Which one do you use? Technical or fundamental analysis?

Re: Which one do you use? Technical or fundamental analysis

Realist said:

Shares in Fosters, Westfiled, CBA, and BHP can not go down 90% - basically impossible!!!

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That's right... even AMP only went down 80%...

GP

Re: Which one do you use? Technical or fundamental analysis

BSD said:

If it is so easy, why don't investment banks have rows of guys trading like you do and sack the floors of fundamental research analysts who guide the investment decisions of trillions of dollars globally?

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... currencies.

Re: Which one do you use? Technical or fundamental analysis

BSD said:

If it is so easy, why don't investment banks have rows of guys trading like you do and sack the floors of fundamental research analysts who guide the investment decisions of trillions of dollars globally?

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I don't consider myself an expert, but I've read enough and from personal experience to conclude that the trader is the most important aspect of any 'system'.

Marty Schwartz says in Market Wizards that he tried to train some employees, but none of them were any good... it shows that he didn't have a proven technical or fundamental system that worked for anyone, but was still able to amass millions.

Re: Which one do you use? Technical or fundamental analysis

BSD

By all means attack the simplicity of my system if you want.....that's exactly the reaction I expected from at least a few people. There's always opposition from those who just cannot accept that excellent trading results can be achieved by simply hitching rides on strongly trending stocks, and jumping off when they stop trending strongly. And that this strategy can be applied in both bull and bear markets.

You've challenged me with a host of questions to put me on the defensive. But the fact is that when you have a simple system as I do that consistently outperforms the market year after year, you don't feel much obligation to defend your methods. I have very little interest in what you think. I'm not the slightest bit interested in spending my time in answering your questions, refuting your arguments or pointing out where you're wrong, or throwing a heap of challenging questions at you. And even if I did, I wouldn't have much interest in your answers.
I'm not interested in trying to change your beliefs or convert you to my way of trading. On the contrary, I want you to keep doing what you're doing.

I've outlined my system, explained how it works, told you how it performs. If you remain unconvinced that this system really can outperform the market, then so be it. I really don't have much more to add.
However, I'll make a couple of brief comments in relation to some of the issues you raised.

Forget about leverage....the stocks I've invested in have, on average, made far larger percentage gains than the All Ords. In the bear market of 2002 I continued making good returns by shorting the market.

I've only traded the blue chips.

The students I referred to were not paying students....some were friends who I helped out, a couple were strangers who rang me and asked if I'd help them. I don't run seminars or a trading education company and I don't derive one single dollar of income from trading education.

I'm not a expert on managing money and I'm not a tax expert either.....nor did I claim to be. But I do have tax effective, wealth creation type investments that have some effect in reducing tax. Don't bother asking me what they are......I have no intention of discussing my personal business on a public forum.

Why isn't everyone, including the investment banks, trading this way if it's so simple? Probably for the same reasons that not everyone is looking after their health by eating lots of fruit and vegetables and getting lots of exercise. Probably for the same reason that not everyone is creating personal wealth through buying investment property on borrowed money, then letting the rental imcome and the tax deductions pay most of the bank committments.
Probably for the same reason that most people waste thousands of dollars each year on takeaway food, when it'd be much much cheaper to pack a sandwich or two and a couple of pieces of fruit, and take them to work.
If you subscribe to the theory that 'everyone would be doing it if it was this easy', then you are showing just how little you know about human nature.

Bunyip

Re: Which one do you use? Technical or fundamental analysis

..for some reason people think that banks should be competent at trading. There may be individuals capable, but.........

..or do banks do well on the in?

Re: Which one do you use? Technical or fundamental analysis

That's right... even AMP only went down 80%...

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AMP made big losses in 1998 and 1999 I would not have bought them. I do not buy companies that make losses, simple as that.

And if I had bought earlier and the Fundamentals changed so dramatically. I would have sold them

But if I held them over the whole time I'd be only down a bit after dividends anyway. They are down about a 3rd now.

Sure I could buy shares and they go belly up, I diversify widely for this very reason. I'd lose 8% at most of my total capital, and claim that back against a gain - reducing my losses further.

Re: Which one do you use? Technical or fundamental analysis

enzo

As usual total nonsense.
Technical analysis can be summarised in one sentence.
Technical analysis seeks to TIME the market. Fundamental analysis seeks to VALUE the market

Now extrapolating that out to investors and traders (as most investers us FA and most traders TA) and we have a similar problem. Investors don't understand the fundamentals of trading.

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Based on what evidence?
As usual, lots of opinion, very little factual basis supporting the opinion.

What becomes very apparent from observing traders, or investors, that place their trades into the public forum, is that generating these fantasy land returns is a very much more difficult proposition than you would have been led to believe if all you listened to were the *claims* of the hindsight traders club.

What we do see a lot of however is, oh my returns are XYZ, but my system is secret, you wouldn't understand my system, posting live interferes with my psychology, and excuse after excuse.

There is no real requirement to disclose your method if you choose to keep it secret........post the trades.

If, your method could be extrapolated from an analysis of the posted trades by second parties.........guess what......your system ain't nothing new.

What will become very apparant, is that beating the market is not as easy as is made out by all the hindsight traders. You beg to differ.......post your trades and demonstrate that you can outperform the market.

And you are one of the people most guilty of this.
I see much braggadicio, very little action.
Every trade commentary is a classic hindsight, no real time trades from you.

There are others that place their trades in the public forum, on a real time basis, and irrespective of their results they deserve respect for actually trading their methodology. It is these results that actually demonstrate the likely success or failure of the underlying strategies, and or philosophies.
These are the results that would generally be achieved or are achievable by others.

jog on
d998

Re: Which one do you use? Technical or fundamental analysis

And as an afterthought, as your post seemingly implies that investor's not only can't trade, but don't even understand trading, well, time to put that to the test.

We both *trade* the US Market, so pick an Index, a lively one, IWM, or DJIA or pretty much whatever you want and we can trade one of them live over the next year or so.

Use whatever instruments you want, Options, Futures, Common, long, short, hedged, anything goes.

You can pontificate theory with the best of them.
Lets see if there is substance to the theory.

jog on
d998

Re: Which one do you use? Technical or fundamental analysis

Realist,

Realist said:

Sure I could buy shares and they go belly up, I diversify widely for this very reason. I'd lose 8% at most of my total capital, and claim that back against a gain - reducing my losses further.

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Whether I agree with it or not, it's good to see that you have a plan and have obviously thought all this through.

Taking solid companies and simply adding to the portfolio when the price drops is not such an unusual strategy. The AIM algorithm works on that principle, as does Navra's DCT system (which I think is also based on AIM).

As long as your time frame is long enough to cover potential extended low periods, then this may well give reasonable returns. From my study of the AIM algorithm though, it rarely gives outstanding returns, but then that algorithm involves regular selling during price rises as well. If you basically just hold forever while the stock is looking good, then your short-term return is essentially just the dividend yield.

Cheers,
GP

Re: Which one do you use? Technical or fundamental analysis

If you basically just hold forever while the stock is looking good, then your short-term return is essentially just the dividend yield.

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Not even that - I always reinvest dividends when I can.

I'm not interested in short term income or returns anyway, I've still got 30 odd years of working to do unfortunately.

Shares are investments for me, not income.

I worked out the other day if I can start with $70K invested and add another $40K a year to the pool for the next 22 odd years and make 10% a year after tax (I don't sell so mostly no tax anyway) I'll have $4 Million. That should be enough.

And adding $40K a year in 10 years will be easy - not so easy now but I still do it....just.

10% return should be fairly easy as well as all my shares pay dividends. And I reduce my tax. If I get 4% in dividends I only need a 6% price gain.

So $4M in 20 years is a good aim, and very realistic and possible. The one problem is I need to buy a house. Or do I? Should I just rent forever - yet to decide.

If house prices drop another 15% I'll buy though.

Re: Which one do you use? Technical or fundamental analysis

MichaelD said:

1. Picking a stock in a long term uptrend and expecting the trend to continue is prediction, which is not possible. It may continue, or it may not. The end of the trend may be tomorrow or it may be 2 years from now. Either way, a significant period of the trend has already passed.


I do not claim to know everything about the market. I know almost nothing.

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Michael

Your comment about prediction is interesting. If there's one way to get a spirited debate going, it's to raise the question of "Does technical analysis attempt to predict the market"?

Buying a strong stock that's starting to take off again after pausing briefly, is simply a case of the trader reacting to what the market is doing. There are no predictions involved. I don't know what the stock will do in future. As you say, it might go a long way or it might quickly run out of steam. If it goes a long way then I'll attempt to ride it for all it's worth. If runs out of steam shortly after my entry, then I'll cop a small loss when it hits my stop.
But although I don't know what it'll do in future, I do know what the probablilities are.
Strong trends tend to last longer than we think they'll last. Momentum breeds momentum....people pile into stocks in increasing numbers when they see a hot performer.
The main reason a strong stock takes off again after a pause, is that lots of buying pressure is coming into the stock and pushing it higher. If we can recognise a strong performer relatively early in its trend, and we buy it after it pauses, then takes off again, odds are that it will run far enough to give us a profitable trades. No guarantees of course, and no predictions either......just a realistic assessment of the probabilities, and the potential for big profits if we're right, or a small loss if we're wrong.

You've stated "Either way, a significant period of the trend has already passed."

My answer is sometimes, and sometimes not. The trend strength tools I use do a pretty fair job in most cases of giving me a timely alert that a strong new trend has emerged.
In any case, missing the first part of a trend is not such a bad thing. Trends frequently stuff around initially before really starting to build up a head of steam. The last two thirds of a trend is where the real strength tends to be.
No trading system can consistently get you in right at the bottom and out right at the top. If you know one that does, please tell me about it and I'll start using it immediately.
If you look at some big trends of the past, and you chuck one of the trend strength indicators on the chart (ADX or ROAR), you'll see that in most cases these indicators started reading 'strong trend' in plenty of time for you to get in the trade and take a substantial bite out of that trend.
And that, in a nutshell, should be our objective.....to take large bites out of big trends.

You've admitted you know almost nothing about the market. So let me give you a few tips that I believe can help you.

Realise that you don't need to know much in order to profit consistently from the market. Too much information and knowledge can be detrimental to trading results. There's a colossal amount of information out there, both technical and fundamental.
Most of it is pretty damned useless in my experience.
The important things in trading are...
* Identify strong trends.
* Have one or two simple setups to signal an entry into these strong trends.
* Use stops and money management to strictly control your losses.
* Have an exit strategy that's designed to keep you in the winning trades as long as they keep performing well, and take you out when the party is over.

In other words, keep it simple and be consistent.

Bunyip

Re: Which one do you use? Technical or fundamental analysis

ducati916 said:

And as an afterthought, as your post seemingly implies that investor's not only can't trade, but don't even understand trading, well, time to put that to the test.

We both *trade* the US Market, so pick an Index, a lively one, IWM, or DJIA or pretty much whatever you want and we can trade one of them live over the next year or so.

Use whatever instruments you want, Options, Futures, Common, long, short, hedged, anything goes.

You can pontificate theory with the best of them.
Lets see if there is substance to the theory.

jog on
d998

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...chest beating for bananas :bad:

Re: Which one do you use? Technical or fundamental analysis

Snake

Sure if you like.
But then I guess you'd rather listen to all the stories.
You obviously think beating the market is easy, I see precious little evidence, but plenty of claims..................all in hindsight.

jog on
d998

Re: Which one do you use? Technical or fundamental analysis

ducati916 said:

Snake

Sure if you like.
But then I guess you'd rather listen to all the stories.
You obviously think beating the market is easy, I see precious little evidence, but plenty of claims..................all in hindsight.

jog on
d998

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Duc,

It`s all entertainment whether it`s fiction or fact.

Beating the market is not easy but earning a healthy income off it is not as difficult as one might think. As far as evidence it is not relevant.Perhaps you want some losses posted to make you feel better about your own losing system?

I`m not playing your game and find your consistent attack on enzo, most know him as WayneL, silly.

It`s part of the mindset one must have: don`t listen to crap.

If you want bananas go to the store.

Snake

Re: Which one do you use? Technical or fundamental analysis

Realist said:

for the next 22 odd years and make 10% a year after tax (I don't sell so mostly no tax anyway) I'll have $4 Million. That should be enough.

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Will $4m be enough though in 22 years?

Even now I think they say you really need $1.5m or so to retire comfortably. In another 20 odd years, I imagine that would be somewhat more than $4m.

However, you'll probably still have good dividend income, which in itself might be enough.

Cheers,
GP

Re: Which one do you use? Technical or fundamental analysis

Duc

You've mentioned the lack of evidence to support the claims about beating the market.
I'm one of the blokes who has made such a claim. Not only that, but I've clearly outlined the system that's enabled me to do it.

Now, my question to you is this.........'Why should I feel obliged to provide you with evidence"?

Incidentally, the use of the word 'simple' to describe a trading methodology does not in any way mean that beating the market is easy.
No matter how simple the system used, there are various factors that ensure that beating the market will never be easy. Overcoming emotion and implementing self discipline are two that spring to mind. Neither of them is easy to achieve, hence trading itself is not easy.


Bunyip

Re: Which one do you use? Technical or fundamental analysis

Hi GP

I think $4M in 22 years time should still be more than enough to generate sufficient income to allow someone to live a comfortable lifestyle......but of course that depends on what they see as 'comfortable'

eg.......if in 22 years time you invest that $4M and receive a yield of 7% (which is pretty easy today with LPT's at least) then you'l have an income of $280k pa.

If you than assume average inflation of 3.5%pa for the next 22 years and use it to discount the $280k back to today's dollars you get:

NPV of that $280k = 280000 x (1 - 0.035)^22 = $127867

So everything else being equal, $280k pa in 22 years time should have the same buying power as ~$127k pa today.

cheers

bullmarket

Re: Which one do you use? Technical or fundamental analysis

Snake

Duc,

It`s all entertainment whether it`s fiction or fact.

Beating the market is not easy but earning a healthy income off it is not as difficult as one might think. As far as evidence it is not relevant.Perhaps you want some losses posted to make you feel better about your own losing system?

I`m not playing your game and find your consistent attack on enzo, most know him as WayneL, silly.

It`s part of the mindset one must have: don`t listen to crap.

If you want bananas go to the store.

Click to expand...

Well if it's entertainment that you're looking for, my mistake, you have undoubtably found it.

Regarding beating the market, you think beating the market is hard, yet earning an income from the market is easy, or easier..............I have yet to see consistent evidence from any but a select few. And enzo is most certainly not one of them.

As regards my *system* time will tell.
But more importantly, so will you.
You won't have to take my word for it, guess what you can follow it each week, and you'll see any disasters, how they are managed, or not as the case may be, and you can make an informed judgement.

Without that accountability, I could claim anything I choose, and who's to gainsay me?.....................This is the situation currently with this debate, discussion..........we have multiple people claiming all sorts of results, but not a shred of accountability.

If you are happy with that situation, then jog on.....................
I personally would like to see some evidence of profitability if profitability is claimed. If it is a discussion on *theory* that's fine, I enjoy discussing theory as much as the next person.

jog on
d998

Re: Which one do you use? Technical or fundamental analysis

Actually I just worked it out again.

$70,000 invested at 10% a year, and topped up with $40,000 per annum extra would turn into $5M after 27 years.

Remember, this is not my super, this is an investement, I also have Super which could be another $@M.

How much tax would I owe in 27 years? If I never sold anything along the way

Re: Which one do you use? Technical or fundamental analysis

bunyip

Duc

You've mentioned the lack of evidence to support the claims about beating the market.
I'm one of the blokes who has made such a claim. Not only that, but I've clearly outlined the system that's enabled me to do it.

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bunyip,
Actually I do not really require disclosure of your methodology at all.
If you wish to claim results XYZ, I would like to see results from trades taken in real time that support your assertion

Now, my question to you is this.........'Why should I feel obliged to provide you with evidence"?

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If you wish to claim the results, then provide the evidence.
If you do not wish to provide the evidence, save your breath claiming the results.

Incidentally, the use of the word 'simple' to describe a trading methodology does not in any way mean that beating the market is easy.
No matter how simple the system used, there are various factors that ensure that beating the market will never be easy. Overcoming emotion and implementing self discipline are two that spring to mind. Neither of them is easy to achieve, hence trading itself is not easy.

Click to expand...

Agreed.
Which is why when people claim the ability to consistently beat the market, immediately my ears prick up.

Using TT as an example yet again, tech/a posts his trades and his results live. He made a lot of money.............but he didn't beat the market.
His is a technical methodology.
There are some live *traders* on REEF, I hate their methodology, but I would never criticise, as, they are doing it live, and are accountable.

People are giving Realist a bit of a hard time for advocating a buy and hold strategy............now I actually don't advocate a buy & hold, however he has some trades listed................yet all the *techies* jump in with a loud collective shout of how that method will not beat XYZ.

Really?
Where's the evidence?

I've followed a number of live traders through the years, only the odd one has made any serious money, most have struggled.

jog on
d998