What have I done?
Since doing a few posts on shares, I have been bombarded with questions by email. Rather than reply to all of them individually (and risk repeating myself) I will answer them here. It is quite obvious a seperate share forum is required, I have downloaded the ‘snitz forum’ stuff but not sure how to get it going. Maybe someone can help.
Here are some of the questions:
1) Do you share trade based on hunches or use a set system? If a system is used
have you modified or changed the system on the way?While I personally trade shares currently, it is only out of boredom. I have not yet found a job in finance, and trading provides some income while absorbing any spare time. I encourage other people to INVEST in shares rather than trade them. There are many professionals in the market who a trader must beat in order to succeed, let me tell you its near impossible. In a booming market however, any idiot can make money. Just like it was impossible to lose money during the property boom.
2) Do you trade based more on fundamentals or technicals or combination. If
technical is used which technicals do you find most useful eg 5 day ma ,200 day
ma, P. SAR etc..You cannot trade with fundamentals. They are only updated twice a year, if that. Fundamentals are for investors. re indicators, the tried and true basic stuff beats new whiz bang stuff any day. I like moving averages, trendlines, gaps, candles, support, resistance.
3) Do you prefer to hold trades for shorter periods (eg less than 1 day to a
few days ) or longer periods ( 1 week +)?risk is inversly proportional to time. 90% of day traders lose. 100% of long term investors win.
4)Do you trade a combo of ETO’s , CFD’s, shares..
shares (FPO’s) are obsolete. I trade eto’s and CFD’s.
5) Do you stick to a profit taking point for eg 30% and stop loss or does the
mark change depending on the trade? and do you take small regular profits or go
for larger profits eg 100% or moreplan the trade and trade the plan. winners hold onto their winners, losers hold onto their losers. most traders fail because they take small profits and fail to have tight stops. have your exit strategy and stop-loss defined BEFORE you enter a trade. emotion kills.
6)What would you reccomend as the best trading book ?
I havent published it yet. LOL. Forget any aussie authors. They are authors, not traders. I like books like “trading for a living” Eng. trading is 80% psychology, 10% money management, 10% knowledge. most trading books focus on the 10% knowledge. I am writing one book about psychology. I will also write a few other books, as the oversights and rubbish in a lot of share trading books must be corrected.
7) Do you use or think any of the stockmarket newsletters are useful eg
intelligent investor, huntleys, marketmad etc..intelligent investor I have read a few times, I think its good, I also hear good things about it. Beware of any newsletter who claims to do all the work for you. Buy and sell recommendations are YOUR responsibility. If you seek them elsewhere you WILL fail. Learn the ropes yourself. In general any newsletter that is INVESTOR based rather than TRADER based is good. Its hard to track economic changes yourself.
7) would you consider it to be too risky to be heavily geared into this
property market currently even if properties held are in good, median based
housing near the city/beaches of Brissy/Perth ?hell yes. dont people ever learn? When I got into shares 5 years ago the first thing I did was learn all I could about crashes. I studied previous booms and busts, so that I could recognise the signs and take the appropriate action. Most people focus on “what will go right!” instead of “what could go wrong?”
where does one find out how much dividends and when a company is likely to pay them?asx publishes this info: http://www.asx.com.au
also, some brokers display this data.9) what do you think of companies that promote charting systems/software/courses?
RUN! If you want to learn about share investing, spend a few hundred dollars on 10 or 12 books. better still, do some asx courses or securities institute courses. paying $8000 for a company to teach you to trade or provide you with software is for people who have more money than sense. consider their motive. if their software was so good, why are they marketing it instead of using it to make millions in the market? This is my rule: THE QUICKER THE EDUCATION, THE POORER THE QUALITY. learning the share game takes years. if you want to be impatient and greedy, ignore me and see how far you get. I and others lost a fortune jumping into the market thinking we could learn along the way. Books are cheap, thorough, unbiased and dont give you high pressure sales headaches.
10) what do you think of managed funds? which are the best ones?
in general, managed funds do worse than the overall market. this is because many have grown too large, and lost flexibility. they cannot invest in quick or small opportunities because of their large size. 80% of fund managers under-perform the benchmark index. with deal for free, it is now possible to buy the index itself. fund managers have hefty fees for entry, management and exit.
11) is share investing time friendly?
it all depends on the performance you want to achieve. if you want a maintenance free, below average performance, get into a managed fund. if you want the best return possible, be hands on. YOU are the best person to manage your investments. knowledge is power. financially uneducated people dont become rich. being hands on doesnt just give you a better return, it means you are aware of the investment climate. this is extremely valuable and important knowledge to have. I throroughly enjoy tracking the market. I know that I see opportunities before 99% of the rest of investors. Being close to the market means you are first to buy and first to sell.
12) Why should I bother learning about shares? Cant I just keep investing in property?
you mean invest in negative geared property? cos theres no more positive geared property to be had.
shares boom in cycles like property. it is now shares turn to shine.13) What is your book about?
my book has a few topics. the first part is about the psychology of investing/trading in shares. the greatest tool an investor has is their own MIND. sadly, most ignore this fact. most books focus on trading systems, charting, money management and the like. I have met many traders who have read 20 or 30 of such books, yet still fail. I have interviewed hundreds of both successful and failed traders, to discover how they differ. The root cause of failure must be addressed. Most people ‘will’ themselves to fail subconsciously. I have found a way to show people how to control and manipulate their mind so that they can avoid the mental processes that result in failure.
The second part of the book looks at new strategies, such as postive gearing and low risk/high return strategies. Some of the strategies are not my own, but I explain them simply so that the average investor can start to use them. I also have developed many new strategies of my own, which I will share. I also look at the new market dynamics, how the market has changed, new instruments such as CFD’s, option strategies, combination strategies, and what the future holds. CFD’s are a very new concept, and very few investors are aware of their benefits. Also, I will share with you the key lessons every other trading book is trying to teach.
While the book will benefit traders the most, investors will find the book extremely valuable also.14) when will you publish your book?
when I finish writing it. currently demand for sharemarket books is low because there is a property BUBBLE. Smart authors are cashing in on the property mania by writing books at the top of the market. I dont have much incentive to work hard on my book right now, though if enough people throw money at me I could be persuaded LOL. Some friends have read what I have written so far (including one who has published his own material) and say it is ground-breaking and easily better than any other Australian investing book (thats not hard to acheive). Like Steve, I have questioned the old ways of investing and researched and developed my own strategies.
if you like, I can add your email to a list and keep you posted. This is a property forum, and we should really take our discussion elsewhere. Sorry for sounding like an infomercial but if its ok for Steve to sell his knowledge, it should be ok for me also. Steve started this way as he admits in his book.I havent been keeping a list thus far, so unless you sent me an email in the last 24 hours please send a new one. No further shares posts will appear on this forum, so get on the list or miss out.
Receiving all those questions… hmm must be tough for the people asking the questions. If I were people out there, I would definately diversify, putting time and money into aspects of life that make money i.e. the stock market – long term & short term, and real estate – long term and short term. But, always invest in what you know, if not, use someone who does.[
]geez, a lot of posts since Sat morn.
got about 10 emails, none from the people who originally emailed me though. keep em comin
Hi Guys long time lurker first time poster, it has been fascinating watching the interaction and enthusiam of people as they explore wealth creation.
I must admit I dont know much about property, in fact what I know about it could be written on the head of a pin.
However, I have been a professional trader for almost three decades, I started tradng back in the days of stockmarket floors and orders placed by telex. And I am motivated to respond to some of things written by Crashy, many of his points need correction and betray his enthusiam rather than his experience.
Ordinarily I would not interject but money is an important thing and is very easy to lose so I feel it is neccesary to offer an alternative position.
Crashy said
You cannot trade with fundamentals
Whilst I am a technical trader and have been since the time before personal pc’s I have to cite the worlds second rich man Warren Buffett. Whilst our methods are vastly different you cannot argue with returns that have for several decades outperformed the S&P 500. The last time I looked his long term rate of return was 18%
risk is inversly proportional to time. 90% of day traders lose. 100% of long term investors win.
This is actually incorrect, risk is invarient of time for two reasons. Firstly markets are fractal in nature so the patterns you see repeated over the long term and also repeated over all time frames.
Secondly risk is a function of money management, it is not a temporal function.
The notion that short term traders lose money and long term traders make money is not supported by quatitative evidence. A more correct statment would be most unprepared traders lose money over all time frames.
shares (FPO’s) are obsolete. I trade eto’s and CFD’s
This is somewhat of an exagerration, cfd’s have been around since 1989 in other markets and are analogous to single share futures. No instrument has yet replaced the fpo since they are they backbone of the secondary market, if Crashy’s statment were true then there would be no market, if there were no market then there would be no equity cfd’s
In other markets such as fx where this concept has been around for sometime cfd trading falls a long way behind the interbank market and futures exchanges.
LOL. Forget any aussie authors. They are authors, not traders. I like books like “trading for a living” Eng.
You know this for a fact do you?
Trading for a Living was written by Dr Alexander Elder not Eng. Elder a Russina psychiatrist is an interesting dinner compnaion, his tale of how escape from the KGB is fascinating. But having spent some time with the good Dr I am failry certain he does not trade.
I am writing one book about psychology. I will also write a few other books, as the oversights and rubbish in a lot of share trading books must be corrected.
Perhaps you could then tell us about how to integrate the shadow which is a Jungian archetype and which is something all successful traders have done. Perhaps you could also critique the work of Thaler and Odean in the first of behaviour finance and its impact upon the effecient market hypothesis.
Would you also be able to tell us where others have gone wrong and where your ground breaking material will set the world alight.
7) Do you use or think any of the stockmarket newsletters are useful eg
intelligent investor, huntleys, marketmad etc..intelligent investor I have read a few times, I think its good, I also hear good things about
Hang on didnt you just say you cant trade on fundamentals yet you are recommending fundamental newsletters
9) what do you think of companies that promote charting systems/software/courses?
Avoid the ASX and Securities Institute if you want to learn about trading neither will teach you about trading. Mind you if you do the SIA courses you might come across someone like me who can teach you about derivatives pricing….a fascinating subject but of not that much use in the trenches.
If you want to find out someones level of trading knowledge there are a few simple questions you can ask.
Whilst these may seem overly technical they are a good guide to the depth of someones understanding about markets.
1. Are the distribution of stockmarket prices leptokeurtotic or random.
2. Optimal f presents us will a problem in money management. What is that problem?
3. The Kelly equation which is the basis for all money management and interestingly enough the basis for betting strategies in blackjack has a fundamental flaw when applied to share trading. What is that flaw?
4. In options trading what is the measure of directional risk?I am sorry to but into a property forum and my apologies to anyone who is put out. But markets are very unforgiving, they will take money off you far quicker than the property market will.
I felt that everyone here had presented so much in the way of free property based knowledge to me that I had to repay the favour
This is the thing that kills me. After researching the stock market for the last 18 months and attempting to self-educate myself, it becomes vey apparanet that I know bugger all.
However, how much knowledge, experience and ability do I need to begin investing?
OR, conversely
How little knowledge, experience and ability will guarantee me 100% failure?
Should I be spoon fed by MarketMad, Fat Phophets, The Inside Trader and similar services?
Should I subsribe to real time data services, or is EOD data enough?
Why do I (apparently) need a PhD as a minimum formal qualification to invest?
Unfortunately, my mathematics stops at calculus and my stock market theory is non-existence. Can you direct me to a few good books, courses or websites?
Michael
Michael, great minds must think alike
Valiant Wagon, it is rare to hear from someone who has (I assume successfully) traded the stock mareket for 30 years. I lost money in it back in the tech crash, but since then have taught myself charting, using mainly volume, trend, support/resistance and the rsi (this helped me know to at least get out before Sept. 11th).
I see now many of the small specs starting to break out, not only those that were in a long term stage 1, but also the downtrenders. I am therefore starting to dabble again, even if it is for only the next few weeks. I am currently looking into Gann’s sqare of nine rule wondering if the laws of natural mathematics help.
Like Michael, I would love to be gently guided in the right direction. Can trading be profitable over decades? Why are you looking into the property market after all these years?? etc etc (would love any info you could throw this way).
Crashy, I used to watch you on the daytraders channel talk of a crash. Trouble was, you talked of it almost a year and a half before the tech crash happened. Think we all know when a market is potentially overheating…but getting the timing right is the tricky part.
So Valiant Wagon, I will be waiting with baited breath for any morsels of info you can throw my way.
A little insecure are we? God forbid someone else apart from you the trading guru should have anything to say. What you have just done is the equivalent of Steve blasting someone here for not knowing as much as him. It’s just egotistical dick swinging.
“Whilst I am a technical trader and have been since the time before personal pc’s I have to cite the worlds second rich man Warren Buffett. Whilst our methods are vastly different you cannot argue with returns that have for several decades outperformed the S&P 500. The last time I looked his long term rate of return was 18%”
Like I said, fundamentals are for INVESTORS, not traders. Buffett is an investor.
“The notion that short term traders lose money and long term traders make money is not supported by quatitative evidence.”
Yes it is, in fact it has been published many times. many online brokers have stated that 90% of accounts opened are bone dry within 12 months. secondly, I said day-traders, not short term traders.
“This is somewhat of an exagerration, cfd’s have been around since 1989 in other markets and are analogous to single share futures. No instrument has yet replaced the fpo since they are they backbone of the secondary market, if Crashy’s statment were true then there would be no market, if there were no market then there would be no equity cfd’s”
Well you can argue exaggeration, the point I was making is that very few traders I know are choosing fpo’s to trade rather than CFD’s. CFD’s have only been in THIS country for 18 months or so. How long they have been present in other markets is irrelevant.
“Trading for a Living was written by Dr Alexander Elder not Eng. Elder a Russina psychiatrist is an interesting dinner compnaion, his tale of how escape from the KGB is fascinating. But having spent some time with the good Dr I am failry certain he does not trade.”
LOL…sensationalise and dazzle! Stroke that ego! Yes, my mistake, it was Elder, not Eng, got my E authors mixed up (god forgive me). The question of whether or not he trades, can be answered by a quote from his book:
“…every morning before trading I sit in front of the quote screen in my office and say: “good morning, my name is Alex, and I am a loser. I have it in me to do serious financial damage to my account.”
Therefore, at the time of writing, he WAS a trader. I do not care if he is still a trader or not, the book has been written. Your claims of meeting him are irrelavant and you have not disclosed any information that was not contained in his book, which makes me wonder. From your behavior thus far, I suspect you saw the good Dr as one of his patients.
“Perhaps you could then tell us about how to integrate the shadow which is a Jungian archetype and which is something all successful traders have done.”
The Shadow is our ‘dark’ side, veiled and repressed, that contains much ‘hidden potential’, if we make peace with it. When we do not integrate the shadow, it remains a hinderance, it can erupt in outburst of rage, self and other abusive behavior. Yes I can tell you how its done, wait for my book.
“Hang on didnt you just say you cant trade on fundamentals yet you are recommending fundamental newsletters”
Perhaps you should read carefully before making such stupid comments. I am promoting investing in shares, not trading shares. Some people asked specific trading questions, which I answered.
“Mind you if you do the SIA courses you might come across someone like me who can teach you about derivatives pricing….a fascinating subject but of not that much use in the trenches.”
more irrelevant ego stroking! ps, i have done my courses bucko!
“If you want to find out someones level of trading knowledge there are a few simple questions you can ask.”
simple? mahahaha u eediot I dont have my text books to consult but here goes:
“Whilst these may seem overly technical they are a good guide to the depth of someones understanding about markets.”
the point being? If someone doesnt understand the answer OR the question, what is the point. You seem to be suggesting that only the best trader in the world should be asked questions about trading. which just reinforces my theory that you have an insecurity issue, though it could also be a messiah complex. either way, your critisism helps no-one.
1. Are the distribution of stockmarket prices leptokeurtotic or random.
leptokeurtotic theory, where for example if the move in price is up then there is an increased, albeit small chance of the next days price also being up. I did read somewhere that there is a fairly high serial correlation which indicates that the best way to predict tomorrow’s volatility is to assume that it will be similar to today’s volatility. This is all theory and cannot be proven, but you asked whether or not it was fact.
2. Optimal f presents us will a problem in money management. What is that problem?
the problem is that while bet size can theoretically reach infinity, in practice it is not possible to bet such large amounts. If you are using a betting system to trade with, failure is guaranteed. Is this question even relevant?
3. The Kelly equation which is the basis for all money management and interestingly enough the basis for betting strategies in blackjack has a fundamental flaw when applied to share trading. What is that flaw?
the flaw is that each hand in blackjack is a statistically independant event, whereas in trading each movement in price is related to the previous movement. could be wrong, but really what does it matter? not like any traders actually use that crap.
4. In options trading what is the measure of directional risk?”
the measure? well you could mean implied volatility, or you could mean risk margin, though its probably something really complex cos I know what an egotistic showoff you are.
What…nobody else is allowed to answer equity questions because you claim to know more? WHO CARES! If everyone here acted as immaturely as you, Steve would be the only one giving advice.
Crashy you seem to be a very touchy individual, I will put this down to your inexperience and desperate desire to prove yourself. Which in turn is perhaps a reflection of your current unemployment.
This is also evidenced by the aggression you show on other parts of the forum ot ideas you struggle with.
With regard to Buffett there is no difference between trading and investing, the only superficial difference is the time frame. Once again you cant argue with returns. Not my cup of tea but he does seem to motor along for a down home country boy
As to the results of my test you only get half marks since you only got half a question right.
Your definition of leptokeurtotic was close enough but that wasnt the question, your knowledge of money management which is the cornerstone of trading is woefully inadequate. I would suggest a little reading might be in order particualry since you are going to write the worlds most definitive trading book.
For those who want to be guided towards technical trading you could look at http://www.ataa.com.au. This is the Australian Technical Analysts Association, for a modest fee they have a newsletter, monthly meetings with a variety of guest speakers and a substantial lending library which will save you a fortune.
You could also look at the courses run by local tafe’s here in Melbourne both Holemglen and the CAE run courses on share market trading and I am certain that other states have similiar courses.
And despite what Crashy says check out the local book scene I know a few of the local authors and despite Crashy assertion all the ones I have met trade and trade successfully. You alo get the advatage of local contacts who you can ask questions of.
Angus and Robertson/Dymocks carry most books or you could try online at http://www.educatedinvestor.com.au
Once again thanks for the property knowledge, I will continue to lurk with interest. I dont want to clog up Steve’s forum so if you want you can email me at [email protected]
PJD
where does one find out how much dividends and when a company is likely to pay them?
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