TIME LINES & REASONS

[duncan macgregor]

I tried to explain my time line strategy which greatly assists me in understanding if a share is on track, and more importantly how it is trending in comparison to my other shares. What is a time line first of all. It is a line of expectation that gets set in advance at a given percentage that you are happy with. It gives an instant comparison with your other higher or lower priced shares and lets you see at a glance which one is trending faster. MY time line or expectation of myself is 20pc per pa plus dividends, or better.
EXAMPLE, Bought NOG at an average of $1-07 set my time line from 1st jan 2005 at $i-03 to the 1st of jan 2006 at $1-23 I then draw my time line between those two points in advance. At any time during the year i can give it a glance and see if i am on track. I normally buy a 50pc stake with a 5pc stop loss until it proves its self, then add to it with the second 50pc stake, with a stock loss designed to suit the volatility of the company. In this case it will be 15pc. I let my stop loss take me out in a down trend, and my time line tells me when it is not worth holding. When the share trends up faster than my time line, i move it up to my stop loss level at both ends it makes it easier to read.
The time line is not a prediction, only the bottom line of what i expect of myself. I only have 3 companies PGG at $2-21 TPW at $5-60
NOG at $1-12 my time lines tell me at a glance which one is trending faster, and which one when the time comes to abandon. When a company trends up at a fast rate, i will double up, and become overweighted. That is why it is very important to understand at a glance. To only have three companies is a little risky, even in a bull market, i like to have five, But the companies i do have are all in different fields. The time line is so easy to draw on a chart, and so helpfull that i always draw it on all the charts, if the company interests me.
The time line is like a stop loss, start it at the level you are happy with, and trend it up to your own expectation level. It will then tell you at a glance when you are wasting time, and it is time to move on. MACDUNK

[whiteheron]

MACDUNK

I am looking at something similar but in a different manner --- although as I am essentially a short/medium term trader I am probably not as likely to hold for as long as a long term investor , regardless of where a stock is at
I will attempt to explain

My son is developing me a spreadsheet to take information from my accounting system on a share by share basis ; being shares held , cost thereof and an allowance for cost of capital at say 10 % pa based on the time held ( a bit above the margin lending interest that I incur from time to time )
This will produce a column for the cost of each share held inclusive of an allowance for cost of capital

He is then looking at importing the current share prices into another column so that the two can be prepared to give a quick and relatively accurate guide as to whether I am in front or behind after taking into account the time value of money

If the imported share price data can be lined up easily with the stocks held we believe that all should be sweet
Other features may be added later if it is successful eg percentage gain/loss , raw and annualised

The project is in its early stages at present and I am going on holiday in a few days so it may be 2 or 3 weeks before I know the outcome

Similar aims , different methods

[Tinker]

Hi Duncan,

Thank you for going to considerable trouble to detail your thoughts.

I have a bit of time so will comment.

Perhaps in a bull market any manner of technical system will provide a result. I have one myself. Reliability is 44%, expectancy is 41% and average hold is 161 calender days (TAs will know what I am talking about). Back tested 8 years ASX. It is working in this bull market, I have checked. I don't trade it.

My perception is that many technical systems are intellectually challenging but not profitable in the long run. A small minority surely are but they don't post on this forum.

In the long run a companies value is related to the endeavours of its people, the service that it provides and the understanding that it is there to provide its owners with a reward for their hard earned capital. Thus my thinking is to look for those companies that do this. And to save others the trouble, yes I do averagely!

Anyway my brief thoughts.


Cheers
Tinker

[whiteheron]

With trading , in my opinion it is essential to monitor things frequently and I usually do so several times a day ( around open , once or twice more during the day and after close )
As I am retired and this is my interest it is not a chore

What does it mean ? --- it means keeping in touch with things
There is always something going on !
Not so important for long term holders though

Any method that makes the key info easier to get in a meaningful form saves time and has got to be worthwhile

[duncan macgregor]

ASPEX, A time line is very easy to draw. At a glance you can tell how a share is doing in competition with your other selections. It matters not if you are a TA investor, or a fundamentalist. To have an easy way to know is only a tool. It is difficult to compare shares that have different prices, this makes it easy, and shows if it is on the right track with your expectation, or falling behind.
At buy time, i am a fundamentalist, but at sell time its my expectation and the market that i listen to, this time line is a very important tool. macdunk

[Steve]

Thanks for this detailed example MACDUNK. It is all very clear now! Time is a variable that I have not really given that much thought, but for which I can see some benefits in considering...

[Wolfman]

Duncan, would you please explain the way you operate stop losses further. In the case of NOG above, is your 'stop loss' set at 15% below your buy price? Do you formally place a sell order with the trigger price set at your calculated stop loss level?

[zyreon]

YOU SHOULD, because if you don't have an order on you'll be inclined - (psychologically a natural predisposition) to "give it a bit more room" unless you have the discipline of a kung fu monk

stop losses are designed to limit your loss -- and risk, violate your stops at great peril

[Phaedrus]

Wolfman,
You might be interested in an article I once wrote on the use and setting of Stops :-
http://www.sharechat.co.nz/archives/2001/06/msg00554.shtml

[duncan macgregor]

PHEADRUS I have read all your articles on sharechat very helpfull, It gave me a great deal of confidence in knowing when to get out.
WOLFMAN,I set a strict stop loss at 5pc when i first buy with a 50pc stake. The share has to prove its self before i invest another 50pc stake. I then place a stop loss on from the highest trend price at what ever level of volatility i think is right for the risk that i am prepered to take. With NOG in my example i am at this moment running a stop loss at $1-02 later on if i buy more if it trends up my stop loss will still be $1-02 and follow the highest price up at a 15pc stop loss level. I do my time line before the event as a tardstick to measure my progress Pheadrus uses tread lines after the event. My way makes it simple for me to compare companies with a wide range of prices, to see what is moving the fastest. I dont so far set a formal stop loss in place, a quick ph call suffices.
Thanks PHEADRUS i learned lots about strategy from your postings
macdunk

[Wolfman]

Thank you for your comment folks.

I have panicked and sold a stock that has been falling only to have it bounce immediately and keep climbing, leaving me out in the cold.

Phaedrus, your article gives a strategy to cope with that and the safety of knowing in the event of a real collapse, protection is there. Cheers.

[Wolfman]

Thanks Duncan.

I see how you project a profit line forward and compare the stocks progress with it and also the progress with other stocks.

I think I need to try and work both bits (forward projection and trends) into my practice analysis and see how it all fits together.

[whiteheron]

Phaedrus

I have read the article referred to in your post of 12 Jan above

What you say in your article and what has happened to me are so closely related that it is uncanny !

I always enjoy reading the postings you instigate and your comments and explanations on postings by others

Looking foward to some more robust discussions in 2005

[patsy]

Phaedrus - Thank you for the link to your article in Sharechat.

Just a quick question: How do you determine accurately a support level? Do you work it out by analysing visually a chart or is there a formula or a more sophisticated way of doing it?

Thanks in advance.

[Phaedrus]

Patsy,
First off, I don't think you should try to determine support levels "accurately". They are best thought of as "zones", in my opinion. Having said that, it is surprising just how often they can be accurate, right to the cent. (These are the ideal examples that I post!!!)
You should be able to see support on a chart from the other side of the room. As with a trend, if you can't see it easily, if it is not obvious, it's not there.
"Is there a formula or a more sophisticated way of doing it." I'm sure there must be. Sometimes the simplest methods are the best, though. In any case, I have not been able to program MetaStock to recognise such things, so I am unable to mechanically backtest any system that uses trendlines, support or resistance.