Short term - knowledge library 1.0 (This thread is READ ONLY.... No unauthorised Posts), page-63

Looking at the Bigger Picture​

gamefisherman
Date: 15/02/16
Time: 08:21:39
Post #: 17018461

Topic : What to do if your still caught in the market crosshairs (in red, or deep in the red).
You will often hear me talk about the importance of trading psychology. Another term for this is called Behavioural Finance. If you Google it, you will end up with googly eyes as there are so many results. This is a good thing, however as that area between our two ears controls all that we do and think, both at a conscious and unconscious level, we need to be continually mindful in all areas of our trading, in this case, when we are in the red, or deep in the red…..
If you are trading/investing without taking time and energy to commit to ongoing learning in this area, you stand to lose a lot. By this I mean your health will suffer from all of that cortisone that is released into our bodies when we are stressed, your access to capital will suffer as the opportunity cost of having that money dwindle away is potentially massive, our inner demons will berate us, and on and on I could go…..That is why we must learn from our mistakes so that they do not ever happen again, or only happen on significantly reduced occasions, due to the changes that we make in our trading modus operandi.
If you are already saying what is he talking about, or you simply wish to grow your knowledge bank in this area, then there are a couple of short articles that I highly recommend you read and absorb. Here they are and I always try to acknowledge the author, source etc as best as I can.
What to do if your still caught in the market crosshairs (in red, or deep in the red).
1. http://ezinearticles.com/?Trading-P...ding-With-5-Tips-on-Trading-Losses&id=5491427

In my mind, one of the most succinct and helpful articles that I have read in this particular area of Behavioural Finance has been added. The author is Mr Gary Dayton, Psy. D: from www.TradingPsychologyEdge.com . Gary is considered to be one of the leading minds in his field, and he is often asked to write articles and speak about Trading Psychology to individuals, corporations, universities etc. He is both an active trader and psychologist. It is well worth the time to click on his profilehttp://ezinearticles.com/expert/Gary_Dayton,_Psy._D./121973
So what is the takeaway from this article???…….Well you need to read it, but for me the most important part is around how it affects our own trading psychology…..
Gary writes… Impact of Thoughts on Losses
How we think about losses is important. Our thoughts about losses influence our trading behaviour. They can affect how we see ourselves as traders and our self-esteem. Thinking about losses in such an unconstructive manner can create a negative trading spiral and actually compound our losses: We think losses are just dreadful. In trying to avoid them, we commit defensive trading behaviours (cutting winners short, letting losers run, etc.). These erratic trading actions may cause even greater losses, further reinforcing the notion that losses are bad. Self-esteem and trading confidence sinks, setting us up for more of the same on the next trade...The reality is trading losses will happen continuously throughout your trading career. They are inevitable and unavoidable. With practice and more trading experience, losses happen less frequently, but you cannot eliminate them completely.

Another useful article that he wrote is called: Day Trading Psychology - How to Survive a Trading Losshttp://ezinearticles.com/?Day-Trading-Psychology---How-to-Survive-a-Trading-Loss&id=5779508 …..
Whilst the heading says “Day Trading……” The article has some significant insights that are well worth adding to your resource library that apply to all traders/investors…..
Before I go, I would like to share one final article written by Gary that formed part of a strategic change in the way that I trade successfully today. Hope you get as much out of it as I do….The article appeared in The Official Advocate for Personal Investing; Originally published JUNE 2010. SFO magazine.
Here is the link… https://tradingpsychologyedge.com/wp-content/uploads/2010/11/SFO_Take_Control_of_Your_Trading.pdf
Please let me know if there is anything that you might want to ask, comment on and I will do my best to respond.


gamefisherman
Date: 27/02/16
Time: 19:49:11
Post #: 17134274

…………………..We have seen so many Sector Rotations in a short period imo...we had the backdoor tech listing craze which is still bubbling along in the background, the Price of Gold and Gold run still bubbling away in the background, the Agricultural craze still bubbling on in the background, the Lithium craze still bubbling along, and now talk around Oil, and on it goes........

So now the trick is imo, where is the CO most active now? Where are they quietly accumulating? What footprints or hints are they leaving, traces of their passing interest and even current presence? Many Lithium plays will continue to re-rate for the exact reasons you mentioned OPW, and I will add some more comments about your insights below (of which I agree). FMV's post was also excellent, and the author provided a convincing case in point re Lithium demand etc.

………………… Follow the money trail, isn't that what they say? Be active in those sectors that are running hot so to speak, so you stack as many of the odds that you can in your favour.

In light of the significant gains that many lithium and graphite stocks have recently enjoyed, I wanted to highlight one problematic area that can affect traders, and in particular those that are relatively new to the markets ie under 2 years active trading in the market I would define as new. So the kicker is this. Lets say ABC is a lithium stock that over the last month has already returned 30% growth. Looking at the chart of ABC, it is obvious that there has been a solid run, but that inner voice of us, rears its ugly head and tells us "look it has had its run, I will move on to the next one."

We all possess certain levels of perfectionist traits. They do serve a purpose in our general lives, however if left unchecked in trading, they can result in self-justification for not jumping on and pulling the trigger for a stock that has already begun its re-rate. However, how frustrating is it to see that stock that we let go just because it went up by 30% already, then went on to make further gains, another 20, 40 60, 80% etc and we didn’t buy it. Why does this happen? A reason is due to our own perfectionist traits that in life helps us to achieve, helps us to produce quality work. So as we did not get the entry we wanted, and the price has already jumped 30% we move on. Sometimes, not even given it much thought....and it is at this point where being mindful around our decision making process that will determine if we take an entry or take no entry. Often it will be the voice of the unconscious, and we will not be aware of what is driving our lack of action to act ie buy at higher prices.

Lets say now that after running some scans a few months later, ABC pops up and we notice that it is trading considerably higher. We look back and scratch our heads, how can this be? The should ofs, the what ifs, etc then come into play....Anyway I am digressing here but wanted to mention this so newer traders are aware that perfectionist traits can cost the trader much money and potential profits. In terms of working through this, it does take time in the market imo. Buy high and sell higher, yes it is a cliche, but out of many of those around, this one may well bode you well in trading.

So at the end of the day, identify the trade that fits your plan, wait for your entry and pull the trigger. That is it, full stop. So what, if the stock went up yesterday by 15% and you missed buying at that level. The market does not care at all about what you do, nor at what price you buy or sell at. Longevity in the market, profits, capital protection and slow compounding growth is what matters most. Buying into strong stocks whilst sounds sensible enough, is often not so easy, especially when fronted with one that you come across that has already risen by 30%.


forrestfield
Date: 09/03/16
Time: 12:27:40
Post #: 17226633

without offending anyone and providing any names of the stocks or being personal, we should sum up this discussion... I mean we are talking some serious rinse and repeat cycle here... lets try to capture it in steps... lets call it story of penny dreadful:

1. listing at asx through IPO at 20c raising decent cash with an exciting project (right sector).
2. Early success with exploration and exit for IPO participants at a nice premium.
3. Capital raising required for further exploration to find the true potential.
4. A discount along with 1 free attaching option for every two shares. Capital raise over subscribed.
5. Share price appreciation with volume leading to further exploration.
6. Share price collapsing before the poor results hitting the market.
7. Poor results does not mean project has no value... further exploration being done to explore the real value and potential of the project.
8. No significant results again... Share price keep collapsing.
9. Company is left with minimum cash. Appendix 5b query causing panic hence capital raise discussions.
10. NO one willing to put their hands in the pocket. Hence massive discount to raise capital. Share price collapses further.
11. At this stage, company and its investors know the project is worthless. Hence strategic review is required.
12. Couple of directors resigning from the board. New directors being appointed who have expertise in certain new trend.
14. As a result of the strategic review, company will now consider new projects...
15. To persue these exciting opportunities, company will seek share holders approval to restructure the company. This will include capital raising. However, heavy discount will be offered which means share price will further decrease.
16. As company has no cash left, company will issue con notes for working capital.
17. Restructing done, capital raised, name changed and company is looking for the hottest sector and project possible.
18. Story will become sexy again like the first time. Share price will rise, investors who participated in the initial capital along with intelligent punters following the trend will make gains.


RINSE AND REPEAT.... I have no intention to offend anyone so apologies in advance if you have been part of this cycle... I have been involved with at least 5 by myself during my early days of trading...


Simonn
Date: 13/03/16
Time: 01:28:12
Post #: 17261022

I personally reckon people expect miracles when trying to flick through for 10 baggers ...
A one bagger is more than enough if you can hit the right lights and continue with spotting them...


gamefisherman
Date: 14/03/16
Time: 05:54:56
Post #: 17264541

Sometimes during the week I miss some posts in this STT thread so I catch up over the weekend (even if I have to burn a few candles). You will pick up a huge wealth of knowledge here, and to be frank in my experience there are traders/investors at both ends of the spectrum, from those just starting, those whom have been chugging along for a year or two, those whom are in the top 10-20% of traders across the country (literally) and I know this from the STT results.

I have noticed that there is often talk about "10 baggers, multi baggers, couple of baggers, and even handbags G2) I sometimes wonder however how that might affect a member either new or even longer. Sometimes we take onboard others experiences and even expectations that can skew our own set of beliefs and goals. Over the weekend yes there was a fair bit of bag sharing, and anything that returns 100% plus via whatever investment instrument is stunning. I dont know of anywhere else where it is legal that investment returns of this nature can occur regularly. Even those stocks that have been called early in cycle are even more impressive. However there is a trap that I think all STT traders/investors should be aware of.........and that is having realistic expectations.
Every member here will have different goals/targets and share their results with their mates (gender neutral too by the way!).

In the weekend thread @Simonn in post no:17261022 added "I personally reckon people expect miracles when trying to flick through for 10 baggers ... A one bagger is more than enough if you can hit the right lights and continue with spotting them..." I tend to agree that when there is talk about those 10 baggers, I do wonder what impact that they may have on someone when they are achieving consistent returns of say 25% per annum. In other words I would not benchmark yourself against others amazing results, which is actually easy to do. I should add however that the STT knowledge library is rich with actual teachings from those that are actually walking the talk. I would recommend that you spend time in their soaking up as much as you can.

".....ive had my first multibagger get away from me, low entry left after 1bag and now i feel sick" That is harsh on yourself...What would you say to a trading mate if they achieved a whopping big 100% return on their investment? You should be proud as that is not an easy feet. Keep an eye on the weekly comp posts and results. Read their posts and see what you can find, are there any themes or threads that tend to pop up.

Create a Word Doc of random posts and pics and go over and over and over them. We all learn from looking at pictures so embed the ones you wish to add to your knowledge bank every day. That is what I do and it helps me enormously in my trading. I picked up this idea right here in the STT thread, apologies to those whom I copied the idea from, as I wanted to add your name for acknowledgment, however my present memory cannot recall. Anyway as I mentioned it is something that I do every day. Whether it be overseas market results, a resonating post and subsequent discussion, a chart, a excerpt from a Company Report, the list is endless really.

There is no Holy Grail in terms of finding a trading system to work from. However developing one is not that hard imo. For example a buy trigger will be lodged into the market when a certain stock that trades between 30c - 60c, 1,000,000 MA daily volume, and a cross over of the 12 day MA over the 30 day MA, with the stock above its 15oMA etc. That is just a pure example of the relative ease around creating an initial part of a Trading System. However, here is the kicker.....it is what is between our ears that ultimately determines success of failure in the market. Trading Psychology or Behavioural Finance is a large topic in-itself, and one that I personally think should get alot more airtime so to speak. So why do people fail in the markets? One of the biggest is that they are unable to control their own emotions. Simple as that, well in reality if only. Some experts believe that the human brain can only cope with 5 NEW pieces of information at a time. This means that if you are trying to manage 5 trades, unless you are working to your pre-planned trade management plan, well what do you think may be the end result?

You dont need to be the smartest cookie on the block to have ongoing success in the markets. What anyone needs for that to happen is a vast array of weapons so to speak. These are located in each of the posts in the STT library. If trading was easy we all would have possibly retired by now, but then again most of us would go bonkers having nothing to stimulate the grey matter for us oldees so to speak.

@forrestfield mentioned over the weekend ...."This is why it is so important to have a strategy and everything comes back to individual strategy.... for example I learned over the years that I need only 2 3 successful trades each year with my large holdings and I am fine".. At face value that would seem like a fairly straightforward plan. The trick however is to be patient enough I would guess and saavy enough as well to be able to pick those few trades. Obviously it works, and works extremely well.

Lastly over the weekend you mentioned that "I'm stuck trying to find a strategy, I have been investing for about 1.5 years now and i have done ok , but at this stage is it luck or skill ? Leaning more to luck if I'm being honest.Started reading guppys book (charting ) but I dont really like his style (too metaphorical )Anyway enough ranting, other than reading these forums how to people find the 10 baggers early ? How are people scanning for stocks?"

You could write a Thesis on just those points and questions you asked. Good work reading Guppies Book, even though it wasnt a good fit for you. Be hungry and thirsty for new knowledge. Read and study as much as you can find time within your day. We all learn at different speeds. Cut yourself some slack too. There would be few traders whom in their first 1-2 years of trading began producing "multi-baggers" on a regular basis. That is unrealistic.
All of your questions and comments are great as it clearly says, this is what I have been doing, this is what I want to do, any suggestions as to how I might go about it? @Gladiator2 commented over the weekend to one of your questions......"don't feel bad mate if we can learn from every trade we should be fine by the end. This is a great thread, you will learn lots so stick around and contribute" He is spot on the money.

In summary from reading your posts, it would appear that you are already on the right track.....never lose that thirst and hunger that drives you to keep improving and learn new knowledge. Keep digging. lurking, questioning, thinking, reflecting, and just hanging out here. There are many many people that have some similar traits here. One of them is to help others. You are in the right spot, maybe give yourself a bit more slack. If you want it bad enough it will come, but it is bloody hard work. If you are prepared to make some sacrifices and are eager to achieve, you are already well on your way up that road.


thevagrants
Date: 14/03/16
Time: 09:33:59
Post #: 17265309

for the benefit of those interested (and to solidify the point), the most successful trader on HC (in your eyes) will not operate in the same manner as you. If you try to emulate them, you're likely to come unstuck. It is most important to work within your strengths.

I learnt this over an aggravating 6-12 months after joining in Oct. 2014. Plus posting and reading the forum FAR too much, and reading the wrong sections of the forum at that. Since then I refined my approach, worked within MY means and the tables seems to be turning.

It is very important to do YOU as it is YOU investing YOUR money.


webbj
Date: 19/03/16
Time: 00:38:28
Post #: 17316554

I have bought and sold shares for over many years, but never very seriously and never really 'traded' until more recently.

Due to a change in circumstances/job situation early last year + a lower salary for the period, I cashed out a few blue-chips which I had bought a few years prior to lock in some gains whilst I was in a lower tax bracket. This turned out to be quite fortuitous, liquidating most of my stock portfolio in early 2015 then the market tanked shortly afterwards.

So learning 1 - regardless of your skill, luck never hurts either.

Not working full-time I had time to observe the market and opened a brokerage account with CMC wanting to learn more about stock trading (the $19 brokerage at CommSec just didn't seem sensible at the time for small trades).

CMC was between $9-11 per trade and seemed to work well. I deposited $25k into the account in June 2015 and started trading - not really knowing at all about day, short or medium term trading.

To begin with I had no strategy. I am still tuning it now and the STT thread amongst others is an invaluable tool to learn from. I started buying things, often recent tech RTO's as I have an understanding of the sector, other-times shells and sometimes random companies that I found on HC.

After three months or so it was clear I would have been just as well of plonking my money in an index fund:

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I realised after a while that I was just doing all the same rookie mistakes, buying at tops when someone posted on HC or elsewhere that a stock was sure to be the next big thing. Buying a stock with a great 'story' or marketing but terrible financials or fundamentals, or buying a stock that was heading down down down and thinking I would be able to pick the bottom.


After refining and reading more I found an interest in the shells space amongst a few others so focused there, sometimes getting in before crowds, before a capital raising etc. Other times I just bought on a hunch and by luck it paid off, or tanked and I couldn't bring myself to sell until it my parcel was barely worth more than brokerage

After a few more months my returns from short term positions started improving, in January I deposited another $7500 into the account whilst a portion of my funds where tied up in longer 'short-term' positions! I put in more money as I was getting more confident, having turned the original $25k deposit into a balance of $34k

Since trying to be less silly and learn from the worse of the wise on HotCopper, other forums, podcasts + other sources of information my short-term portfolio has done pretty well. Its still lumpy but the original $33k is now worth around $43k which I am happy with on an overall basis but still have work to do. The recent returns are not trending at all the way I would like and I am taking steps to improve the situation:

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The recent down-trend is both a result of me being greedy and over-confident.

learning 2 - position size (I bought overweight positions in two stocks, over twice my approx average parcel size per security)

learning 3 - taking profits & stop loss / take profit triggers (in both cases of the larger positions above, they rallied really well (above 40% each, but then retraced and I locked in little or no profit). I had a big portion of my account tied up, no profit to show and no money to pursue other opportunities. My entries were right, the exits were a disaster and what really matter.

Over the 9 or so months I have made 158 trades with brokerage totalling just under $1500. Traded just under 50 individual tickers and participated in two capital raising/share purchase plans. By individual ticker I profited from 28 of them and lost on 19.

10 individual stocks accounted for nearly 80% of my profits and the top 3 losers accounted for 50% of my losses.
Hold times vary from a few months to within the day, although average I would think would be around 2-3 weeks.

Over $2000 of the profits was just dumb luck.. I traded BUD (back when it was POK) and did really well, was one of
my better ST trades and whilst in that position, I happened to hold a fairly large parcel of shares for a back-dated share purchase plan entitlement date. The SPP was 10c and stock traded at almost 20c on relisting.


reminder - luck.. sometimes its just luck. If you can't get lucky, at least try and make sure you get the odds in your favour

In terms of 'learned the hard way' moments, I think you can only really learn these yourself.. the hard way! My biggest learning in the same period has been outside this particular account, trying to catch falling knives (SGH for me) and in other cases trying to fight trends. Liquidity is important, you might get in - for a great price - but thats no use if you can never sell your parcel to someone else.

Cutting losses is hard and I still struggle, did that with two stocks today. Its a relief when you do and needs to be done.

learning 4 - the trend is your friend. Never try and fight it. Just don't.

I think some lessons (good and bad) you can only learn by doing. I used to try and watch paper-trade or follow stocks in watch-lists but found it just wasn't the same. Often now I take @Freeholds TM 'sniper entry' or a pilot position, as soon as I have some skin in the game, even if its a tiny, tiny parcel - I find its easier to pay proper attention and interest in a stock.

For more reading, obviously the STT threads, this STT Knowledge Library, Chat With Traders is a really good podcast series, over 60 hours of excellent interviews and otherwise its important to find your niche and then research it well.

learning 5 - continuous improvement

I know how to make money trading, its really easy. In fact anyone can (you just buy low and sell high ). Its working out, how to not loose money which is the most challenging in my experience! Trying to identify what I do wrong and take steps to stop myself doing it again has been challenging but something to keep doing.

Apologies for the novel, hope its helpful. TL/DR;

• Not sure there is a minimum amount of cash needed. For me $25k was ample and I almost always had 6 or 7 holdings at a time and up to 10 or more in some cases with that amount of cash. I'm sure its possible with much less, all one would need is more time (or skill) to compound their money.
• Biggest learning - you will probably make most of the mistakes that everyone else does at some point. Just do your best to make that mistake with the smallest parcel/position possible.