Newbie Lessons - All your questions answered

[Craton]

Yes "going Long" means an anticipation of an upwardly trending share price.

"Going short" means an anticipation of a downwardly trending share price.

If the share price direction is sideways, ranging between and upper an lower resistance and support, there are various options strategies that involve placing both a short and long position on either side of the current share price with a view to closing the losing position and allowing the winning position to turn a profit. Trailing sells and buys can be incorporated into the process to lower risk. This is a simplified example, the importance of the Greeks and the impact on the relative value of the option employed can be critical and I encourage you to learn more.

Indeed that is how you lower risk, but refer to my previous comment about the importance of understanding the impact of the Greeks.

Cheers

Sir O

Thanks for the feedback Sir O.

I was going to PM you the following but have decided to post here instead as a psychology example.

I'm none too sure if I'll ever get my head around derivatives as I had decided a long time ago when I first looked at these type of instruments that, no matter how hard I tried I wouldn't understand them let alone know how to use them. Time to learn/study was also against me.

Also when I first started investing, the first rule I used (apart from knowing oneself) was to understand my risk tolerance and "playing" with things I don't understand was clearly and firmly off the agenda and so, derivatives and the like just didn't feature on my horizon. My strategy was simple. Buy a quality dividend paying share, build the position over time on perceived lows so as to build an income stream via div's or the sold share via cash and the interest come retirement. Yes, I do have more than one stock.

I also made it a rule to have an allocation available (approx. 30%) in cash for rainy day events and for spec and penny dreadful stocks.

This has suited me fine and it's been amazing how I've turned my life of renting with bugga all savings or assets into owning outright two residential properties and a retail business along with the associated building and property. I also work within the business so have a wage to live on. Sounds impressive but remember I live in a remote/regional area so like for like, I doubt if I could do the same in the big smoke. Not that I want too, ten years eking out an existence in Sydney was ten years to many.

Options/derivatives, FX and the like to me are complex and hence I avoid like the plague. Sure I might and probably do miss opportunities but the payoff is that I can sleep well at night. Now having discovered ASF (why I hadn't seeked out stock forums in the past in beyond me, too busy working, being a dad and learning a new trade I'd say) I find myself coming back to these complex instruments.

The questions you pose and meant as lessons are fantastic. I can tell you honestly that the discussion on the potential trade stump me. I simply don't know enough about how these de-risking plays work and as such, shy away from them and any attempt to answer. My feeble attempts as you'll note have been just that, feeble. As such I doubt if I'll be able to get my head into the option/derivative space as it doesn't float my boat as much as say, T/A does.

I feel I'd be wasting my time studying option plays when I'd rather be looking more and more into the T/A side of things and just playing the long game. I accept that I may miss opportunities but I'd rather play with something I'm far more comfortable and perhaps familiar with than going out on a limp. Of course this may all change if or when I have that eureka moment. Will leave it there for now and do as you suggest because it's obvious, there is much to learn.

Thanks ever so much for stimulating and thought prodding this old clunker mind of mine, much appreciated.

Cheers!

 

[Sir Osisofliver]

I'm none too sure if I'll ever get my head around derivatives as I had decided a long time ago when I first looked at these type of instruments that, no matter how hard I tried I wouldn't understand them let alone know how to use them. Time to learn/study was also against me.

Also when I first started investing, the first rule I used (apart from knowing oneself) was to understand my risk tolerance and "playing" with things I don't understand was clearly and firmly off the agenda and so, derivatives and the like just didn't feature on my horizon. My strategy was simple. Buy a quality dividend paying share, build the position over time on perceived lows so as to build an income stream via div's or the sold share via cash and the interest come retirement. Yes, I do have more than one stock.

I also made it a rule to have an allocation available (approx. 30%) in cash for rainy day events and for spec and penny dreadful stocks.

This has suited me fine and it's been amazing how I've turned my life of renting with bugga all savings or assets into owning outright two residential properties and a retail business along with the associated building and property. I also work within the business so have a wage to live on. Sounds impressive but remember I live in a remote/regional area so like for like, I doubt if I could do the same in the big smoke. Not that I want too, ten years eking out an existence in Sydney was ten years to many.

Options/derivatives, FX and the like to me are complex and hence I avoid like the plague. Sure I might and probably do miss opportunities but the payoff is that I can sleep well at night. Now having discovered ASF (why I hadn't seeked out stock forums in the past in beyond me, too busy working, being a dad and learning a new trade I'd say) I find myself coming back to these complex instruments.

The questions you pose and meant as lessons are fantastic. I can tell you honestly that the discussion on the potential trade stump me. I simply don't know enough about how these de-risking plays work and as such, shy away from them and any attempt to answer. My feeble attempts as you'll note have been just that, feeble. As such I doubt if I'll be able to get my head into the option/derivative space as it doesn't float my boat as much as say, T/A does.

I feel I'd be wasting my time studying option plays when I'd rather be looking more and more into the T/A side of things and just playing the long game. I accept that I may miss opportunities but I'd rather play with something I'm far more comfortable and perhaps familiar with than going out on a limp. Of course this may all change if or when I have that eureka moment. Will leave it there for now and do as you suggest because it's obvious, there is much to learn.

Thanks ever so much for stimulating and thought prodding this old clunker mind of mine, much appreciated.

Cheers!

Hi Craton,

Glad you've gotten some insight from the discussion. You are definitely on the right track there about only doing what you understand and feel comfortable with. It's part of "know theyself" in my mind.

I know this is a newbie thread and that some of what is in here can be seen as daunting and complex, but usually I'm responding to requests for information. This time I felt was important to help open the eye's to the possibilities and as JBH was a stock we discussed in detail and timing seems opportune, I jumped on the chance to discuss these issues. I intend to show what happened afterwards, but the lesson is always more powerful if you can pre-empt the trade on record before/if it happens. (You then don't get people saying prove it).

One of the things I have neglected (as simply too busy), has been a discussion around what I consider to be top tier and second tier stocks, and their impact over a longer term investing/trading horizon. I started talking about them around the #690 mark back on page....35.

I then kinda got distracted by the silly season and didn't tie the big picture of what I do all together. It's appropriate however to talk about the above transaction in context with a broader picture however, so....

Here's the model of how I invest in the share market (note this isn't the whole picture, because despite what brokers and financial advisers will tell you, the market isn't the only game out there and you need to diversify away from the share market into non-related asset classes).

Tier 1 Portfolio (Long-Term, passive, geared)
Market cycle bottom (6 o'clock - about March 2009) - I'm on record on these forums somewhere that I did indeed purchase at this time. Here you purchase core tier 1 portfolio stocks. Use margin lending up to 50%, ensure portfolio is positively geared. I can now effectively hold these positions indefinitely. The ability to hold them indefinitely is important because the market will undergo a period of instability and uncertainty. It's important to realize that this is simply fluctuations in capital value of the portfolio that is perfectly in line with fluctuations of the market. By positively gearing the portfolio at this time I can be a passive holder of those assets. Any capital growth during this period will lower the LVR (loan to valuation ratio) of the portfolio below 50%, so re-establishing the 50% gearing ratio by purchasing more shares (if you do not lose the self sufficient nature of the portfolio - dependent on borrowing rates and income from the portfolio) is appropriate.

Once the above is done, when you can no longer create a self sufficient portfolio of high quality stocks, the nature of the market has changed, and our actions within that market also needs to adjust to the changing conditions. For this core portfolio, it may no longer be appropriate to purchase additional shares, so debt reduction becomes important. I will use excess income from trading activities and yield from the portfolio to pay down the margin loan until my LVR is at a minimum 25% or below. (I've started this process, but it's likely to take a while). This ensures the integrity and longevity of the core portfolio. (This core portfolio in terms of money allocated to this asset class will be approx 85-90% of investment at inception).

Tier 2 - Long-term, active, geared
After the bottom of the market investors start looking for shares that aren't as high a quality as the Tier 1 stocks. They may simply be smaller market cap, or be industry centric or have other reasons behind their lack of inclusion into Tier 1. Many of them have higher yield or growth characteristics, so generally it's appropriate to look at these shares to enhance the characteristics of the core portfolio over time. These assets however an not Tier 1 shares that I would be happy to hold across multiple market cycles. Therefore assets in this category have a greater focus upon a) risk and b) profit taking. If/when appropriate to do so I will crystallize my gains, or limit my losses in these kinds of position, and usually use the proceeds to pay down debt. That is the active component of the portfolio, but these shares can be held for quite a length of time. I've got some stats on this, but can't be stuffed looking them up (they are on the home comp anyway). No allocation of funds is made towards this area at inception. Stocks in this category are purchased with proceeds from the trading portfolio's.

Trading System - A, B, C, D I will not be sharing how they are constructed, don't ask for more detail.
Trading System A works across all kinds of markets to a greater or lesser efficiency. As a consistent system with little time commitment it just plugs away, average months it will net 2.5%-3%, good months are 6%-8%, bad months are -2%-1%. Approximately 10% of funds will be placed in this at inception point (March 09).

Trading System B is...well it's really not a system at all, it's simply a cash box that I use for trades that smack me across the face. This is "play money" and highly discretionary in nature. It may have nothing in it from time to time, by I like to start it with 5% of funds at inception. (I also tend to dump a bit of cash in here to pay the tax man if a Tier 2 stock is sold). It mostly sits in cash investments all the time. As you might expect, this tends to get ravaged in a trading position if I'm not careful and paying attention, (which I frequently am) so hence the tiny allocation towards it at inception. (This is however where I've made some good gains when I am paying attention).

Trading System C is the short squeeze system I demonstrated here. This looks for outlier events within a low risk environment, and incorporates stops and position sizing methodologies. It has no allocation at inception, I will fund it from profits in the trading system. This is largely ignored in early cycle and starts to come on-stream later in the market cycle.

Trading System D is a secret. Sorry not sharing.

Ok I posted this before I finished because the page went glitchy and I thought I lost it. Will come back to this later, but ask question if you want.

Cheers

Sir O

P.S. With the above said, into which does the JBH proposed trade fit in?

 

[tech/a]

Ok I guess This T/A will tie in with some of Sir O's stuff.
Havent read his last post.

But here is chart 1 a long term overview to the Latest high.

I have noted most of the important technical features.

Some maybe interested in how I structure a picture
of a chart------Its landscape

Other charts will be specific to certain areas of interest
(To me) and daily time frame.

Click to EXPAND

 

[tech/a]

Chart 2 a quick look at the trends structure on a daily chart

Click to expand

 

[Craton]

Sir O. Again, many thanks for sharing not only you insights but your time.

P.S. With the above said, into which does the JBH proposed trade fit in?

Hmmm...righto, I'll have a stab at it.

Can’t be Tier 1 nor secret Trading system D for obvious reasons.

Trading system A just chugs away and as you are currently not holding JBH, can’t be A.

This leaves the less obvious Tier 2 and the Trading systems B and C.

Trading system B is “not a system at all” and you only allocate 5% so rule out B as you say you may not pay enough attention to this one.

C is low risk and has no allocation but does “comes on-stream” late in the cycle. Low risk so this one ruled out too but could be a candidate.

Leaving Tier 2 as the most likely strategy as focus is on risk and profit taking.

 

[Sir Osisofliver]

Sir O. Again, many thanks for sharing not only you insights but your time.

No worries, if you get something out of it I'm a happy camper.

Hmmm...righto, I'll have a stab at it.

Can’t be Tier 1 nor secret Trading system D for obvious reasons.

Trading system A just chugs away and as you are currently not holding JBH, can’t be A.

This leaves the less obvious Tier 2 and the Trading systems B and C.

Trading system B is “not a system at all” and you only allocate 5% so rule out B as you say you may not pay enough attention to this one.

That's 5% at inception. The amount in there will vary.

C is low risk and has no allocation but does “comes on-stream” late in the cycle. Low risk so this one ruled out too but could be a candidate.

Leaving Tier 2 as the most likely strategy as focus is on risk and profit taking.

So the original trade was the first trade I did in the short squeeze system. This proposed trade fits in the cash box as a trade that "smacks me across the face." Tier 2 is long only focussing on growth and income, so JBH as a proposed trade fits within there...I just have to remember to a) keep an eye on it and b) maintain appropriate risk management like a trailing stop.

Looking forward to what Tech/A has to say about it. I like his analysis so far and it's always interesting to me to see a technical approach that differs from my own yet comes up with the same results. (So far anyway).

Cheers

Sir O

 

[tech/a]

JBH is such a good chart to look at and analyse.
A lot to gain.
This chart I look at Accumulation Characteristics of a consolidation
This being the initial consolidation in Sir O's chart.

If you look at any of the smaller boxes I noted on chart 2
you'll be able to find characteristics there that would offer
opportunity to hold or add or make other derivative decisions.

The key here is to Analyse whats happening at the Top and
bottom of the box---there ----are the tests!

Simply Is supply Increasing and over coming demand
Is demand over coming supply?
How do we know---?
(1) Price is not being forced lower by supply
(2) Following bars are NOT indicating a follow on of supply
Supply is NOT searching lower prices. Its waiting for higher prices.
And keeps getting it.
(3) Demand is not prepared to search for higher prices until its evident that
Supply has with drawn---due to the fact that those holding don't now want to sell as they see strength.
This is evident when price then makes NEW highs on low---er volume
The characteristics of a trend

The next chart is of the CURRENT (Loosely described---Consolidation )
Accumulation---Distribution---Not Clear yet?
The next 2 charts

One longer term and one more right of screen.
Sorry for the wait---but always busy!

Click to expand

 

[tech/a]

Ok I have come to a technical conclusion. How that falls in with Sir O I don't know.

But I think the following charts and in particular the JBH Chart is a great one for some technical analyzing.

Click to expand any of the charts.

 

[burglar]

... Sorry for the wait---but always busy! ...

Thanks tech/a!

Worth the wait.

 

[Craton]

Ok I have come to a technical conclusion. How that falls in with Sir O I don't know.

But I think the following charts and in particular the JBH Chart is a great one for some technical analyzing.

Click to expand any of the charts.



View attachment 59055

View attachment 59056

View attachment 59057

Thanks tech/a, you make it look and sound so easy! Those price/volume indicators really stand out.

Question. Is it my eyes but in the SP sticks only the close and not the open is shown, is the a reason for that?

 

[Sir Osisofliver]

Ok I have come to a technical conclusion. How that falls in with Sir O I don't know.

But I think the following charts and in particular the JBH Chart is a great one for some technical analyzing.

Click to expand any of the charts.



View attachment 59055

View attachment 59056

View attachment 59057

Hi Tech/A this is very much appreciated,

We do indeed have a similar conclusion that differs in only one respect, that of price target. Once again, just for kicks.... DYOR THIS IS NOT ADVICE. I can see that your technical price target is based upon the descending triangle formation. (If that wasn't clear to any newbies he's taken the range of the triangle, and projected that from the break point to achieve the stated 12'ish price target)

I won't be sharing here at this time what my projection and price target and the analysis behind it is. So it is on record however I'll be sending Tech/A a PM (which I hope he'll keep), which records what my projection is and we'll see how each of us comes out when the trade ends. (Remember it's my intention to go dark on commentary on this trade until conclusion.)

I'm also going to assume that we as traders know how much equity is appropriate to place into a proposed transaction. For position Sizing see the information in this thread or search the forum. There is plenty of information around to determine "how much" to put into a particular transaction.

OK, so now we have an anticipated direction, what are our options at this time? Since the direction is downwards we cannot use an equity position and equity platform such as E*trade or Commsec, (unless this is a feature attached to your account in the form of derivatives). Many Market participants require you to sign waivers and other actions before using such products to make sure you understand the risks involved, the most obvious one being leverage risk.

Downward trending price movements are historically more volatile than upward trending price movements. Meaning that typically they move downwards faster, but also tend to counter-trend rally with a larger movement of price action. Stops that would have been appropriate to maintain during an upwards movement typically would be stopped out (in percentage terms at least).

This leaves us with a bit of a quandary, do we widen our stops? If we do what's the potential impacts of such an action?
Do we tighten our stops? If we do what's the potential impacts of such an action?

Cheers

Sir O

P.S. - Does anyoe have any questions for me at this time (likely to be busy today but will come back this arvo)

 

[Sir Osisofliver]

What no questions?

Remember newbies (and others) I won't be commenting or engaging if/when the trade enters, so you won't have forever to ask me questions that I will answer.

Cheers

Sir O

 

[VSntchr]

if/when the trade enters

If we are on the same page, it must have been veeeerry close to triggering yesterday!

 

[ROE]

market is heating up lot of new people join the forum, lot of spammers and marketeer
taking advantage of the new fish, take extreme caution

plenty of good information available for free, all you do is ask and the good people will point you in the right direction
by not paying for thousand of dollars on system or course you already ahead of the pack by a few thousand bucks.

 

[Sir Osisofliver]

If we are on the same page, it must have been veeeerry close to triggering yesterday!

And today.

 

[Sir Osisofliver]

Hey crawler - please take your spam away from this thread. But congratulations, you're the first!

I'm going to ask a mod to dive-bomb your post.

For the newbies, here's alternative views about the wealth within course...that don't give a glowing recommendation from a newly registered, single digit poster...The below is from the wealth within thread link

I have been doing the course for 9 months & I am not at all happy with it. The material is very outdated, all examples are late nineties or early 00s. The support is abysmal and they have an attitude of 'we are always right & you are wrong regardless'.

The on line webinars are terrible; also very old & the presenters waffle on about rubbish without concentrating on the subject material. If you want to learn all about Gann & Dow theory go ahead & they only use Market Analyst. It is a lot of money although it can be covered by VET Fee HELP, so you only have to pay if your income exceeds $50,000. I have done many other University courses & on line trading courses and this is one of the worst that I have come across. I think the Government should investigate it & take it off of being eligible for Govt assistance. Many of the webinars on their website are extremely old.

Assignments are not individually marked so the only way you know is to watch webinars giving the answers on each question which does not address how you answered the question.

Yes you have to work hard to pass but you want the information you take away to be what you require. If you have internet problems they show no concern - exams must be completed on particular days & if your internet is poor at the time you take the exam they don't care. Often they take a long time to reply to phone calls or emails and then the information is not always helpful.

It has some benefit but not $7,000 worth!

Buyer Beware!

I'd like to agree wholeheartedly with 'kded' below. WealthWithin were hopeless, I wish I hadn't got sucked in by their slick website - their student support is terrible.
I had a so called 'coach' who was useless - I emailed him to say I couldn't understand a tax formula & therefore couldn't even begin to answer a question. His response was that nobody else had had trouble with this question (ie I must be an idiot?) and that he'd help me once I'd answered the question & showed my calculations. This is their standard, cut & paste ansewer to all enquiries it seems. I guess you're supposed to bash your head against a brick wall for a few hours before daring to ask for help.
I suspected at this point that I'd stepped into the twilight zone of trading courses and withdrew asap. I got all my money back thank goodness.
The webinars are outdated, repetitive, boring & not very useful. The videos I bought before I started the course were so old they were an embarassment.
I found them overall to be condescending, and very very 'superior' in their attitude.
Not a pleasant experience, given what they charge.

Plenty of one-posters hey! Does anyone have a book on how to read between the lines?

 

[prawn_86]

I have just removed some spam posts. Anyone wanting to advertise can contact the forum owner directly

 

[tech/a]

And today.

Oh My!

 

[Sir Osisofliver]

Oh My!

<.< >.>

No comment.


Lets just say the window closed a short time ago.


Cheers

Sir O

 

[skyQuake]

<.< >.>

No comment.


Lets just say the window closed a short time ago.


Cheers

Sir O

Thanks for the heads up, pretty hard finding shorts in this market