Newbie Lessons - All your questions answered

[Sir Osisofliver]

Are you suggesting that now is the price to buy into JB? Perhaps based on the green line across the price peaks in January, May and this month?

Cheers.

If anyone wants to do an analysis on the below, happy for it to happen, but I will not be commenting in order to abide by forum rules...that said....

Disclaimer: This is NOT ADVICE. DYOR stands for DO YOUR OWN RESEARCH. You heard me. Don't make me break out the legalese. Remember the forum rules about stock ramping. I want this to be clean and I DON'T want to get Joe in trouble. If I see a post that skirts the grey area I will ask a mod to remove it. Clear? In this discussion similar to the first time I will be pre-empting a potential trade in the absence of a signal in an effort to give clarity.

I have to be extra careful crypto because of what I do for a living...I am not suggesting nor advising anything.

Would you like to have a go at the questions?

Cheers

Sir O

 

[crypto]

Would you like to have a go at the questions?

Cheers

Sir O

I'm certainly thinking about them. I am pretty new to this and have only spent the last few weeks lurking here, reading and utilising the introductory materials at ASX.

I'll get back to you

 

[burglar]

Again, I find myself in frontier territory!
I'm awaiting some new neurones to fire.

Meanwhile I would suggest:

You were demonstrating a squeeze.
Low risk, high reward strategy.

Question: Why am I showing you this now?

It may be cyclical, I should be looking at the shorts once more.

Question: With the benefit of hindsight was my decision correct?

Yes! You got out before it got bumpy!

Question: What do you notice about the price action, prior to and after my exit point?

Uptrend prior to exit, and then pivoting into downtrend

Question: Why have I said this is a potential trade and what kind of trade am I looking at?

I seriously doubt you would want to go long.
If you know the cycle, you might want to seek indicators to go short.

But I am surmising!

 

[Sir Osisofliver]

Yay! Forum engagement!

Again, I find myself in frontier territory!
I'm awaiting some new neurones to fire.

Meanwhile I would suggest:

You were demonstrating a squeeze.
Low risk, high reward strategy.

Indeed that was the Idea I was putting forward, a system that looks for outlier formations, and more importantly how do we go about putting structure and system in place to take advantage (make profit) from such an idea. I hope the newbies took those lessons to heart.

Question: Why am I showing you this now?

It may be cyclical, I should be looking at the shorts once more.

Okay, well an examination of the short positions would show you that the shorts effectively bottomed out at roughly 7% of issued capital just prior to the peak in Nov '13. Since then they have been fluctuating and currently sit at around 12.3% of issued capital, well below the ~25% of issued capital they were when we began looking. What hypothesis can you draw from this?

Question: With the benefit of hindsight was my decision correct?

Yes! You got out before it got bumpy!

Question: What do you notice about the price action, prior to and after my exit point?

Uptrend prior to exit, and then pivoting into downtrend

Hmm, can you give me more detail? If you were to describe the price action prior to and following from my exit, what is the one descriptive word you would use?

You can see your original (green) line on the chart, and where I placed my line (the black one). At the time I questioned you about the placement of your line, with regards to the breach of your line and what your actions were....

So what do you think was my indication (prior to the confirmation proposed by the descending green line that crypto identified) that we were moving away from an up-trend and into a down-trend?

Question: Why have I said this is a potential trade and what kind of trade am I looking at?

I seriously doubt you would want to go long.
If you know the cycle, you might want to seek indicators to go short.

But I am surmising!

So if you are correct, I would be using what kind of instrument?

Cheers
Sir O

 

[crypto]

So what do you think was my indication (prior to the confirmation proposed by the descending green line that crypto identified) that we were moving away from an up-trend and into a down-trend?

Was the issuing of shares / options during the second week of November a factor?

 

[Sir Osisofliver]

Was the issuing of shares / options during the second week of November a factor?

It was not a factor that entered my decision process.

Cheers

Sir O

 

[burglar]

... what is the one descriptive word you would use? ...

Volatility!

 

[Craton]

Hi All,

View attachment 58962

Since November 2013 I have not held JBH, nor has any of my system's scanned JBH as a potential trade. This does not mean that there have not been any trading opportunities in JBH. There have been respectable price movements of $3-$4, easily profitable, particularly when using leveraged instruments.

Question: Why am I showing you this now?

Question: With the benefit of hindsight was my decision correct?

Question: What do you notice about the price action, prior to and after my exit point?

Question: Why have I said this is a potential trade and what kind of trade am I looking at?

Takes a Scotch over to the corner and waits for responses....

Cheers

Sir O

G'day Sir O.

Disclaimer: Total noob when it comes to charting but that's what I'm here for, to learn.

Question: Why am I showing you this now?
To show us:
SP shows a lot of the classic bullish chart with uptrend, peak then downtrend along with up and down thrusts.
How to let a runner/winner run by using Trailing Stops
It doesn't matter if one doesn't sell at the top. Profit is, well, profit as the trailing stops show.

Question: With the benefit of hindsight was my decision correct?
For you, probably yes. Others might have ecked out another few more dollars allowing for the bounce.
Am not sure but the indicator at the top of the chart is volume yes, so volume may have been a factor?

Question: What do you notice about the price action, prior to and after my exit point?
On the up, higher lows and higher volume.
After the peak, lower highs, lower lows and falling volume.

Question: Why have I said this is a potential trade and what kind of trade am I looking at?
At a guess, a derivative probably a Call option.

Now a question for you Sir O. Single malt or blended?

Thanks for taking the time to illuminate the beginner. Cheers!

 

[crypto]

Thanks for taking the time to illuminate the beginner. Cheers!

And you too mate, for asking the questions which I struggled to articulate.

 

[burglar]

... So if you are correct, I would be using what kind of instrument? ...

It's not pointy-nose pliers or forceps.

I'll let the others have a "Yay" forum engagement.

 

[Sir Osisofliver]

Volatility!

So what does this increase in volatility in the auction process that is the market represent? A) increasing impulsive movement (trend) or B) increasing uncertainty?

Does the increase in volatility make is easier or harder to trade the share in terms of your resources, (including time?)

G'day Sir O.

Disclaimer: Total noob when it comes to charting but that's what I'm here for, to learn.

Question: Why am I showing you this now?
To show us:
SP shows a lot of the classic bullish chart with uptrend, peak then downtrend along with up and down thrusts.
How to let a runner/winner run by using Trailing Stops
It doesn't matter if one doesn't sell at the top. Profit is, well, profit as the trailing stops show.

Not a bad response for the impulsive movement, but the share has been consolidating for some time now, why am I now showing the chart with vague hints about a potential trade?

Question: With the benefit of hindsight was my decision correct?
For you, probably yes. Others might have ecked out another few more dollars allowing for the bounce.
Am not sure but the indicator at the top of the chart is volume yes, so volume may have been a factor?

You raise a good point on psychology. The trade was exited at the right time for me. another person may lament the lost opportunity those few extra dollars represents.

Question: What do you notice about the price action, prior to and after my exit point?
On the up, higher lows and higher volume.
After the peak, lower highs, lower lows and falling volume.

so this is confirmation that the market has entered a period of consolidation and uncertainty over the timeframe I have chosen to represent the price action. Does this lead you to suspect that I am forecasting a resumption of "trend" in the somewhat near future?

Question: Why have I said this is a potential trade and what kind of trade am I looking at?
At a guess, a derivative probably a Call option.

Assume you are correct. By using a leveraged instrument of some kind, what have I introduced to this potential trade that was not present in the original equity investment?

Now a question for you Sir O. Single malt or blended?

a bottle of Nants will do nicely.

Cheers

Sir O

 

[Craton]

And you too mate, for asking the questions which I struggled to articulate.

Cheers crypto, thanks for the acknowledgement.

BTW, forgot to mention a couple of things which, from my perspective, are taken for granted.
On the uptrend, the highs were getting higher too and, with regards to resistance lines any pullback was struggling to break the resistance (downwards) or conversely, met with support at resistance.

No doubt there is jargon like the double top and the like that I've left out but the main thing is to learn to recognise what the chart is telling us, not so much the technical terms or jargon (which will come naturally with the time invested in learning), thus learning to apply or dismiss a trade quickly and efficiently and then moving on to the next trade decision.

Sir O has mentioned time and again that we are emotive critters and this is the one bugbear that one needs to learn to override. I know personally in my early days I spent far too much time mulling over my course of action. Being decisive can not only lock in profits but eliminate excessive losses (and the associated time waiting for a stock to recup, if ever). Risk/reward, know thyself.

 

[Craton]

Oh, didn't see you had replied Sir O.

 

[Wysiwyg]

Question: Why am I showing you this now?

To show a chart tells us what has happened in the past and that with this past observation your (our) choice of technical analysis is used to propose a possible price direction moving forward.

 

[Craton]

Not a bad response for the impulsive movement, but the share has been consolidating for some time now, why am I now showing the chart with vague hints about a potential trade?

To be honest, I'm not sure. Perhaps there's the potential to trade the resistance? I do note that the SP struggles to break the bottom resistance line or conversely, there is support there. This must be significant.

You raise a good point on psychology. The trade was exited at the right time for me. another person may lament the lost opportunity those few extra dollars represents. so this is confirmation that the market has entered a period of consolidation and uncertainty over the timeframe I have chosen to represent the price action. Does this lead you to suspect that I am forecasting a resumption of "trend" in the somewhat near future?

Knowing one's appetite for risk v reward is essential when it comes to trading. An uptrend is quite possible in this bullish market although I can not pin point why an uptrend may develop. If you mean the consolidation is the trend then yes, a continuation is most likely looking at the trading range.

Assume you are correct. By using a leveraged instrument of some kind, what have I introduced to this potential trade that was not present in the original equity investment?

Leverage generally means higher risk but also the added risk comes with the higher potential for reward. Can it also be a form of de-risking by having less money on the table for the same reward? If you know what I mean.

a bottle of Nants will do nicely.

Cheers

Sir O

Ah-huh and buying Australian too, dig it! About to have two fingers with a cube of ice myself, cheers.

 

[Craton]

To show a chart tells us what has happened in the past and that with this past observation your (our) choice of technical analysis is used to propose a possible price direction moving forward.

So I would guess that the starting point is that one needs the tools to predict what a SP may do in the future.

 

[burglar]

So what does this increase in volatility in the auction process that is the market represent? A) increasing impulsive movement (trend) or B) increasing uncertainty?

Does the increase in volatility make is easier or harder to trade the share in terms of your resources, (including time?)


Sir O

To the best of my knowledge, increased volatility generally denotes a downtrend.
Or uncertainty.

Now I'm uncertain.
Oft I have heard that volatility presents opportunities.
If only I knew what opportunites (IDEAS)
and how (STRATEGY/SYSTEM) to profit from them.

That would make me a Vice-Demi-God!?




Is now a good time to throw up some trading jargon?

e.g. Descending Triangle forming.

 

[burglar]

Yay! Forum engagement!

So if you are correct, I would be using what kind of instrument?

Cheers
Sir O

Please Sir,

I would be purchasing a PUT Option.
But would I anticipate a breakout to maximise potential?
Or would it be more prudent to wait for confirmation?

 

[Sir Osisofliver]

To show a chart tells us what has happened in the past and that with this past observation your (our) choice of technical analysis is used to propose a possible price direction moving forward.

So I would guess that the starting point is that one needs the tools to predict what a SP may do in the future.

I'm going to contrast the above two statements. I'n not picking on you Craton, I merely wish to demonstrate a mindset.

Look at the language in Wysiwig's comment...propose a possible direction vs Craton's use of the word predict. This is important (it may seem I'm harping on) because of the definition of financial risk. Financial risk is about expectation. If my expectation is that JBH will be between $50 and $8 in the next 12 months I have minuscule financial risk because the probability that the SP will be outside of that range is extremely low. However I cannot make money with such a wide range or wide expectation of SP movement. I must choose a direction for price movement (go sideways is also a price direction). If I expect that JBH will be at $50 in 12 months time, and it falls to $8, significant financial risk has already occurred, because the result is vastly different from my expectation.

We cannot predict anything with 100% certainty. There are simply too many variables that can occur over time. All we can do is anticipate a price direction, act accordingly and act to limit what happens if/when our expectation is proved incorrect. This is the importance of stop losses, both as a method of preserving profit and as a method of limiting losses.


Getting to the other comments shortly.

Cheers
Sir O

 

[Sir Osisofliver]

To be honest, I'm not sure. Perhaps there's the potential to trade the resistance? I do note that the SP struggles to break the bottom resistance line or conversely, there is support there. This must be significant.

So how significant would it be if the horizontal support you have identified is broken? What would your actions (and anticipation) be if this were to occur? Conversely if the descending line in the chart were broken, how significant would this be and what would be your actions/anticipation?

Knowing one's appetite for risk v reward is essential when it comes to trading. An uptrend is quite possible in this bullish market although I can not pin point why an uptrend may develop. If you mean the consolidation is the trend then yes, a continuation is most likely looking at the trading range.

Whilst sideways can be a trend (as I said there have been opportunities to make profit from the "bumpy" price movement since my exit), trend moves either upwards or downwards. We can only anticipate and act accordingly.

Leverage generally means higher risk but also the added risk comes with the higher potential for reward. Can it also be a form of de-risking by having less money on the table for the same reward? If you know what I mean.

So higher risk due to leverage (among other things), what actions will I take to offset this additional risk that was not present in the pure equity transaction?

Cheers

Sir O