Short Term Trading Week Starting: 11 Mar, page-10

Hey guys, I have been reading through the Short Term Trading Knowledge Libraries lately, they are great reads and always good reminders of how to trade well. Here are the links for those who want to have a read.

Important Note This information is provided on a
READ ONLY basis.


Knowledge Library 1.0
http://hotcopper.com.au/threads/sho...y-no-unauthorised-posts.2634026/#.VlHu6o9OJaQ


Knowledge Library 2.0
https://hotcopper.com.au/threads/sh...d-is-read-only-no-unauthorised-posts.3141533/


Knowledge Library 3.0 (NEW)
https://hotcopper.com.au/threads/sh...y-3-0-start-of-colation.3941039/#.WwGaDvZuKPw

After reading through a bit of the knowledge library 2.0 over the weekend, still loving this bit of Gold about trading plans from Gladiator. Hope this encourages people to read them, there is nothing wrong in trying to improve your trading strategy.

TheGladiator

06/09/16

13:25

Post #: 18961854

Originally posted by SaberX ↑

Thanks for your kind words @qqqq - I hope you were not mistaking me with someone else however. I do try and keep a level head and look at all the sides of the story. Some may call me a cynic at times. I just try to be wary of the psychological biases of owning or not owning and self-confirmation of what you want to know.

I did come to the STT trading to hopefully get more of a better grasp of methodology on how to enter and know when to exit stocks, hopefully I can pick it up through following advice and posts here. One of the issues i find is that even with stocks such as XPE my posts or knowledge do not seem to translate into tradable profits. For example I should have taken the good run up from the 3s into the 9's/10s, but held on. One thing is emotion and listening to hot copper can be a detriment at times. If anything now I think I operate by listening to how much cheering is going on in a speccy on hot copper mums and dads to judge that the time to drop out is nearing haha. In the end looking back in hindsight the downtrend seems to pronounced from the 10s. However in person at the time the decision to cash out wasn't taken...

Quite often I seem to be missing out on ripper stocks, cashing out at the worse times or timing an entry in only to see a fall. It seems like I am missing one part of the puzzle and it has been frustrating and costly.... unfortunately I haven't been able to find a mentor IRL or electronically so while things feel so close to grasp I have never quite found that missing link between why I am always so close yet so far with my investments or short term trades. I'd like to think I have just been plain unlucky but I put it down to the failure to know better in terms of entering and exiting.

I think that is one of the hardest parts as a newbie. One does not necessarily know when they are making a good or bad decision given the circumstances. The common instance of cashing out only to see something rocket back up, or the converse where when you finally hold on you fail to protect your capital and the stock continues going down. a 10-15% loss then becomes 40%.

I guess if it was that easy that I could solve that question and consistently produce winners time after time then everyone would be doing it...hopefully I can contribute to discussions well and learn enough to get me consistently producing profits over losses one day.

You always hear about the painful, expensive losses people make before being successful. Hopefully not just a motivational story and one day I'll be making a net return than watching capital drain out each year.

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Hi Saber. I may be incorrectly reading between the lines here and apologies if I am, however are you getting most/all of your stock tips as well as when to sell from HC?

If so that's the clearest answer as to the current predicament you are in. Most people go through this, including myself, and the only way I dug myself out of that was to commit to putting together a trading plan which had a number of conditions that had to be met before I would buy into a stock. I will insert a previous post I've made on this at the end.

Then when it comes to exiting you can go back to your original reason you bought the stock to see when it becomes overvalued. For example if company ABC has a MC of 10m but it's competitors are worth 50m (extreme example obviously) then when it hits 50m it's fair value and probably time to sell. Obviously this is a very simple example but you will get better at finding the value of your stocks when you actually start to pick them yourself or put in your own research on top of those you find on HC.

So once you have your strategy in place then use the tips from STT and see if they fit. If they do then go off and do more research.

Final thing is never ever ever ever get your exit price from HC, especially individual stock threads. Most holders are deluded and will be waiting for their stock to hit $1 in the year 2400.

OK this is really the final thing. Read the knowledge library.... and not just read it. Study it and practice what's in there. There is no resource available anywhere in the world as good as our knowledge library.

OK post below I was referring to.

1. Market cap
2. Enterprise value
3. Valuation of peers
4. Is it in the right sector
5. How many do directors hold
6. How many do top 20 hold
7. Performance of current directors
8. What are it's upcoming milestones


1. Market cap
Market capitalisation is the market value of a company's shares. This figure is calculated by taking the share price and multiplying it by the total number of shares. it can get a bit tricky deciding whether to use options. Options should be included if they are in the money or close to being in the money.

For example, company ABC has a share price of 2c and has 200,000,000 heads (shares) and 10,000,000 options with a strike price of 3c. The market cap is (200,000,000 + 10,000,000) * 0.02 = $4,200,000.

If the options had a strike price of 10c though I wouldn't have used them in the calculation.



2. Enterprise Value

I can see sectorlead has already written a great summary. See
http://hotcopper.com.au/posts/17358542/single


3. Valuation of peers

When determining whether a company is "cheap" and therefore has more room to run, it's important to see how it's valued compared to its peers who are at a similar point in its life cycle. You should also look at those who are more advanced to see possibly how much room the stock can run if it meets it's objective.

As an example let's look at SRT. Based on my research on fintech companies who are making $1m NPAT per year, they have a MC of $100m+. So SRT first performance milestone is $1m NPAT and if the vendors don't achieve this they pretty much get nothing. So SRT currently has a MC of 26 million and will have 1.55 b shares if milestone one is achieved. So 100mil MC = 6.5c. So theoretically srt will minimum 2 bag if milestone 1 is achieved.


4. Is it in the right sector

As I'm writing this I can see others have already written great summaries lol. For sector analysis see freeholds posthttp://hotcopper.com.au/posts/17358262/single


5. How many do directors hold

This is very important as when directors have skin in the game they will be more than likely look after themselves as well as shareholders. So no massive dilutions and being very prudent with company finances. They will also ensure placements go to sticky hands as they wouldn't want to see constant pump and dumps. Very good example is DUO which Peter wall had no shares in and was diluted to hell and back numerous times. Matthew walker though was very smart about it and raised at good prices most of the time to very sticky holders.


6. How many do top 20 hold

The more the top 20 hold the tighter the register. This means there is less free float available of shares which will be sold on market. The less shares available to be sold the easier it is for the share price to run. The people in the top 20 are also important. If you have people in the top 20 who consistently back winners they will more than likely attract other good investors who follow them.


7. Performance of current directors

This is extremely important. We are trusting directors with our money so if they haven't performed in the past what makes you think they will perform in this stock. Mark creasy in the mining game and Matthew walker in the shell game are great examples. Check what companies the directors have worked in and see the share price performance to work out how successful they have been.

8. What are it's upcoming milestones

From a STT perspective we rely on announcements and big milestones to make money. If a company has no big milestones coming up then what will make the share price move up?
These milestones are also important in understanding when to time our entries. Depending on our trading strategy you can time your entry. Personally I like to get in 6 weeks earlier than when a milestone is due so there is less competition from other traders.

Remember this is the absolute minimum amount of research I will do to help me shortlist prospective stocks. Without doing the above as a minimum the risk increases substantially.