Tipping competition/buying indicators

[Boggo]

As far as indicators are concerned, which came first, the chicken or the egg ??

Indicators show you where a stock is in relation to where it has been in a previous period in time.
Is it over sold, over bought or in a position that it has been in before with the possibility that it may do the same as it did the last time.

Below is a pic of the indicators that are the foundation of my Metastock daily scan.
The chart is AMP, I got a heads up yesterday and another today and may get a few more if it behaves.

Should I just ignore those alerts because they are generated by indicators ?


AMP Daily

 

[beaul]

I am confused by the comments by Trembling Hand and Tech A who are respected members of this forum.

Take 10stocks with exactly the same chart as the winning chart but 2 days before it appears to take off
What you'll find is perhsp a couple will end up home runs with charts that look easy to pick and others will just look crap.

If I am to accept their opinion, wouldn't that also mean that ALL technical indicators are crap and that ALL the books on Technical trading are also crap.

I must admit my friend who has made $3.5 million out of trading (I see him once a week) does NOT believe in Technical Indicators.(he says it's all random)

 

[Trembling Hand]

I must admit my friend who has made $3.5 million out of trading (I see him once a week) does NOT believe in Technical Indicators.(he says it's all random)

What years did he make his 3.5 mill? let me guess, been at it for years, 2002 comes along his already got 3-10 years experience and survived with a decent bank roll still intact then makes 3.5 mil in the following 02- 07 bull market. Roughly correct?

Will he repeat it in the next period.

 

[beaul]

Yes T/H you are correct.
He did show me his earnings (from Shares) for 2009.
Using $100,000 in capital he made a profit of $185.000.

Lately, since Jan 2010 he has lost $25,000, and now he has pulled out altogether.
He does NOT believe in Technicals.
He trades in exploration and penny stocks, sometimes banks.
He trades daily and does not use stop losses.
He has been trading for 10 years.

 

[Trembling Hand]

Yes T/H you are correct.

Hahaha.

That is how it goes. Three things,

1. Very underestimated, the size of your starting capital.
2. Surviving long enough to know what you do well and how to reapply it consistently without being taken out of the game, see point 1
3. The market conditions. Every dog has his day. A bull market is the making of many dogs. Good news is there is always a bull market somewhere. Even if its a being bullish on a bear market. Which takes you back to point 2. know what makes money and when.

TA works and then again it doesn't. As is said around here from time to time, everything works and nothing works.

But the fundamentals of the game never change. You make money by taking care of the down side while exposing yourself to the maximum upside. In effect its no different to any other biz,

Sum of wins > sum of losses + expenses = success.

TA is very good at that when you drop the idea that its predictive and you use it to focus on a framework to mange a trade, risk & reward.

It doesn't predict anything.

 

[skyQuake]

Yes T/H you are correct.
He did show me his earnings (from Shares) for 2009.
Using $100,000 in capital he made a profit of $185.000.

Lately, since Jan 2010 he has lost $25,000, and now he has pulled out altogether.
He does NOT believe in Technicals.
He trades in exploration and penny stocks, sometimes banks.
He trades daily and does not use stop losses.
He has been trading for 10 years.

Did you question him why he used only 100k in capital? Why not $3.5 mil to make $6.5m?
And why did he get out of the game after losing only 25k? (0.7% of total bankroll)
He may be a very conservative trader and/or has lived and learnt enough about money management.

 

[tech/a]

It doesn't predict anything.

But our friend can clearly see that in those trades he's seen it HAS predicted the outcome.

We know he's wrong.

I would argue that ANY analysis fundamental/technical/hot tip you name it is ONLY anticipatory.
At the point at which the analysis is made you have anticipation.
You place or close your trade in anticipation of the conclusion YOUR analysis provides you.

Nothing more nothing less.See Boggo's charts.
Your anticipation of/from your analysis will be either shown as correct or incorrect.

I would also argue that your friend will also report that his $3.5mill came from only 20% or less of his trades.In other words he had some spectacular wins rather than many many good winners.

 

[lukeaye]

Yes T/H you are correct.
He did show me his earnings (from Shares) for 2009.
Using $100,000 in capital he made a profit of $185.000.

Lately, since Jan 2010 he has lost $25,000, and now he has pulled out altogether.
He does NOT believe in Technicals.
He trades in exploration and penny stocks, sometimes banks.
He trades daily and does not use stop losses.
He has been trading for 10 years.

Lol at that.

What might be a good excersice for you, as i did when i used to think there was a secret winning forumla to be found in indicators, was to trade forex on a 1 min chart using moving average crosses as an indicator. It is widely used by a lot of "teachers" and "educators" of the markets to show how to make money. Looks great for teaching newbies because on the charts (which are historical) it shows great trading set-ups, get a demo account and learn the reality. The lag of these indicators kill you. Try it with BB?

Im not saying its not possible, but im yet to find a sucessful application for BB as a predictive tool. I don't know if others have done it, but i can't. And skyquake is right, 9 is not a conclusive sample. If you picked 9 trades from march lows, you would think your system was Robust. But take 9000 trades over the last 5 years and see how your strategy fares?

 

[beaul]

Did you question him why he used only 100k in capital? Why not $3.5 mil to make $6.5m?
And why did he get out of the game after losing only 25k? (0.7% of total bankroll)
He may be a very conservative trader and/or has lived and learnt enough about money management.

I have known him for a while and known he was a successfull trader (not an investor) when I decided that trading from a boat while cruising was practical, I went an saw him for advise.

He is 63 years old and not in good health (stress?)
As i said, he has all the toys, including a rolls royce and he said the other day that, if ,he is not getting fun out of it, why do it, he doesn't need any more money.
He advised me NOT to trade at the moment, its too hard.

I have watched him pick trades, he uses basic information probably fundamentals (no technicals in use).
It takes him 30 sec to decide whether a stock is worth a punt or not.
He doesn't day trade.
He says he uses stop losses but I have noticed a couple of times he ignores them.
However he does generally get out quick if a stock turns and he does let his profits run.

He likes speckies, he says they are more fun.
When I asked him whether he always traded spec's or was that a recent thing, he said he has always traded spec's particularly exploratory mining stocks.
He is very open with me, he says anyone can do this.
I am not so sure.

I would also argue that your friend will also report that his $3.5mill came from only 20% or less of his trades.In other words he had some spectacular wins rather than many many good winners.

I am not sure about that. He always shows me his portfolio. A couple of months ago they were 90% green (up) now they are 80% red.
However I think you are right his big wins are big wins.

 

[Wysiwyg]

He trades daily and does not use stop losses.

He says he uses stop losses but I have noticed a couple of times he ignores them.

I think you are unclear about your friends stop loss belief.

 

[beaul]

I think you are unclear about your friends stop loss belief.

He really doesn't take trading all that seroiusly.
We were watching BLY one day and it was going down.
We had his son on Skype and his son said SELL dad. He turned to me and said, yes he is right I will sell BLY.
I went back a week later and he still had the BLY stock. (further down)
I said why didn't you sell BLY. He said I forgot?

 

[nunthewiser]

LOL i have no intelligent comment to add but sure am getting a giggle out of this thread

 

[lukeaye]

What did he do for a job before he retired, to accumulate his wealth?

 

[beaul]

He was laid off as part of a Qld Deparment restructuring. He had a salary of at best $40,000 a year. He got divorced and lived on a boat for 8 years.
I believe he may have got a small amount from an inheratince but he starting trading with very little to begin with.

LOL i have no intelligent comment to add but sure am getting a giggle out of this thread.

I don't understand what there is to giggle about.
I am just explaining it, as I see it and as I have been told.
I have seen his portfolio and his toys.
He also owns four houses.
So what do you find to "giggle" about.

 

[Naked shorts]

Beau have a read of this:
http://traderfeed.blogspot.com/2009/12/lessons-for-developing-traders-what.html

No, it's not chart formations, esoteric numerological series, or any of the multitudes of indicators that have been found to be non-correlated with future market movement.

 

[jonojpsg]

DOn't forget too that you are looking at 31 stocks picked by people who are looking to win a competition with them rather than necessarily putting a trade on, eg I backed OSH because I has been looking at them and knew that a year down the track closer to FID on PNG LNG would mean an improvement in SP, eg my tip was based on FA not TA.

Also agree that the start of 09 would have been a squeeze point for many stocks would it not?

 

[Knoxy]

Don't know why you're busy discussing someone else, all hearsay and is either invading his privacy or he is all pride and likely to overstate. May have even used the A1 trader status to cover a lotto win, who knows? Wouldn't take anything out of it, freaks exist in any market.

I'm a much happier trader since I've realised nothing predicts what will happen next. Indicators can only show history and what is happening now. If I take a trade because the conditions look right then it turns out bad, so what? I was right to enter the trade because current action at the time was favourable, I wasn't predicting a 4th wave correction to a fib level or any other BS.

After entry it just becomes a matter of how I manage the trade. Life becomes far less stressful when your trading isn't all about proiving yourself right then beating yourself up when not. Very 'Trading in the Zone' attitude but Douglas seems to have it right for me.

Indicators I'm happy with are those that show me what's happening now in a way that I understand. That's all they can do.