Picking Stocks versus timing the Market

[tech/a]

Two shares that spring to mind are TLS and CBA.
Both give a reasonable dividend, but for long term investors, the outcomes are quite different.

So why would you keep TLS
Twice as much CBA would be better.
Why would you not make a call?

 

[sptrawler]

So why would you keep TLS
Twice as much CBA would be better.
Why would you not make a call?

I thought that was the point I was making, I must have missed the target.

 

[tech/a]

Sorry I re packaged the obvious

 

[Darc Knight]

A lot of smart people on this Forum. How hard would it be for ASF members to get our heads together and come up with a "close enough" market position to make it profitable?
I was reading an article which showed in hindsight how cycling from a local share index to a cash/F.I. index at set intervals worked. Then there's our property index to throw into the mix.

Just thinking out loud.

 

[Danny Younes]

One of the best ways to pick stocks is to find stocks that are performing stronger or weaker than the parent index. Stocks that are performing stronger indicate that there is a high probability that they are being supported by professional traders. As the market drops, these stocks don't drop as much.

If you are looking to take a long position in the market, the stocks that are going to perform for you are stocks that are showing strength in the background and the way you can identify strength is by looking at volume, the range of the bar and where the bar closes. Strength in the background is usually referred to as widespread down bars with high to ultra-high volume.

It's not all about picking the top or bottom of a market. If you try to do this, it's like catching a falling knife, you are going to get hurt. Picking stocks is all about following the footsteps of professional traders, where most retail investors trade against them.

 

[luutzu]

One of the best ways to pick stocks is to find stocks that are performing stronger or weaker than the parent index. Stocks that are performing stronger indicate that there is a high probability that they are being supported by professional traders. As the market drops, these stocks don't drop as much.

If you are looking to take a long position in the market, the stocks that are going to perform for you are stocks that are showing strength in the background and the way you can identify strength is by looking at volume, the range of the bar and where the bar closes. Strength in the background is usually referred to as widespread down bars with high to ultra-high volume.

It's not all about picking the top or bottom of a market. If you try to do this, it's like catching a falling knife, you are going to get hurt. Picking stocks is all about following the footsteps of professional traders, where most retail investors trade against them.

You can't really make money following others. You can for a while until the tide turns and the professional all run back, crushing you long before you can get out of the way.

 

[Danny Younes]

You certainly can. Professional traders leave footprints on a price chart and they are very obvious. And these footprints tell us their intentions in the markets.

The majority of retail investors don't know how the markets really work and are continually caught on the wrong side of the trade. That is why reading volume and price action is crucial to be successful in the markets.

A lot of investors use lagging indicators and when these indicators are telling them to buy, you'll usually find that professional traders are selling in the background and the retail investors are left scratching their head wondering what just happened.

 

[luutzu]

You certainly can. Professional traders leave footprints on a price chart and they are very obvious. And these footprints tell us their intentions in the markets.

The majority of retail investors don't know how the markets really work and are continually caught on the wrong side of the trade. That is why reading volume and price action is crucial to be successful in the markets.

A lot of investors use lagging indicators and when these indicators are telling them to buy, you'll usually find that professional traders are selling in the background and the retail investors are left scratching their head wondering what just happened.

The bigger guys with more data and experience, bigger account... I guess they can. For the small fries, it's going to be almost impossible.

There's the market manipulation, the leaving of footings to entrap and mislead etc.

Then there's also the brain power, maths wizardry compounded with computing algorithm that let the smart money front run the trend; predict moves if x, y, z are shown etc. etc.

I guess if enough smarts and money is thrown at it, it's doable.

Just read The Quants... about the geniuses who managed trillions of dollars of hedge funds. The big guys managed some tens of billions... made incredible amount of money hedging this and that... their black boxes and PhDs and computer whizzes rolled in the cash for a decade or two...

Then everything unwind in 2007 and 2008. Losing almost everything.

During the period, those masters of the universe were scratching their heads. Having no clue what's going on, why their black box isn't working as it used to.

I guess the lesson to take away from that is that, yes, a bunch of very smart people will be able to work out a smart machine that will play the market and its traders like a yoyo... then soon enough something unexpected happen that the model either didn't predict, couldn't predict, or put the chances of it happening as 1 in 10,000 years etc....

The author was quoting the smarts money how a 1 in 10,000 year event occurred 3 days in a row in the spring autumn of 2007.

To me, this is too hard and too much work. We're capitalists... take it easy. Let the executives wrestle the politicians and slap the activists around on our behalf

 

[Porper]

You certainly can. Professional traders leave footprints on a price chart and they are very obvious. And these footprints tell us their intentions in the markets.

Would be interested in a chart depicting these "footprints" Danny. Maybe a live chart as well so we can see how it works going forward. Please, not just a link to your paid service.

 

[Danny Younes]

Algos work for a period of time and then they stop working. Why, because the markets do not operate in a vacuum, they are not predictable, they are random.

Market manipulation is very common, it basically happens every single day and the best time to manipulate the markets is around news announcements. Professional traders are there to mislead the retail trader. When there is a positve news announcement, the professional trader will be looking at selling their holdings, but the news will entice the retail trader to buy.

To give an example back in August 2011, gold was on a magnificent rally. Goldman sachs announces that gold will go well beyond $2000 a troy ounce. This creates a level of activity for the retail trader to buy gold. Goldman sachs is reputable, they know what they are talking about.

The price chart shows at the time of the announcement there were widespread up bars with ultra-high volume. The ultra-high volume is not created by the retail investors buying, it's mainly due tio the professional traders selling. After the announcmenet, gold did rise towards $1900, to entice more buyers, then it sold off. Since that day gold has never traded above $1923. Where is it trading today around $1,200 and eve went as low as $1,000. So clearly you can see the news was fabricated to entice retail investors to buy. Professional trader were taking profits.

This continually happens on a daily basis and it's why over 95% of investors are not successful in the markets. Understanding the predators is crucial to your success in the markets.

I have attached a chart so that you can see what I mean

 

[tech/a]

I like Danny
Now I see why Tradeguider!!


On altos artificial intelligence is making huge in roads to the issue of random markets

Im on holidays so talk later!

 

[barney]

Would be interested in a chart depicting these "footprints" Danny.

Ditto from me Danny …. You are obviously well versed in price action and will gain a good audience here if you are prepared to give a little of your knowledge …. Cheers

 

[galumay]

Aghh...technical traders with all the answers! Its like deja vu.Why are they always so dogmatic and certain that they know how the world works?! Its some sort of Dunning-Kroger effect I suspect.

 

[tech/a]

Why?

Because we do!

How do you see any reply dogmatic in this thread
Questions have been asked so to requests for an example each delivered in a respectful, thoughtful and to some Helpful manner.

There is only one antagonist post I see and it starts with “G”

Bach to holiday

 

[barney]

Aghh...technical traders with all the answers! Its like deja vu.Why are they always so dogmatic and certain that they know how the world works?! Its some sort of Dunning-Kroger effect I suspect.

Lol … Geez @galumay … that's a bit harsh isn't it (Assuming you mean Dunning-Kruger?)

Technical analysis which is backed up by fundamental reasoning is as close as we can get to correct "real time" data in my humble opinion …… Both are pretty handy indicators but even more useful when used in tandem …

For me the tech vs fundy scenario is not even an issue … I like it both ways If anyone tells my wife I will be totally peeved!

 

[luutzu]

Lol … Geez @galumay … that's a bit harsh isn't it (Assuming you mean Dunning-Kruger?)

Technical analysis which is backed up by fundamental reasoning is as close as we can get to correct "real time" data in my humble opinion …… Both are pretty handy indicators but even more useful when used in tandem …

For me the tech vs fundy scenario is not even an issue … I like it both ways If anyone tells my wife I will be totally peeved!

You wife probably knew already

 

[Danny Younes]

Aghh...technical traders with all the answers! Its like deja vu.Why are they always so dogmatic and certain that they know how the world works?! Its some sort of Dunning-Kroger effect I suspect.

Everyone is entitled to their own opinions and their own style of trading. My style of analysis has been around for over 100 years and it's the analysis also used by the majority of professional traders because volume and price tells you alot about the sentiment of traders.

There is a reason why exchanges are reluctant to release volume information...

Galumay I wish you every success with your trading

 

[barney]

You wife probably knew already