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RE: Beginners Questions - SebForLiberty - 2016-05-03
(2016-05-03, 09:23 AM)Lplate Wrote:(2016-05-02, 06:29 PM)SebForLiberty Wrote: . . . .Hi Seb, welcome. That question is relevant if you were putting money into a fund which he runs. On the other hand, the question we face as individual punters is not what someone else has done, but whether we can implement the stage analysis concept and make money from it. You have to look back over some shares which have broken into stage 2 and say would I have been able in practice to get an entry, what would the risk be, and would I have been able in practice to exit at a suitable price.
Therfore when i look at a method, to know if this method is effective, i simply look at the success of people who use it.. . . .
This is also relevant is you wonder if using his system is a good idea.
If the inventor of this system didn't succeed, then i don't see how i could succeed with his system.
And for example, it has been proven by backtest that the CANSLIM system doesn't work, so even if the idea looks interesting and IBB is a successfull business (in selling news letter, not managing money...that's my point), i wouldn't use it.
If a trader is really good, why not manage billions in the order to collect management fees ?
However a possible answer could be that he is very good trading small or micro caps, like i do, which isn't possible with a big capital.
If i remember well, that's the issue Jesse Livermore faced at a point in his life of trend follower.
About your back testing idea, that's exactly what i do with a friend, but it's always easier when you already know what happens next.
But again i'm deeply convinced that it's a good strategy, in worst case it won't beat the market, i'm just wondering if he really succeed a lot, it would give me more motivation.
Also i think that this kind of strategy is especially good to reduce risk (drawn down), which doesn't necessary imply that it beats the market on the long run.
RE: Beginners Questions - pcabc - 2016-05-03
(2016-05-03, 06:35 PM)SebForLiberty Wrote: This is also relevant is you wonder if using his system is a good idea.
If the inventor of this system didn't succeed, then i don't see how i could succeed with his system.
And for example, it has been proven by backtest that the CANSLIM system doesn't work, so even if the idea looks interesting and IBB is a successfull business (in selling news letter, not managing money...that's my point), i wouldn't use it.
If a trader is really good, why not manage billions in the order to collect management fees ?
Technical analysis seems to get much less promotion that other methods, eg fundamentals / value investment. People seem to love quoting Warrent Buffet for example. Of course it is clear he has done well, so anyone would be pleased to have a small fraction of his sucess. However, I wonder if the money supermarkets etc promote what fits their models best? I suspect it would not work for them promoting technical analysis as it is easy to do it badly and therefore they could get the blame when things go wrong?. However, if you invest in a mixed portfolio of funds that don't do well in the value / fundamental model it is simply that you have not pound cost averaged over a long enough timeframe?
I rather line Weinstein's book as he provides good guidance. Other books in comparison have interesting tool sets but leave the details to yourself or talk about patterns but are vague on how to make decisions. When to sell seems to be a topic with less coverage.
Quote:Also i think that this kind of strategy is especially good to reduce risk (drawn down), which doesn't necessary imply that it beats the market on the long run.
I've not been through a full cycle with Stage Analysis. However, it seems to have got me to protect my positions when the market turned. The bit I need to learn better is to not to keep trying to trade when the market is turning against me. Patience is hard.
RE: Beginners Questions - SebForLiberty - 2016-05-04
(2016-05-03, 09:29 PM)pcabc Wrote:(2016-05-03, 06:35 PM)SebForLiberty Wrote: This is also relevant is you wonder if using his system is a good idea.
If the inventor of this system didn't succeed, then i don't see how i could succeed with his system.
And for example, it has been proven by backtest that the CANSLIM system doesn't work, so even if the idea looks interesting and IBB is a successfull business (in selling news letter, not managing money...that's my point), i wouldn't use it.
If a trader is really good, why not manage billions in the order to collect management fees ?
Technical analysis seems to get much less promotion that other methods, eg fundamentals / value investment. People seem to love quoting Warrent Buffet for example. Of course it is clear he has done well, so anyone would be pleased to have a small fraction of his sucess. However, I wonder if the money supermarkets etc promote what fits their models best? I suspect it would not work for them promoting technical analysis as it is easy to do it badly and therefore they could get the blame when things go wrong?. However, if you invest in a mixed portfolio of funds that don't do well in the value / fundamental model it is simply that you have not pound cost averaged over a long enough timeframe?
I rather line Weinstein's book as he provides good guidance. Other books in comparison have interesting tool sets but leave the details to yourself or talk about patterns but are vague on how to make decisions. When to sell seems to be a topic with less coverage.
Quote:Also i think that this kind of strategy is especially good to reduce risk (drawn down), which doesn't necessary imply that it beats the market on the long run.
I've not been through a full cycle with Stage Analysis. However, it seems to have got me to protect my positions when the market turned. The bit I need to learn better is to not to keep trying to trade when the market is turning against me. Patience is hard.
Haha yes, actually Warren Buffet "only" did 20% a year, by being leveraged in average at 1,4 and with an average cost of money of 2% a year, so at the end his average return on investment (not equity) isn't a lot more than the market.
Warren Buffet is mainly the proof of the power of being frugal (he has always been living very modestly) while reinvesting your profits on the long run.
Many traders did better than him, but they were big spenders or stop working early.
Honestly i didn't get your questions, i'm sorry, my English isn't perfect yet.
Yhea you are totaly right, that's why i like this book, it gives you a very practical and detailed system to use.
RE: Beginners Questions - pcabc - 2016-05-04
(2016-05-04, 07:33 PM)SebForLiberty Wrote: Haha yes, actually Warren Buffet "only" did 20% a year, by being leveraged in average at 1,4 and with an average cost of money of 2% a year, so at the end his average return on investment (not equity) isn't a lot more than the market....
I'd be quite happy with that figure at present. It is interesting that the leverage is not widely reported on when he is often quoted.
Quote:Honestly i didn't get your questions, i'm sorry, my English isn't perfect yet.
Your English is good enough.
It was a rhetorical question. A question that was asked to prove a point or make an example. No answer was expected.
RE: Beginners Questions - SebForLiberty - 2016-05-05
(2016-05-04, 09:36 PM)pcabc Wrote:(2016-05-04, 07:33 PM)SebForLiberty Wrote: Haha yes, actually Warren Buffet "only" did 20% a year, by being leveraged in average at 1,4 and with an average cost of money of 2% a year, so at the end his average return on investment (not equity) isn't a lot more than the market....
I'd be quite happy with that figure at present. It is interesting that the leverage is not widely reported on when he is often quoted.
Quote:Honestly i didn't get your questions, i'm sorry, my English isn't perfect yet.
Your English is good enough.
It was a rhetorical question. A question that was asked to prove a point or make an example. No answer was expected.
I would be happy too with 20% a year in average, but anybody could have achieve 12% a year simply by buying an ETF on the SP500. If you use 1.4 leverage with borrowed money at 2%, then you would have enjoy a 16% annual return. So Warren Buffet stock picking abilities beat the market by "only" 3 points. That's my point. However not everybody could have borrow money for decades at an average cost of only 2% since not everybody own insurance compagnies and Banks like Warren Buffet (throught his investment compagny).
RE: Beginners Questions - SebForLiberty - 2016-05-14
Hello everyone, having study more about stage analysis, i have new questions for those among you who master this investment strategy. I hoppe you can help me
Firstly, i'm not sure i understand why volumes are important. Indeed in the books he explains than if volumes rise with the break out, it's a good sign because it shows that people are willing to buy. Ok, but it also shows that people are willing to sell...if nobody want to sell even with a rising price, which would also be a good sign, then volumes wouldn't rise. So do you have an explaination about it ?
Secondly, at page 151 of "secrets for profiting in bull and bear markets", the chart shows an example of a buying opportunity according to him. However the MA is still declining (even if the price is beyong the MA), so i don't understand, i thought we are supposed to avoid a stock with a declining MA, is it right ?
Finaly does he use a simple or an exponential MA ?
Thank you very much
RE: Beginners Questions - pcabc - 2016-05-14
(2016-05-14, 03:49 PM)SebForLiberty Wrote: Firstly, i'm not sure i understand why volumes are important. Indeed in the books he explains than if volumes rise with the break out, it's a good sign because it shows that people are willing to buy. Ok, but it also shows that people are willing to sell...if nobody want to sell even with a rising price, which would also be a good sign, then volumes wouldn't rise. So do you have an explaination about it ?
The idea is that we want to buy stocks that are going to move significantly. To move significantly there must be sufficient buying interest. The rising price, on volume, signifies more buying than selling pressure and the volume that there is an increase in interest. If little volume accompanied a rise then it would show that there was a lack of buying interest.
Quote:Secondly, at page 151 of "secrets for profiting in bull and bear markets", the chart shows an example of a buying opportunity according to him. However the MA is still declining (even if the price is beyong the MA), so i don't understand, i thought we are supposed to avoid a stock with a declining MA, is it right ?Given that the point is made repeatedly regarding only buying above a rising MA I assume that that particular chart was drawn a little sloppily.
Quote:Finaly does he use a simple or an exponential MA ?The book discusses simple (pages 13-14) MAs but the Mansfield charts use another form of weighted MA (page 25).
Thank you very much
RE: Beginners Questions - SebForLiberty - 2016-05-14
" The rising price, on volume, signifies more buying than selling pressure and the volume that there is an increase in interest. If little volume accompanied a rise then it would show that there was a lack of buying interest. "
Rising volume also means more people are willing to sell the stock as its price is going highter. If little volume accompanied a rise then it could also show that owners don't want to sell despite of the rising price, which is obviously a good signal.
" The book discusses simple (pages 13-14) MAs but the Mansfield charts use another form of weighted MA (page 25). "
Yes that's my issue, which one Stan uses ? and what kind of weighted MA is it on the Mansfield charts ?
thanks