TH's buy & hedge system

[Naked shorts]

Why don't you?

who said I already haven't?

 

[James58209]

Hi Trembling Hand,

Thanks very much for sharing your ideas!

I'm a little confused about one thing, though.

Yep fully aware of the problem between the weightings of the index and my holdings. May over time correct that. But maybe not. I don't want an index tracking portfolio. And although the hedging will not be matched 100% the other problem is that then I'm not all that sure I would be comfortable holding 20% of capital in BHP & RIO for example. Anther time when theory doesn't match practicality??

A wise man once said:
http://aussiestockforums.com/forums/showthread.php?p=226197&highlight=TLS#post226197

With a little education, practice and patience I see no reason why someone would not be able to learn basic techniques for putting money into the market which can beat an index.
Like when you see Market corrections hit the front page of a newspaper is when I add to my super holdings. Very simple but reasonably effective. The selling is a bit harder but that holds for getting out of an index fund as well.

Not to mention the staying away from or getting rid (stoploss) of the Duds. HIH...Onetel...TLS which index funds hold.

So has Telstra become a better company since then, or is it just looking over-sold at the moment? Can it be trusted to continue paying generous dividends?

Cheers,
James

 

[Trembling Hand]

Hi Trembling Hand,

Thanks very much for sharing your ideas!

I'm a little confused about one thing, though.

James if you cannot see the difference between an index fund being long a stock for 5 years that's gone from $7 to $3 and what I'm trying to do here being close to flat when appropriate then there is probably not a lot more I can add to alleviate your confusion.

 

[James58209]

Hi TH,

James if you cannot see the difference between an index fund being long a stock for 5 years that's gone from $7 to $3 and what I'm trying to do here being close to flat when appropriate then there is probably not a lot more I can add to alleviate your confusion.

I'm in awe of your trading skills, which is why I have read so many of your posts from several years back. Of course you are lot more impressive than any index fund! I just thought that if you have the protection of hedging, and you have a long-term outlook (a variation of buy and hold), then you might choose high beta stocks that have a good track record of performing well over the long term (at least in boom times).

Cheers,
James

 

[Trembling Hand]

I just thought that if you have the protection of hedging, and you have a long-term outlook (a variation of buy and hold), then you might choose high beta stocks that have a good track record of performing well over the long term (at least in boom times).

Yep that would be idea. Though I don't want to get too hung up in trying to pick individual winners. As long as they are moving up and down they will be of some benefit. At the moment its a decent idea to be holding something other than Big miners & banks so as any drawdown in a particular sector isn't going to knock me around too much. Tls is moving around 10% per month so it looks good for this at the mo.

I'm no fan of TLS (and I know it quite well as my partners a senior advisor there) but as long as it doesn't go in a straight line down to $1.80 it will be a reasonable one to have here. Today for example I'm glade I'm holding Tls rather than more Rio & Bhp.

By the way my system will probably produce another buy signal some time between here and next Monday. I probably will not be taking it because I don't want to look like too much of a goose & as I haven't built up any guru profit with this system. : But that signal will give me a panic point to put a hedge on to protect from loses if it goes under that within the preceding weeks.

 

[tech/a]

By the way my system will probably produce another buy signal some time between here and next Monday. I probably will not be taking it because I don't want to look like too much of a goose & as I haven't built up any guru profit with this system. But that signal will give me a panic point to put a hedge on to protect from loses if it goes under that within the preceding weeks.

T/H

I cant believe that your serious.
Whats the point of having a system if you have a discretionary bias as to when to implement it!
Perhaps a psychological error in the wiring which needs to be addressed if you wish to follow a system.

Watching how gurus handle situations which turn out to be less than ideal you/I learn far more than when they seem to be ever profitable.
I'm more impressed with people who handle adversity than those who avoid it---seemingly I may add.

True gurus are like chameleons they are so well versed that they never lose sight of the big picture---impressing all when they get there or admit that they need to re visit their ideas.

Something I have done far more often than adopting a long term strategy.

I like many others are following with interest.

 

[Trembling Hand]

T/H

I cant believe that your serious.
Whats the point of having a system if you have a discretionary bias as to when to implement it!
Perhaps a psychological error in the wiring which needs to be addressed if you wish to follow a system.

What the hell are you talking about ???????????????????????????????????????????

You do not hit the buy button beyond your predefined risk just because there is another signal. What system scans the market every day and takes every signal churned out by the code

I cannot believe you even bothered with the comment.

Perhaps a psychological error in your personality????

 

[tech/a]

What the hell are you talking about ???????????????????????????????????????????

Trading a system--this system.

You do not hit the buy button beyond your predefined risk just because there is another signal. What system scans the market every day and takes every signal churned out by the code

If there is a pre defined risk component that filters trades then there wouldnt be a buy signal. Certainly you dont need to take every signal in a well tested system particularly if you have Monte Carlo results confirming performance over 1000s of portfolio's but you should take some trades if your capital allows.Your system has a hedge component anyway so I'd have thought this is a perfect time to kick it off.Those trades now listed have they been hedged or are they just naked currently?

Some systems do take every signal.

I cannot believe you even bothered with the comment.

Why I think its relevant.

Perhaps a psychological error in your personality????

Maybe-----but has served me well.
I'm not getting into you T/H just asking the obvious questions.(Obvious to me).

 

[nomore4s]

Whats the point of having a system if you have a discretionary bias as to when to implement it!

I didn't realise every system had to be traded mechanically.

I also don't understand why a system like this couldn't be traded on a discretionary basis?

 

[Trembling Hand]

Tech you have chosen to jump in and look for problems without even taking the time to ensure you know what you're talking about. Which is the usual response I seem to get from you. More interested in discrediting and adding BS where it doesn't exist.

I have already said very very clearly that this is a discretionary system. Yet you have ignored that to open up a line of attack that simply doesn't exist here.

Its mind numbingly boring having to go over and over the same old **** simply because your fail to see what is clearly spelt out over whatever is going on in your head.

Like I said yesterday I'm expecting to get another buy signal some time this week but being only 1 week into it I'm not going to take it as this is a LONG TERM system. I, as I'm sure any half decent trader would agree, there is no need to deploy all capital in the first week of trading. It would in fact be a stupid thing to do.

As for adding a hedge here there is simply no reason to. The market is acting to my analysis so far. I said yesterday if we trade under the level where the next signal is triggered then its not acting to my expectations and I will move towards flat by starting to hedge then. Until then I'm looking for an up move.

 

[Frank D]

Whats the point of having a system if you have a discretionary bias as to when to implement it!
.

A system doesn’t have to be black or white it can be optimized to
the markets conditions, trends and cycles, and therefore discretionary
in nature when it is being excuted.

 

[nunthewiser]

FWIW.

I personally am finding this thread intriguing. Some parts i cant actually get my head around ....namely the non closure of various position re hedges (but dare say i will understand the methods and strategys as more gets posted).
I often hedge postions on a short term basis on longer term stocks i hold but this is mainly via cfd,s and a shorter term approach to trade short and "hopefully" profit on the dips as they occur. There is NO tax minimisation strategy in place on these trades.
I have no current questions or knowledgeable comments currently but will enjoying reading and learning as the thread expands.

Thanks.

 

[tech/a]

I didn't realise every system had to be traded mechanically.

To me ---A system is a set of rules for buying/selling/position sizing/and managing trades.It is a system as it has been back tested/forward tested and tested in various markets and instruments.
It has a blueprint you can clearly see if it is trading within its parameters or it isn't. You know what type of markets it has been tested in and the duration of those tests.

I also don't understand why a system like this couldn't be traded on a discretionary basis?

Its not a system its a trading method or a conceptual system.Vast difference.
Again to me

Tech you have chosen to jump in and look for problems without even taking the time to ensure you know what you're talking about. Which is the usual response I seem to get from you. More interested in discrediting and adding BS where it doesn't exist.

Not discrediting anything-- not understanding how you treat a system is the issue---now that I understand that its a trading method or Conceptual System with no blueprint to follow you/it make sense.

I have already said very very clearly that this is a discretionary system. Yet you have ignored that to open up a line of attack that simply doesn't exist here.

You stated that the filter is discretionary nothing else---as far as I know its a system by my own definition.-----------TH's buy & hedge system.
Very Little discretionary about a system lots when it comes to a concept.

Its mind numbingly boring having to go over and over the same old **** simply because your fail to see what is clearly spelt out over whatever is going on in your head.

Cant agree more--- if your going to talk about a system then do so---if its a trading method based around an idea or hypothesis then don't call it a system. Your right its my own definition and education in systems/their design and implementation which give rise to my questioning.

Like I said yesterday I'm expecting to get another buy signal some time this week but being only 1 week into it I'm not going to take it as this is a LONG TERM system. I, as I'm sure any half decent trader would agree, there is no need to deploy all capital in the first week of trading. It would in fact be a stupid thing to do.

If you think so.

As for adding a hedge here there is simply no reason to. The market is acting to my analysis so far. I said yesterday if we trade under the level where the next signal is triggered then its not acting to my expectations and I will move towards flat by starting to hedge then. Until then I'm looking for an up move.

Fair enough.

A system doesn’t have to be black or white it can be optimized to
the markets conditions, trends and cycles, and therefore discretionary
in nature when it is being excuted.

Sure it can but a system in my definition has a set of numbers which define its expected performance relative to similar conditions in which it was tested (markets conditions, trends and cycles etc).This clearly then isn't a system more a concept/idea or Hypothesis and I think TH would agree.

If it were a system (by my definition) we could talk about all sorts of interesting numbers and test periods blah blah.
Sadly we have to watch the forward tested results of T/H's rules to see if in fact he has a profitable system concept at hand.

 

[mazzatelli]

Let's call it TH's buy and hedge model then :

I like the idea if there are solid super duper indicators for a longer term outlook - long the put + stock => synthetic call at < fair value/credit if possible and leave for upside gains, little margin and bounded downside risk

Look forward to your exploits
Au revoir

 

[Trembling Hand]

Sadly we have to watch the forward tested results of T/H's rules to see if in fact he has a profitable system concept at hand.

I for one have already learnt a lot from your contribution. Sadly it has nothing to do with trading.

 

[doctorj]

To me ---A system is a set of rules for buying/selling/position sizing/and managing trades.

Who gives a donkey's nut over these semantics? It's an approach that has not yet been discussed at ASF and therefore there's a good chance we can learn something from it. Feel free to start a thread to discuss if all systems must be mechanical, but in doing so, don't forget there is a discretionary component to techtrader.

TH - I watch this thread with interest. Please don't be distracted by the religious zealots.

 

[Trembling Hand]

For anyone interested here is a bit of light reading on the tax treatments of futs & options as hedges. : All as clear as mud so I've asked my accountant to get a private tax ruling for me.

http://www.asx.net.au/products/pdf/taxation_of_exchange_traded_options_oct_2009.pdf

http://mindthemarkets.com.au/documents/Taxation_futures_Dec03.pdf

As we understand it at the moment the hedging transactions will be taxed in the fin year that they are closed out in. But we are not sure what happens if that affects the outcome in later years once the underlying share holding is closed out.

Other things that are being checked is the entitlement to franking credits and the holding period rule. If the tax office ever sorts out their crap and handles the rest of the gumph they have taken 6 months to sort out (which include a data entry error doubling last years income!! and charging me tax & 13% interest on it!! Then sending me a letter from dept collectors all the time while telling me we are fixing it!!!!!!! ) this may be answered.

 

[Joe Blow]

This is an interesting thread, so I would like to urge everyone to keep it constructive. So please, no insults or personal attacks. Lets just discuss the topic at hand and keep it as civil and respectful as possible.

 

[tech/a]

Who gives a donkey's nut over these semantics? It's an approach that has not yet been discussed at ASF and therefore there's a good chance we can learn something from it. Feel free to start a thread to discuss if all systems must be mechanical, but in doing so,

TH - I watch this thread with interest. Please don't be distracted by the religious zealots.

The vast majority of those watching on will be less than experienced. Most like you believe that trading a Model/plan/idea is in fact developing a system.
Off they go convinced that they have devised a system. many at great cost.
That's why I GIVE A DONKEYS. Its important that people understand the vital difference in whats being discussed---if its not known then the misconception lives on.

don't forget there is a discretionary component to techtrader.

There sure is and its not used in the entry/exit M/M or Position sizing for the system it is used when there are more entries available than funds.

Montecarlo analysis has shown that there is a range between portfolios from lower to higher return over the test period. The live 7 yrs trading was in the higher end of the Monte-Carlo results.

T/Hs discretionary component (The filter) is the crux of the idea.

I for one have already learnt a lot from your contribution. Sadly it has nothing to do with trading.

Well I disagree.

Your Idea has merit and is a question asked by many traders.Can/Should I hedge a portfolio rather than sell it in less than ideal conditions.
The question is can your filter turn these corrective moves or change of trends----enough to better a buy and hold strategy.
If your indicator works well enough early enough on entry and on exit then success---if not then in your study a less than ideal result may come about.

On with the show.

 

[It's Snake Pliskin]

The vast majority of those watching on will be less than experienced. Most like you believe that trading a Model/plan/idea is in fact developing a system.
Off they go convinced that they have devised a system. many at great cost.
That's why I GIVE A DONKEYS. Its important that people understand the vital difference in whats being discussed---if its not known then the misconception lives on.

Some systems designers call their systems strategies and other synonomous names. Just read Robert Pardo's book to see what I mean.