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Great thread sir O. This is yr post #43. I understand the above. What happens if you use a broker like IB or trade in US shares? CHESS doesn't apply. How does that work?
Tks
Nowadays it's all much more advanced. The paper system has been replaced with CHESS (Clearing House Electronic Subregister System) and transactions are handled electronically, no physical delivery of stock certificates needs to occur, the buyer and seller are represented by merely an order in a computer system.
SRN - Stands for Security Holder Reference Number and is a unique 10 digit number that starts with an I - (yes I know on your statements it looks like a 1 - trust me - it's an I) to designate an ISSUER Sponsored Security. EG I0001428793. If you have issuer sponsored stock it means your stock is not sponsored by a broker and is held on the ISSUER Sponsored Subregister. For each stock you have - you will have a different SRN.
HIN - Stands for Holder Identification Number and indicates your stock is held by a broker and is held on the CHESS subregister. Your HIN number will be the same across all stocks that you hold with that broker.
When a Transaction occurs CHESS will transmit the data to the registry - who will then issue you with a HOLDING STATEMENT - which merely indicates your holding in a company.
Sir O
Might be good not to limit yourself to such a conclusion just yet.Great post.
Further discussion on FA and TA would be great to read. The way I see it is that as long as the information is correct and you believe the accountant telling the story FA is the way to go.
Great post.
TA seems like watching the baccarat players at the casino using their scorecard to follow the run or betting against it. You will have good days and bad days but the only people making money consistently will be your broker. Just like the casino taking 5% or just betting against you.
I realise I am very much a newbie to all of this but at the moment the balance as always seems to be somewhere in the middle. You need to be able to understand the FA and follow the TA to make money or stop you from losing to much.
Technical analysis and systems to exploit the results of that analysis with consistent results takes years to accomplish
The ultimate aim of Technical Analysis is to accurately predict the movement of a share price based solely upon the price and volume data that has already happened.
If someone finds a consistent and predictable way to use analysis (either technical or fundamental) the moment that the market becomes widely aware of this methodology, system or indicator, it will be incorporated by the market and the advantage will disappear.
In all likelihood in my opinion since we are dealing with complex chaotic system analysis, no one will ever find a methodology or indicator that will get it right every time.
not because I want to discourage you from using technical analysis but because I want to express how difficult it is to achieve a consistent and profitable system
I don't believe in EMH either - but I'm not quite ready to label the work of Nobel Prize winning Academics as "a load of rubbish" and felt that the newbs should know about it.
As for the pace of learning, my experience tells me that MOST people find this sort of stuff daunting and confusing - maybe you're just smarter than the average bear.
It's a blunt and arrogant statement coming from a wannabe trader, but I don't consider it any more so than an economist stating that the markets are perfectly efficient. Anyone who suggests that cannot possibly be familiar with the market, and the logic is just absurd. Even intelligent people can be foolish, so I don't have any trouble challenging the opinion of someone who would be held in much higher regard than myself.
Sure, but I think it's more about frame of mind than the "knowledge". It's easy to learn, but it's hard to change how one thinks. I believe trading and similar activities are suited to a certain thought-process that is usually only gained with experience. As for me, I might be being defensive since I've had top become a profitable trader within a month or two, and I'd like to believe I have and that it won't actually take six months or a few years.
Risk Management Techniques and Optimisation. (Part 1)
I'm going to try and keep this pretty simplistic - This IS a newbie thread after all.
Ok so Bank secret number 2 told you one of the ways in which banks make money from you. By using the security value of your assets and lending against those assets (and keeping a small reserve).
If you look at the example I gave you above where you go to the bank with $1M property for a $100,000 loan. They would then on-lend about $812,000 (even though the maximum capacity for them to on-lend is....$900,000). They reserve the remaining security.
Yup with you so farHi Sir O, You should be knighted for your contribution to newbees like me.
Then we could call you Sir Sir O
It is going back a few pages but i think i have lost the plot.
Customer A provides $1 million security to borrow $100,000
Whoa stop there...which bank lends out $812,000 with no security?Lets say Customer B and C borrow $406,000 each with no security. (the $812,000)
If Customer B and C default the security Customer A provided will not help the bank???? Or does that mean if the liquidator takes over Customer A will loose the full $1 million security?
Cheers,
Basilica
Yup with you so far
Whoa stop there...which bank lends out $812,000 with no security?Ok aside from American Banks to unemployed people to buy houses and inflate the propery market...causing economic downturns, credit crisis and toxic debt? Ahem - anyhow there are very few banks that will lend money out unsecured, if they do lend it unsecured it's generally it's done via credit cards where they get extremely high interest rates.
Banks also have more than 3 customers, so it's only when a AGGREGATE level of customers default on their loans that banks get into trouble. They have this slush fund that they use to cover shortfalls in the interum.
Hope that ends your confusion.
Cheers
Sir O
Yes that does help. So the bank can only ever use the million security for the 100k loan. Would a liquidator have access to the full million in a wind up of the company?
Cheers
The efficient-market hypothesis states that it is impossible to consistently outperform the market by using any information that the market already knows, except through luck. Information or news in the EMH is defined as anything that may affect prices that is unknowable in the present and thus appears randomly in the future.
You've only been trading for two months? Um okay well I don't want to sound patronising but I don't think a couple of months counts as "Consistant" yet. I've been investing and trading for a while now...and I'm still learning - I don't think I'll ever be done.
share their thoughts as to what was the reason why they decided to enter the trade and then why they exited
Sir Osisofliver:
Efficiency is subjective anyway. It can be measured, but as always it's a matter of perspective.
An academic might label a market as quite efficient, while a shorterm trader might see as inefficient. The participants obviously make the market, but they are also what makes a market more efficient. I think how efficient a market is viewed will often depend on the timeframe of the participant. Shorterm traders will probably view it as far more inefficient than investors or academics.
When someone says they don't want to sound xxxx, it means they're about to sound just that:.
I must admit I don't spend a lot of time reading Annual Reports. It also depends on whether I am investing long-term, or looking at a trading position as to whether I will bother looking at a stock in that level of detail. Going through annual reports is time consuming and boring. I'd reserve that for looking at a stock I'd intend to hold for 5+ years.SirO,
When flicking throught the annual report looking at FA which section do you always look at first? I realise that possibly you study many things before coming to a conclusion but I am just curious as to which number interests you the most?
The reason that I ask is that cash may decrease to pay a dividend so the dividend is not always the best indicator. They may have also increased borrowings to pay dividend.
Cheers.
Chapter 2 - How to manage your bank manager... secrets from the inside.
This is gonna sound a little like bank bashing - and there is a reason for that. Simply put...when you go and see your bank manager does he have YOUR best interest at the front of his mind or THE BANKS' best interest? We know the answer to that one it's the Banks best interest - otherwise your bank manager is out of a job. Yet the bank manager as an employee of the bank will do his or her best to appear to be your best friend and trusted banking professional who saves you money.
So when your bank manager appears all friendly and uses sales techniques against you - just remember - he or she works for the bank - not for you.
Ok so what are the sorts of things that they do to ensure that they work in the banks best interests?
Bank Secret number 1.
Ok this is something that EVERY bank will do and by doing this will save you THOUSANDS. When you get a mortgage, they will ask how frequently you want to make payments. If you say monthly...
they'll say 'No Problems" and continue.
If you say Fortnightly.... they'll say "no problems" and continue.
If you decide to pay fortnightly (AND YOU SHOULD), when you get your mortgage documents, if you are paying attention and haven't gone glassy-eyed from reading all the legalese, you will see that they will amortise your fortnightly payments across the year so that you pay exactly the same as someone paying monthly. You pay exactly the same over the course of a year.
Now ask yourself why would they do that? Go ahead - ask your bank manager (and remember that he'll use sales techniques against you) you probably won't get the REAL answer.... Here it is.
There is 52 weeks a year, 26 fortnights a year...but only 12 months. So by choosing to pay fortnightly (AND NOT AMORTISING THE PAYMENTS) you are in effect making 13 months of payments in a year. You are making EXTRA payments (even though the difference to you is about the cost of a cup of coffee every fortnight).
By not amortising the fortnightly payments, over the course of a 30 year mortgage, you will make an additional 19 payments earlier than you would normally have done so, and save yourself...72 mortgage payments.
Wait 72??? How is that possible I hear you cry? Because when you start paying your mortgage - for the first decade or so when you make a payment, the largest portion of that payment is paying off the interest - not the principle. Extra payments reduce both the principle and interest portion of the loan - and hence you pay it off that much faster. Don't believe me? Go ahead ask your bank manager. I haven't found one yet who'll give me a straight answer - but they will all blush when they realize they have been caught out.
Sir O
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