Newbie Lessons - All your questions answered

[mcgrath111]

Hi All,

Being a relatively young guy (25), I was wondering if you could share a light on one or two things that you've realised have an effect on building wealth.

A key for me is using credit cards. Aside from the annual fee; rewards have paid for trips, and a few gift cards along the way.
If I had of realised this earlier, I would have accumulated far more/ received greater rewards.

The point I'm trying to get at, is there things that you only realised until you were older that you wish you had of known when you were younger?
Any pearls of wisdom or just finance 'hacks' so to speak?

Many thanks,

 

[goponcho]

Is morningstars financial data super inaccurate?? Seems to be sometimes! Thoughts?

 

[jenisa]

"Is morningstars financial data super inaccurate?? Seems to be sometimes!"..this is actually a really good question. Waiting to here the thoughts as well.

 

[tech/a]

Hi All,

Being a relatively young guy (25), I was wondering if you could share a light on one or two things that you've realised have an effect on building wealth.

A key for me is using credit cards. Aside from the annual fee; rewards have paid for trips, and a few gift cards along the way.
If I had of realised this earlier, I would have accumulated far more/ received greater rewards.

The point I'm trying to get at, is there things that you only realised until you were older that you wish you had of known when you were younger?
Any pearls of wisdom or just finance 'hacks' so to speak?

Many thanks,

Id reply but Ive posted many posts with my hints and findings over the years
they are all in the archives somewhere. It takes a lot of time and thought to
most of my posts and to continually keep regurgitating stuff is annoying.

I've made a suggestion to Joe to help us out and supply a valuable resource to all
but so far Joe has other priorities.

Search Tech/A Threads if your interested there is a lot there!

 

[mcgrath111]

Id reply but Ive posted many posts with my hints and findings over the years
they are all in the archives somewhere. It takes a lot of time and thought to
most of my posts and to continually keep regurgitating stuff is annoying.

I've made a suggestion to Joe to help us out and supply a valuable resource to all
but so far Joe has other priorities.

Search Tech/A Threads if your interested there is a lot there!

Thanks Tech/A

Truth be told, I sometimes search through your old posts (I'm a bit of a creep haha).

 

[mick1990]

Hey guys,

Just starting out, been reading up on day trading for a little while. My question is does anyone have a preferred trading platform, I've got a bunch of mates who use commsec and one that swears by Maquarie's platform. I know all the big banks have their own - any advice on if it's makes a difference which one I choose?

 

[Habakkuk]

Hey guys,

Just starting out, been reading up on day trading for a little while. My question is does anyone have a preferred trading platform, I've got a bunch of mates who use commsec and one that swears by Maquarie's platform. I know all the big banks have their own - any advice on if it's makes a difference which one I choose?

The newbie questions are the only ones I feel qualified to answer, especially since nobody else has done so.
As you are just starting out, the choice of platforms is the least of your problems. You're talking about day trading and mates who use Commsec. Are they day trading? Commsec brokerage is the most expensive around. It seems unlikely, but I don't know.

If you mean just standard short-term trading, that might be o.k. Day trading is buying and selling shares within the same day, not holding over night. Either way, Commsec is the last broker I would choose.

You mention platforms and that all the banks have their own. That's true for their standard trading platforms (it's just a form you fill in for your orders) and they would all be a little different. I don't think it makes any difference which one you choose, unless the lowest number of clicks required is vitally important.

But if you are really talking about day trading, the standard (free) platform will be useless. You need to subscribe to the live, dynamic data platform. ANZ have their own one indeed. Westpac, NAB Trade and Commsec all use the same, WebIRESS. They will not look exactly the same, but have the same features. The cost is from $49.95 (ANZ) - $79.00 (Westpac) per month. Commsec charge '2.53 cents per minute' as well as a platform fee of $40.70 per month. You might want to verify all that.
Almost all other, non-bank brokers have better rates. There are many to choose from and none is the 'best'. They are competitive and have different features, so it depends what's important to you.

As a bottom line, here is my advice: trading can result in losses. It's safer to keep your money in a term deposit.

 

[Smalltimeguy]

Question about technical indicators and their recommendations to sell or buy.
I'm looking at au.investing.com as the only good one round (by the looks of things),
can a newbie rely or gain anything from the moving average or technical indicator recommendations?
Currently on the asx 200 the indicators are giving a sell indication...

 

[tech/a]

Very little.

Find all you can on price action
+ Chart reading.
VSA --- Volume Spread Analysis
Is a good start

 

[Boggo]

Question about technical indicators and their recommendations to sell or buy.
I'm looking at au.investing.com as the only good one round (by the looks of things),
can a newbie rely or gain anything from the moving average or technical indicator recommendations?
Currently on the asx 200 the indicators are giving a sell indication...

Indicators are a which came first, the chicken or the egg situation.
You can use indicators to narrow the field of candidates, or to build a watchlist of potential buy candidates.

Identifying a pattern with assistance from indicators or an indicator may work provided you know what you are looking for.
I don't use an index etc filter as I find that is too generic and inhibits potential candidates, instead I use a MACD that eliminates a significant number of stocks and what remain have to then demonstrate a potential to breakout or repeat a past pattern.
A quick eyeball of a scan list that pass the parameters and you may see one or two for the watchlist.

I had a look at that site in your post, looks good but you try making money from that and you will be disappointed, much more precision is required than just a "rising tide rises all boats" approach.

My opinion, learn to look for patterns, all aspects of it including the important volume at tech/a mentioned above although I find there are occasionally times when that aspect is irrelevant.
(Don't be afraid to ask him for help in that area as long as you are displaying true effort in learning)

Below is an example of one that sat in a watchlist of mine for weeks (5) but every week was a build up in the right direction (the chart is weekly).

(click to expand, same stock QAN, two charts)

 

[XavierRI]

Hi,

I'm just learning to paper trade at the moment.

Does anyone know where I can find weekly/monthly/quarterly /6 months performance graph for the ASX sectors (like the graph below)

 

[Bob111]

Sir O, What a great piece. I thoroughly enjoyed reading through the 48 pages of info.

I especially liked the section on the economic clock. I may have missed it somewhere but it looks like dividend yields as a confirming factor where never delved into in any depth? I thought I would create some graphs on the different sectors dividend yields compared to the S&P 50 dividend yield but I couldn't find which companies where in the S&P 50 during the time frame of 03 - 07 so I just used the current 50 companies of which 42 were trading during the period. I figure this shouldn't screw up the results too badly?

I've attached the graphs below (hopefully). Is what we are looking for, the breakout of the utilities graph above the S&P 50 dividend yield line?

 

[Bob111]

and last one....

 

[traderace_mkt]

I think you can learn as much about understanding and analysing a business from following the share specific threads here on ASF, there are some very knowledgable and skilled people that share their analysis and research here and I have always found that if you ask questions to further your understanding, they are more than happy to help.

Yes I have seen that too. People on ASF are very helpful with their analyses and suggestions. There's always something new that I get to learn from ASF members.

 

[BearCave]

Question about LICs/EFTs. I've been reading about these and apparently there are some management fees involved. How are those fees charged to an investor?

 

[MarketMatters]

Question about LICs/EFTs. I've been reading about these and apparently there are some management fees involved. How are those fees charged to an investor?

1. Firstly you are charged on brokerage to purchase.
2. An annual management fee may be charged which is generally built into the unit price. You will see this as a % ie. 0.5% would be equal to $50 on $10,000 investment each year.
3. Notably each investment can vary in costs with passive players averaging as low as 0.1% and up to 1%+ for active managers.
4. You will likely find a buy/sell spread meaning there is a difference between the buy price and the sell price.

 

[john m]

Ok it's time for a lesson.

Turning an Idea into Profit

Many posters on this forum will talk about a system or strategy. I want to lead those interested down the process of how you go from an idea...into actually making money from that idea. This will be a simple process or idea I'm going to take you down. This won't be new territory for many traders, but what I'm trying to show the newbs is the process. This means it will require some input from the newbs though...I'm not just going to hand over a system, I expect others to think their way through the process. You won't value what you learn if you are simply given it. So unlike most of my lessons where I just vomit up information...with this lesson I want commentary, questions, flames na-uhs and lively discussion and will be pausing every so often to seek it.

Disclaimer: This is NOT ADVICE. DYOR stands for DO YOUR OWN RESEARCH. You heard me. Don't make me break out the legalese. This is also a system I have used but currently don't have the time/inclination to operate. So I'm not ramping anything. I will not be speaking about any specific stocks, only the characteristics that a system will look for. If I mention a stock it will be for example purposes only and most likely involve past price action. Feel free amongst yourselves in the thread to comment, but any questions along the lines of what do you think of XYZ stock in the strategy should be ignored. Anybody feeling the need to respond to that kind of question please 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?

So what is a system as opposed to a strategy?

In my definition a strategy is the indictors, both technical or fundamental, that are used to identify trading targets to achieve a high probability of a successful outcome. It's easily able to be tested on a large amount of data and across multiple market conditions. Ideally it also allows the market to be scanned for opportunities.

Ok so what's a System? A system takes a strategy to the next level and through a process of preselection increases the probability associated prior to the application of indicators. To me the system is the idea, what you are going to use to preselect those high priority targets.

So lets start with an idea...

Have you ever noticed that something will tank down over a relatively long period of time and then when it seems it cannot go any further down, it explodes out of the blocks? It moves very rapidly, like a rubber band being pulled to full extension and then let go. What is happening? Why the very quick movement? That stock is a dog isn't it? Look how far down it's come? What the?

Link

If you have a look at the above link this might explain what is going on with the price action. It's from the ASIC website and is a list of declared short positions on stocks. Here in Australia you can short a stock using a synthetic instrument via an equity CFD or in limited circumstances short the stock itself if you have a friendly full service broker. The amount of shorts as a percentage of issued capital is an interesting idea, because what happens when the share price starts to rise? All those people who are short in the stock need to close out their positions (which means purchasing the stock at market price). This can cause a rapid movement of the share price as the short positions are unwound. It's like the reverse of a stock overhang. It's a defined quantity of stock that needs to be purchased. In-built demand! With a number I can measure!!

Ok so now we have the germination of an idea, we've got a potential theory to explain some market action and we've found some data.

The next step...

...is to kick the sh!te out of the idea. We're stress testing the thought process.

1) What are the Pro's and what are the Con's?
2) Rank the Pro's and Con's in order of importance


I'll be over there with a scotch and dry while you guys and girls talk it over.

Cheers

Sir O

Ok it's time for a lesson.

Turning an Idea into Profit

Many posters on this forum will talk about a system or strategy. I want to lead those interested down the process of how you go from an idea...into actually making money from that idea. This will be a simple process or idea I'm going to take you down. This won't be new territory for many traders, but what I'm trying to show the newbs is the process. This means it will require some input from the newbs though...I'm not just going to hand over a system, I expect others to think their way through the process. You won't value what you learn if you are simply given it. So unlike most of my lessons where I just vomit up information...with this lesson I want commentary, questions, flames na-uhs and lively discussion and will be pausing every so often to seek it.

Disclaimer: This is NOT ADVICE. DYOR stands for DO YOUR OWN RESEARCH. You heard me. Don't make me break out the legalese. This is also a system I have used but currently don't have the time/inclination to operate. So I'm not ramping anything. I will not be speaking about any specific stocks, only the characteristics that a system will look for. If I mention a stock it will be for example purposes only and most likely involve past price action. Feel free amongst yourselves in the thread to comment, but any questions along the lines of what do you think of XYZ stock in the strategy should be ignored. Anybody feeling the need to respond to that kind of question please 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?

So what is a system as opposed to a strategy?

In my definition a strategy is the indictors, both technical or fundamental, that are used to identify trading targets to achieve a high probability of a successful outcome. It's easily able to be tested on a large amount of data and across multiple market conditions. Ideally it also allows the market to be scanned for opportunities.

Ok so what's a System? A system takes a strategy to the next level and through a process of preselection increases the probability associated prior to the application of indicators. To me the system is the idea, what you are going to use to preselect those high priority targets.

So lets start with an idea...

Have you ever noticed that something will tank down over a relatively long period of time and then when it seems it cannot go any further down, it explodes out of the blocks? It moves very rapidly, like a rubber band being pulled to full extension and then let go. What is happening? Why the very quick movement? That stock is a dog isn't it? Look how far down it's come? What the?

Link

If you have a look at the above link this might explain what is going on with the price action. It's from the ASIC website and is a list of declared short positions on stocks. Here in Australia you can short a stock using a synthetic instrument via an equity CFD or in limited circumstances short the stock itself if you have a friendly full service broker. The amount of shorts as a percentage of issued capital is an interesting idea, because what happens when the share price starts to rise? All those people who are short in the stock need to close out their positions (which means purchasing the stock at market price). This can cause a rapid movement of the share price as the short positions are unwound. It's like the reverse of a stock overhang. It's a defined quantity of stock that needs to be purchased. In-built demand! With a number I can measure!!

Ok so now we have the germination of an idea, we've got a potential theory to explain some market action and we've found some data.

The next step...

...is to kick the sh!te out of the idea. We're stress testing the thought process.

1) What are the Pro's and what are the Con's?
2) Rank the Pro's and Con's in order of importance


I'll be over there with a scotch and dry while you guys and girls talk it over.

Cheers

Sir O

ok ive been watching a share since I have owned it for several yrs. Its obviously been shorted repeatedly as the share creeps down to around .8$ than shoots up to 1.10. this has happened several times. So I decided next time it shot up to 1.10 I was going to sell half my shares wait for the lull than buy back in. So I sold for 1.12.$ it is currently sitting 1.25$. doh. How should I have done this ? I thought I was on a winner so I never thought to position size mainly due to not reading about until recently. Its not all bad I originally bought the share for around .8$ thanks john

 

[Zaxon]

ok ive been watching a share since I have owned it for several yrs. So I sold for 1.12.$ it is currently sitting 1.25$. doh. How should I have done this ?

That depends on what "type" of investor you are. As you've held it for several years, let's classify you as not a trader. If you're a value investor, then you behavior seems possible (albeit you gave no fundamental reasons for this). If you're a momentum investor, then no, you should keep holding while a share goes up. If you believe in reversion to the mean, then you've done the right thing.

You need to tell us more about your investment thesis: what drives your decision making in shares.

 

[john m]

thanks for the reply I would say im a value investor but now I have retired I wouldnt mind learning more about trading. As for what drives my decision making I would say greed. From what i can make out so far its a hell of a lot like gambling.

 

[tech/a]

Gambling
Let’s take a horse race

Once you place a bet you can’t
Change it
You can’t cancel it
You can’t withdraw your bet half way through the race because you don’t like what you see.
You can’t increase your bet half way through the race because you like what you see.

If your trading you can do all of the above with the click of a mouse.