "either bought or sold". i.e. for someone to buy a share, someone else has to sell it. OK?

2/ trades.... im' just going to guess this refers to the number of transactions (buy or sell) that have been made thus far today?

Yes.

thanks heaps Sir O. for all your efforts

Ah, it's Sir O's generous nature and overwhelming kindness. He just can't help himself.

 

[ChaoSI]

At this stage you could either buy a book like Stan Weinstein's "How to Profit in Bull and Bear Markets" to learn a bit about charting, or if you have signed on with Etrade (and I presume Comsec also offers some education), they have a reasonable Education section which gives you the basic about how to understand charts.

oh no. i understand what that graph from before (page.. 9 i think it was? with the open and close high low ones represents and the explanation was clear enough that i get the vague purpose. i was just wondering if there was an actual name for that type of graph that's all =)

Ah, it's Sir O's generous nature and overwhelming kindness. He just can't help himself.

and yours as well among a great number of others on this forum apparently =)

 

[Julia]

oh no. i understand what that graph from before (page.. 9 i think it was? with the open and close high low ones represents and the explanation was clear enough that i get the vague purpose. i was just wondering if there was an actual name for that type of graph that's all =)

No fancy name ChaoSI. Just a chart. Different time frames will show you different trends.
The ASX has some quite good education/info sections also.
http://www.asx.com.au/resources/online-courses.htm

and yours as well among a great number of others on this forum apparently =)

You're very welcome. Will send you a PM with some other stuff.

 

[Sir Osisofliver]

oh no. i understand what that graph from before (page.. 9 i think it was? with the open and close high low ones represents and the explanation was clear enough that i get the vague purpose. i was just wondering if there was an actual name for that type of graph that's all =)

I went and had a look. Its a bar chart. It's the simplest (and most common) way of representing the price action and capturing the four main data points of Open, High, Low and Close. You could just as easily use candlesticks or some other method of representing the same data.

Oh and, now you are slightly more educated vegetable. ~

Cheers
Sir O

 

[ENP]

OK Newbies...time for another lesson.

what's it going to be..

Economic Cycles and How to recognise them or

Fundamental and Technical Analysis techniques? (Newbie Version) (I'm thinking that once I get to the end of this I might start a Not so newbie but still learnin' thread - so don't expect any great depth to this topic)

once again First In wins

Sir O

Just looking back over the thread.

Not sure if you covered how to spot economic cycles? This is way back on page 4

 

[ChaoSI]

I went and had a look. Its a bar chart. It's the simplest (and most common) way of representing the price action and capturing the four main data points of Open, High, Low and Close. You could just as easily use candlesticks or some other method of representing the same data.

Oh and, now you are slightly more educated vegetable. ~

Cheers
Sir O

candlestick is basically the same thing is it? colour denotes whether the close was higher or lower than the open? and the tails mean the high and low?

yes.. educated vegetable... still mushy on the inside tho

open questions:

- so you have a core position of stocks (probably something 'safe') that you develop over each cycle, selling portions off in order to reinvest into the same shares at a later date
then *i'm guessing* you have non-core positions ... shares that you buy a stack of, wait (for a profit of course ) and sell... all of it?

okay so obviously the price that you sell at is totally subjective in where you think it's going to peak with the general idea being that you sell just short of the peak (as opposed to the gamblers sydrome of "just a little more.. just a little more").
so do you guys wait for a preset price? (which i'm told is a good way to go... get to a price and sell it unless you're SURE it'll go up..)
or do you guys wait for a percentage?

i guess my problem is that i'll always try and sell it higher than it'd probably go (or Mr Murphy sees me place a sell order and immediately sends the stock down ) so where i could've made a profit i end up holding onto the stock...

i guess i'm one of those "hold out for more" ..
any tips in this regard?

 

[explod]

candlestick is basically the same thing is it? colour denotes whether the close was higher or lower than the open? and the tails mean the high and low?

yes.. educated vegetable... still mushy on the inside tho

open questions:

- so you have a core position of stocks (probably something 'safe') that you develop over each cycle, selling portions off in order to reinvest into the same shares at a later date
then *i'm guessing* you have non-core positions ... shares that you buy a stack of, wait (for a profit of course ) and sell... all of it?

okay so obviously the price that you sell at is totally subjective in where you think it's going to peak with the general idea being that you sell just short of the peak (as opposed to the gamblers sydrome of "just a little more.. just a little more").
so do you guys wait for a preset price? (which i'm told is a good way to go... get to a price and sell it unless you're SURE it'll go up..)
or do you guys wait for a percentage?

i guess my problem is that i'll always try and sell it higher than it'd probably go (or Mr Murphy sees me place a sell order and immediately sends the stock down ) so where i could've made a profit i end up holding onto the stock...

i guess i'm one of those "hold out for more" ..
any tips in this regard?

You need to study Candlestick Charting very well and then it is a very valuable tool

In short, I look for strength in a stock, on the buy sell what size are the bids. If we have 2 buyers wanting a million at $2 and 4 sellers tring to palm off 500,000 at $2.01 then you have some strength indicated, but it is just one of very many things to look at. Volume of sales is a very imprtant indicator also but they all need to be read in tandem. Untill you have done some serious study in charting then stay well away from it.

 

[Sir Osisofliver]

Just looking back over the thread.

Not sure if you covered how to spot economic cycles? This is way back on page 4

No I never got around to it - I got crazy busy at work...I'm still at work now (I love my job but I hate deadlines). Maybe that's what I'll do next when I can summon the motivation and get some spare time.

Cheers
Sir O

 

[Market Depth]

AHHH SELLING! this is always the 'Tricky Part'. 1001 ways to skin a cat

For me, and I've mentioned this in a recent thread. It comes down to 'What Type of Trade Did I enter'?

For an 'Intraday' trade, then it only comes down to feel and by observation of the trading tape, or 'Market Depth' information. Over time watching my favourite stocks, I know then very well, and understand the spreads between the bid and ask. I know when they are acting as they should and when there could be a short term shortage of stock (Buying pressure) or an over supply (Selling pressure)

For a short term trade, or swing trade, held for 2-5 days, then a 'High Point Reversal' bar on a bar chart, would signal a sell for me at the next open.

For a position trade or trend trade, then support and resistance lines drawn on a chart, can offer obvious exit points. A close below one of these points, would signal a sell for me on the open on the following day.

For a long term investment trade, I tend to use point and figure charting as well as a 200 day moving average, a cross below the 200 day ma, would alert my attention, I may not sell all of my holding however, just take some profit off the table.

The last example is the one I'm most flexable with. I've given my investment time to grow, and it only seems fair that I give it considerable thought and time when it comes to selling. If the stock has a major correction, and catches me out somewhat, and I can see that fundamentally it is still sound, then I may in fact buy more rather than sell.

 

[Sir Osisofliver]

candlestick is basically the same thing is it? colour denotes whether the close was higher or lower than the open? and the tails mean the high and low?

Do you have three days spare? Candlestick charting is a topic all by itself and one frankly I'm probably not the best one to discuss as I don't use it often but know the theory. It suits some people who are visually orientated. Do some searching around these forums or the net, there is some good material on it.

yes.. educated vegetable... still mushy on the inside tho

open questions:

- so you have a core position of stocks (probably something 'safe') that you develop over each cycle, selling portions off in order to reinvest into the same shares at a later date

Why would I sell? It's a serious question because if it's a good asset I'm probably miles ahead on capital gain at the end of the cycle - BHP at $8 for EG in '02/03. There is no way in hell I'm gonna sell an asset like that so what I need to do is protect that share when the inevitable correction happens. If I DO sell then not only am I up for the capital gains but I just lost the cost based yield on the share. Good assets increase the size of their dividends over time - and it's money I don't have to work for - so my passive income gets bigger. These types of assets form the "core" portfolio purchased in the correct window of opportunity (IE Just after a correction). This is generally when the assets are also positively geared, so I can hold them indefinately whilst I wait for the economic cyle to mature.

As a very general rule (because of something that I called Value Chain Dynamics) once the market reaches the old high (In this case 6800 points) the market moves into a faster paced market that is more suitable for shorter term transactional trading. (Mind you - you can do that at any stage of the cycle, its just that this is the kindest market in which to short term trade IMO. This is where non-core assets with good growth profiles that are cyclical in nature come to the fore - especially in our commodity driven market.

then *i'm guessing* you have non-core positions ... shares that you buy a stack of, wait (for a profit of course ) and sell... all of it?

Correct - but depending upon its performance in the last two years of the cycle. If I think it classifies as a core stock or is in an area of the market that I can see significant consolidation Eg CSG area - I'll protect and hold it, particularly if it is paying me a dividend.

okay so obviously the price that you sell at is totally subjective in where you think it's going to peak with the general idea being that you sell just short of the peak (as opposed to the gamblers sydrome of "just a little more.. just a little more").
so do you guys wait for a preset price? (which i'm told is a good way to go... get to a price and sell it unless you're SURE it'll go up..)
or do you guys wait for a percentage?

Define subjective. Of course there is a significant amount of analysis that I do, both from a top-down fundamental and technical approach about my decision to "harvest" non-core stocks in a mature cycle. I don't have to be exact for it to make an enormous level of difference either. Close enough is more than good enough.

i guess my problem is that i'll always try and sell it higher than it'd probably go (or Mr Murphy sees me place a sell order and immediately sends the stock down ) so where i could've made a profit i end up holding onto the stock...

i guess i'm one of those "hold out for more" ..
any tips in this regard?

I don't know what time frames or style of trading you are talking about. I also don't know what floats your boat about trading. I struggled to find something that I knew could make me money until I investigated systematic trading styles. But even systematic trading (which took me years to get a system that works for me) may not work for you. If you are....detail orientated (Which is a nice way of saying anal retentive), it may suit you a great deal, but you'll need to put the hard yards in and develop one yourself.

Cheers
Sir O

 

[ChaoSI]

Do you have three days spare? Candlestick charting is a topic all by itself and one frankly I'm probably not the best one to discuss as I don't use it often but know the theory. It suits some people who are visually orientated. Do some searching around these forums or the net, there is some good material on it.

haha i'm working my way through a short term trading book, nice technical info in it. I'll get back to you on that one

Why would I sell? It's a serious question because if it's a good asset I'm probably miles ahead on capital gain at the end of the cycle - BHP at $8 for EG in '02/03. There is no way in hell I'm gonna sell an asset like that so what I need to do is protect that share when the inevitable correction happens. If I DO sell then not only am I up for the capital gains but I just lost the cost based yield on the share. Good assets increase the size of their dividends over time - and it's money I don't have to work for - so my passive income gets bigger. These types of assets form the "core" portfolio purchased in the correct window of opportunity (IE Just after a correction). This is generally when the assets are also positively geared, so I can hold them indefinately whilst I wait for the economic cyle to mature.

hmm interesting, basically if you managed to get a good price on something eg CBA when it went down in... 08 was it? to 26$
you buy a large amount then and basically just sit on it and increase it when possible during the next down cycle? so in effect you're treating it like an investment account of sorts yes? using the dividends from that core stock to fund others? hmm should rethink my sell order then i think...

Correct - but depending upon its performance in the last two years of the cycle. If I think it classifies as a core stock or is in an area of the market that I can see significant consolidation Eg CSG area - I'll protect and hold it, particularly if it is paying me a dividend.

understood so if you're looking for 'non-core' but you keep and eye out something that you might want to place into 'core'. Basically keep an eye out for opportunities...

Define subjective. Of course there is a significant amount of analysis that I do, both from a top-down fundamental and technical approach about my decision to "harvest" non-core stocks in a mature cycle. I don't have to be exact for it to make an enormous level of difference either. Close enough is more than good enough.

subjective, in the same sense that "beauty is in the eye of the beholder" a 'good' price or time to sell for one person might not be 'good' enough for another.

I don't know what time frames or style of trading you are talking about. I also don't know what floats your boat about trading. I struggled to find something that I knew could make me money until I investigated systematic trading styles. But even systematic trading (which took me years to get a system that works for me) may not work for you. If you are....detail orientated (Which is a nice way of saying anal retentive), it may suit you a great deal, but you'll need to put the hard yards in and develop one yourself.

well i meant that independent of time frame. some stocks i've held for years others i've only had recently. regardless of the time held when comes time to consider if i would sell it i always think "oh i could get higher than this" ie. be on the greedier side which, IF the price gets that high, is fine, but if it doesn't and tanks without ever getting there, you've lost an opportunity for a gain. This is the case regardless of short or long term trading.

Cheers
Sir O

no Sir O,
cheers to YOU

btw i'm not to sure as to what is meant by systematic trading is specifically, but i guess that's for me to work out eventually.


As always Sir O, a pleasure.

 

[Sir Osisofliver]

hmm interesting, basically if you managed to get a good price on something eg CBA when it went down in... 08 was it? to 26$
you buy a large amount then and basically just sit on it and increase it when possible during the next down cycle? so in effect you're treating it like an investment account of sorts yes? using the dividends from that core stock to fund others? hmm should rethink my sell order then i think...

Close. Remember I mentioned Value Chain dynamics? Value Chain dynamics are what happens after a major correction. There is still money flowing into the market even during the worst of corrections. This money comes from savvy investors who recognized a mature market and held back funds, from continuing superannuation monies, international investors who seek more secure markets that our own etc etc. All this cash is looking for a home, so where does this money initially end up? It moves first into these core blue chip assets. Once these stocks have recovered and are no longer perceived as good value then the money looks at slighter lower quality (and smaller capitalisation stocks). This is a very general statement of course - individual stocks have their own growth characteristics.

This movement early in the cycle means that you have the equity gain and can purchase additional quantities still relatively early in the cycle, before the market reaches the old high. Eg Buying BHP in 2005 at circa $12.50 - still a very good price in comparison to the price at the end of the cycle.

By doing the above you are compounding your gains rather than just sitting on the stock and getting a market level of return.

understood so if you're looking for 'non-core' but you keep and eye out something that you might want to place into 'core'. Basically keep an eye out for opportunities...

Yup

well i meant that independent of time frame. some stocks i've held for years others i've only had recently. regardless of the time held when comes time to consider if i would sell it i always think "oh i could get higher than this" ie. be on the greedier side which, IF the price gets that high, is fine, but if it doesn't and tanks without ever getting there, you've lost an opportunity for a gain. This is the case regardless of short or long term trading.


no Sir O,
cheers to YOU

btw i'm not to sure as to what is meant by systematic trading is specifically, but i guess that's for me to work out eventually.


As always Sir O, a pleasure.

Hope that helps

Cheers

Sir O

 

[zoeinthecity]

That's the second time I've done that

yes I mean PURCHASE a put option

Cheers

Sir O

How does purchasing a put option help?

 

[Sir Osisofliver]

How does purchasing a put option help?

http://www.asx.com.au/resources/options-courses.htm

 

[zoeinthecity]

http://www.asx.com.au/resources/options-courses.htm

Hot Dog! That was quick.

So my questions are:

1. What does it mean when the news bulletin says "CBA closes up 4 points" (or something to that effect)?

2. What sort of income strategies/dividend strategies exist, and where can i find out more?

I'm more interested in creating an income that can fund further studies.. travel.. etc.

Thanks!

 

[Sir Osisofliver]

Hot Dog! That was quick.

So my questions are:

1. What does it mean when the news bulletin says "CBA closes up 4 points" (or something to that effect)?

Means the price action has moved, specifically the closing prices. EG CBA closed on Tuesday at $53.30 then closed on Wednesday at $53.84 - therefore CBA closed up 54 points.

Points gets used rather than the word price because of indices EG All Ords closed up 49 Points - rather than price...clear?

2. What sort of income strategies/dividend strategies exist, and where can i find out more?

I'm more interested in creating an income that can fund further studies.. travel.. etc.

Thanks!

As many as can be thought of. I know that is not particularly helpful, but "Income" strategies as opposed to "wealth creation" strategies are generally short-term trading strategies - and there are a multitude of ways that can be used to derive an income from the markets. The way I like to differentiate it is that you work to create an active income. So you need to work at the process of your trading strategy to create the income.

Wealth creation however should be designed to create a passive income stream from dividends as a natural consequence of building your assets over the longer term.

So are you wanting to create an active income in the short-term (which means learning how to trade consistently and effectively), or a passive income in the long-term (which means learning how to manage your equity)?

Cheers

Sir O

 

[zoeinthecity]

So are you wanting to create an active income in the short-term (which means learning how to trade consistently and effectively), or a passive income in the long-term (which means learning how to manage your equity)?

Both? Can i have both?

I went through the options trading tutorial at ASX and am interested in the idea of options.

I'm just curious about this...

The price for CBA right now is $54.00

If I owned 1000 shares, and wrote a call option at $55.00 for 0.470

A mysterious someone is going to buy this call for (0.47*1000) =$470

Sooo... Then, the price goes up to say, $55.50... And they exercise their option. I get to keep the $470 +$1000,

Correct or not?

And if the price goes down, I'm okay with that because I'm holding the shares for the *long term*

It seems a little bit too simple . Am I missing something glaringly obvious and dangerous?

 

[Sir Osisofliver]

Both? Can i have both?

Yes you can - to the limit of your time and expertise.

I went through the options trading tutorial at ASX and am interested in the idea of options.

You are aware that I sent you to that location to show you how to use options as a risk management tool rather than as an income generating activity? If you are interested go search the threads by WayneL in the derivative sections of this forum. It will be well worth your time.

I'm just curious about this...

The price for CBA right now is $54.00

If I owned 1000 shares, and wrote a call option at $55.00 for 0.470

A mysterious someone is going to buy this call for (0.47*1000) =$470

Sooo... Then, the price goes up to say, $55.50... And they exercise their option. I get to keep the $470 +$1000,

Correct or not?

Not - When you write a call it is the same as purchasing a put. IE you only make money if the price goes down. When they exercise their option, that means they purchase your CBA shares at the agreed strike price $55.00, at this point they are the new owner of the shares and have a profit of $500 minus the principle they paid of $470 = $30 net profit. A return of 6.4% on their funds.

You would have sold your CBA for $55.00 and taken a premium of $470.

Clear?

And if the price goes down, I'm okay with that because I'm holding the shares for the *long term*

It seems a little bit too simple . Am I missing something glaringly obvious and dangerous?

Yes you are. If you are serious about learning options I would encourage you to learn a lot because the leverage involved will kill you quickly if you are inexperienced.

Cheers

Sir O

 

[youngone]

Hi Sir O.

Im a newbie here and i do have alot of questions.

So, what is ASX300. my understanding of it is that, companies listed in the ASX300 have huge amount of investors and are a term long stock (blue chip) eg.

thanks for reading.