Australian (ASX) Stock Market Forum

Your Biggest Investment Blunder!! & lessons learned!

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I started trading the SPI contract in 1988 just after the '87 crash when it was $100 a tick.Back then the volatility used to be very high and it was not uncommon to have 30-50 point gap openings for or against you.Thats 5 grand or so a contract either way.I had DOS PC that I wrote my own trading software for.The system tried to identify trends,but it was way to complex and curve fit to blazes.(it used low pass, and band pass filter techniques)

After about six months I got so worn out mentally that I used to dread hearing on the radio in the morning what the Dow did overnight.I was still in my twenties back then and trading with a mate.He also just could'nt hack the pressure !
Needless to say, I didn't make a cracker trading the SPI back then.

Lessons learnt,
Only trade with your own money ( were still good mates)
Keep systems simple !!!
Dont give up, it aint that hard to make money, but it took me a bloody long time to figure out how to do it. ( years)

HM
 
I am proud to have been a victim of the dot.com boondoggle. I bought into the infamous BT TIME fund about 2 months before the crash. I felt pretty pleased with myself for a few weeks as I watched my wealth grow and my confidence as an investor blossomed. Then reality struck. I eventually sold out at about half my purchase price, and they still kept dropping. I lost about $4k. But in the end it was money well spent in one way - it was a great education. Now I am a lot wiser and more humble.
 
Reading through today's posts, the common theme seems to be concern as to when to take profits. I share this.

Do any of you TA experts out there have some basic guidelines which could help in picking when a stock has started on a downtrend, as opposed to being in a very temporary "dip". Apologies if my terminology is less than it should be.

I'm sure many of us who are basically fundamental investors would appreciate some help here.

At the same time, looking at some stocks which I sold around a year ago because they were definitely trending down at the time, I see they have now recovered and are well past their previous high. So, as someone commented I think yesterday, if your fundamental reasons for buying the company in the first place still apply, then there is no reason to sell. Realist would endorse this, I imagine.

Julia
 
Sorry, still have to totally disagree with you.
Stop_the_clock said:
Who mislead the market with a poorly scripted announcement?
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Who listened to the announcement rather than paying attention to what the stock PRICE was doing?
Stop_the_clock said:
Who ramped a share?
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Who took a tip from a stranger with a hidden agenda?
Stop_the_clock said:
Which bank had technical problems and wouldn't accept a trade?
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Black swan events will happen. Trading plans need to be robust enough to handle them.
Stop_the_clock said:
What suburbs had a power outages?
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Who doesn't have a UPS?
Stop_the_clock said:
Which bank left you on hold over the phone?
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Ditto re black swan events.
Stop_the_clock said:
etc etc
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We are responsible for EVERYTHING that happens to our trading capital. To attempt to blame others for our omissions or errors guarantees failure at this game. No one else makes us put on a trade. No one else makes us close a trade.
 
Julia said:
Reading through today's posts, the common theme seems to be concern as to when to take profits.

At the same time, looking at some stocks which I sold around a year ago because they were definitely trending down at the time, I see they have now recovered and are well past their previous high. So, as someone commented I think yesterday, if your fundamental reasons for buying the company in the first place still apply, then there is no reason to sell. Realist would endorse this, I imagine.

Julia
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A very good point. I never sell just because a price falls. I don't use stop losses. If a price falls I check to see if I still have faith in the company If I have I am more likely to buy than sell, especially if there is a reason for the fall which I consider temporary.
 
Julia said:
Reading through today's posts, the common theme seems to be concern as to when to take profits. I share this.

Do any of you TA experts out there have some basic guidelines which could help in picking when a stock has started on a downtrend, as opposed to being in a very temporary "dip". Apologies if my terminology is less than it should be.

I'm sure many of us who are basically fundamental investors would appreciate some help here.

At the same time, looking at some stocks which I sold around a year ago because they were definitely trending down at the time, I see they have now recovered and are well past their previous high. So, as someone commented I think yesterday, if your fundamental reasons for buying the company in the first place still apply, then there is no reason to sell. Realist would endorse this, I imagine.

Julia
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I flicked through pages of one book, I think it was written by 2 fellows and the title was
–You only make profit when you sell- or something close.

Couple of methods I think help when undecided, are:

Part selling when not sure is one method.

Another part selling even better, is to sell enough shares to remove your money and leave profit in the market.

Both, substantially reduce profit if you calculate –maximum possible profit-, but –maximum possible profit- is utopia and not possible to make every time, so why agonise.
 
Happy said:
–You only make profit when you sell- or something close..
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I don't consider you have made a profit until you have bought something of better value than the item sold.
 
Freeballinginawetsuit said:
What a silly comment.
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Think about it again. When you sell all you have is money which you will probably spend. It costs something to buy and sell so that part is lost. If you haven't bought something better than you sold then you are behind. Always works for me.well mostly always. But then again I often do make silly comments so you may be right.
 
battiwallah said:
I am proud to have been a victim of the dot.com boondoggle. I bought into the infamous BT TIME fund about 2 months before the crash. I felt pretty pleased with myself for a few weeks as I watched my wealth grow and my confidence as an investor blossomed. Then reality struck. I eventually sold out at about half my purchase price, and they still kept dropping. I lost about $4k. But in the end it was money well spent in one way - it was a great education. Now I am a lot wiser and more humble.
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Butti !! My man - I was there with you. I switched into BT time right near the top - Ended up about 6k down if memory serves. Taught me that if i was going to lose my money - I'd be bloody well better doing it MY OWN WAY rather than some anonymous broker twit who couldn't care less about my cash. :banghead:
So... I proceeded to do just that for the next couple of years!! :(
(see my posts at start re MRL and TMS)
 
As regards to selling; what i do now is, i review the companies i hold, and i say, would i BUY them if i didnt already hold them? If the answer is yes i hold, if no then i sell.

Jim Sinclair reckons if you think the price of gold has topped, sell 1/3rd and then u have capital to buy again when it drops and still 2/3rds in so exposed to further upside, kind of hedging your bets i guess.

With regards to Stop versus MichaelD - im with Michael
 
nioka said:
Think about it again. When you sell all you have is money which you will probably spend. It costs something to buy and sell so that part is lost. If you haven't bought something better than you sold then you are behind. Always works for me.well mostly always. But then again I often do make silly comments so you may be right.
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Sure I spend the money, I certainly wouldn't give up an unrealistic profit target. I certainly would like to take advantage of the liquidity or I may as well be a slow moving Dinasour "Institution" rather than taking advantage of exiting/entering before them (who wouldn't).

The whole reason I trade is to negative gear the profits (and yes you only pay tax on total trades, once a year despite some dribble on the forum). I'm the first to admit I'm into property and the first to admit that I'm not into tax. I would like to realize some security for my own and extended family in homes for the kids. The sharemarket enables some unrealistic opportunities for this that bear no similarity to the hard earned cash from the real business world.

If I owned a share that had doubled in value of course I would take the profit, I'd then put that money into a commercial entity that cost heaps and wiped the profits. I would repeat the process over and over. Once completed I would lend against the asset and start all over again. Along the way their may be costs associated with the trading setup like technology peripherals, a new car to supervise the buildings, some trips to research/buy some materials
etc. Anything that legitamitly can rip off the tax man and save your disposable income!.

It may be possable for the sharemarket to pay for usual out of pocket expenses that are usually funded by ones taxable income. It may be possable to own some form of property (commercial or domestic) that has been funded by and associated with your trading setup. It certainly is possable to put actual gains made on educated investments into real life directions you directly have control over.

Then again you may hold your shares, get your dividends pay your CGT. You may also believe as a shareholder you have a say in your Companies running/management and global material prices. You may even stay in for the long haul with the institutions and ride the dips. Hopefully the world has no wars, the economy holds up,....... and and and!. You could use all your fundamental research and technical analysis to the nth degree, but your still punting on the long term unknowns.

Or you could just take the unrealistic profits when they come along, have tight risk measures on your losers and put your wins into some form you do control.

Because really mate, the best you can do in the sharemarket is have a sensible punt on the near term, the long term is way out of our grasp.

Anyway I hope your shares are doing well for you and your long holds on substatial gains hold up and keep running.

Cheers.
 
JULIA

Do any of you TA experts out there have some basic guidelines which could help in picking when a stock has started on a downtrend, as opposed to being in a very temporary "dip". Apologies if my terminology is less than it should be.

I'm sure many of us who are basically fundamental investors would appreciate some help here.
Click to expand...

One of the biggest areas where Fundamental traders could benifit.So in my veiw a very good question Julia. I know your a long term holder so I will base the answer on long term timeframes.

(1) Stocks and Markets dont like being out of equilibrium.They like to revert back to the mean, so from a chart perspective any prolonged trading away from the natural angle of the trend of a stock will see it eventually come back to its equilibrium. Each stock is different but you'll find most trend at 35-45 degrees.

(2) Volitility is one of the first indicators.Nice orderly trading turns to wild swings in percieved value. The ranges in price each day are longer than when in a trend.

(3) The majority of trends which turn to longterm bearish are those which
(a) Have fundamental news which effects longterm valuation of the company.
(b) Have a period of distribution at the head of a trend before new buyers disappear and selers take hold.

A 150-200 day EMA (Exponential moving average) can be a great exit indicator for these longterm stocks.

ATR (Average True Range) is another,ATR opperates at a set deviation to the mean.2,3,6 etc.Most traders have found that stops set at 5 to 7*ATR
being the best.Swings to this area are violent enough to trigger the sell,common then for the stock to either trade sideways and do nothing OR fall.

(4) One of the best Tools in the box would be a basic understanding of Elliot Wave Theory. Would take a month to learn. Having a grasp of Corrective moves and in particular where a trend is at Wave 1,3, or 5. and the l,ikely length of these waves really gives you some nice targets and areas to watch,coupled with other analysis,will serve you well.
Helps you read corrective moves and gives you confidence when a stock
corrects. Elliot is one of those "Predictive" types of Analysis using current price action. Over the years it has to me proven un canny accuracy.

(5) Lower highs and Lower lows. Always form in down moves. The longer they take to form the larger the down move will generally be.

Julia if you wish some charts with examples on these techniques we could move the discussion down to "Improving Chart Analysis " or start a new thread "Recognising tops"

By the way nothing is an exact science all we can do is place ourselves in the position to take advantage of our analysis if it proves to be correct.
The quicker you act on the analysis when its Right (and in particular) Wrong the more benificial it is to you.

Shorter term is another sport all together.

Hope this helps.
 
tech/a said:
C

There are many ways to calculate a Moving average.
Simple moving average --SMA is simply the addition of (I'll use closes) closes devided by number of periods being averaged.
Exponential Moving Average places more weight on recient data and less on older data.
Weighted M/A is similar in that it weights todays price much more heavily that say that of 10 days ago.


I have the maths if you want it but this maybe of help.
http://www.investopedia.com/articles/technical/052201.asp
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Many thanks T/A.
 
Good question Julia.
Thanks for the answer Tech, .though I will need to research what you are talking about,

I particularly like your suggestion as follows: (it relates to my mathematic knowledge).

ATR (Average True Range) is another,ATR opperates at a set deviation to the mean.2,3,6 etc.Most traders have found that stops set at 5 to 7*ATR
being the best.Swings to this area are violent enough to trigger the sell,common then for the stock to either trade sideways and do nothing OR fall.

Tech, How do you work out the mean?
 
tech/a said:
(We get most developements cross our office desk for civil Works-thats How I find out years before construction).

There is a plus side.
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Interesting point TechA - why the big deal about insider share trading then?
 
Prospector.

Two vastly different yet similar things.

I guess I'm seeing opportunity which I can quite legally talk to you or anyone else about.
If however my company was listed and I knew that we were about to win the Adelaide Darwin Rail link and I told you or anyone else that that was about to happen and you profited from that--then thats insider trading. (one example of it).
 
Yep, I am sure what you have done is way above board, but I guess I was more querying why insider trading, which is such a nebulous thing anyway, is frowned upon on the one hand, is only occasionally detected, but obviously happens, frequently!
 
tech/a said:
JULIA



One of the biggest areas where Fundamental traders could benifit.So in my veiw a very good question Julia. I know your a long term holder so I will base the answer on long term timeframes.

(1) Stocks and Markets dont like being out of equilibrium.They like to revert back to the mean, so from a chart perspective any prolonged trading away from the natural angle of the trend of a stock will see it eventually come back to its equilibrium. Each stock is different but you'll find most trend at 35-45 degrees.

(2) Volitility is one of the first indicators.Nice orderly trading turns to wild swings in percieved value. The ranges in price each day are longer than when in a trend.

(3) The majority of trends which turn to longterm bearish are those which
(a) Have fundamental news which effects longterm valuation of the company.
(b) Have a period of distribution at the head of a trend before new buyers disappear and selers take hold.

A 150-200 day EMA (Exponential moving average) can be a great exit indicator for these longterm stocks.

ATR (Average True Range) is another,ATR opperates at a set deviation to the mean.2,3,6 etc.Most traders have found that stops set at 5 to 7*ATR
being the best.Swings to this area are violent enough to trigger the sell,common then for the stock to either trade sideways and do nothing OR fall.

(4) One of the best Tools in the box would be a basic understanding of Elliot Wave Theory. Would take a month to learn. Having a grasp of Corrective moves and in particular where a trend is at Wave 1,3, or 5. and the l,ikely length of these waves really gives you some nice targets and areas to watch,coupled with other analysis,will serve you well.
Helps you read corrective moves and gives you confidence when a stock
corrects. Elliot is one of those "Predictive" types of Analysis using current price action. Over the years it has to me proven un canny accuracy.

(5) Lower highs and Lower lows. Always form in down moves. The longer they take to form the larger the down move will generally be.

Julia if you wish some charts with examples on these techniques we could move the discussion down to "Improving Chart Analysis " or start a new thread "Recognising tops"

By the way nothing is an exact science all we can do is place ourselves in the position to take advantage of our analysis if it proves to be correct.
The quicker you act on the analysis when its Right (and in particular) Wrong the more benificial it is to you.

Shorter term is another sport all together.

Hope this helps.
Click to expand...

Tech, thank you. Much appreciated. All clear except the ATR bit which I don't get at all. (I'm not the least bit mathematically minded). Is this discussed anywhere else, or can you explain it differently?

Julia
 
ATR = average true range
How much a share price fluctuates per day on average, so 6.5*or 7*ATR is pretty wide.
 
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