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rotsevni
15-01-2005, 12:27 AM
A slightly hypothetical question here from a newbie, to help my understanding of TA: I hope it's not a dumb or overly-repeated question)....

One of the funding principles is that "market action discounts everything". I note however that many (most?) traders do rely on all sources of information besides what the charts say.

But assuming there are a few purists out there (or those using mechanical systems based on market action only) then I wonder how they decide where best to focus there attention. What makes one market more worthy of there attention than others? For example, if foreign charts could be converted into local currency so that the currency price action is factored in, then is it a level playing field and are the US, UK, Japanese, ASX all equally worth scanning for the best trading formations/opportunities? Are there times when they move from one market to another (eg NZX has been in stall mode for the last month)

I'd be interested in what those with experience in these markets now think about the relative merits. Is a market as small as the NZX worth spending much time on? Presumably there are some hurdles to overcome with offshore markets (foreign currency accounts etc), is it worth the effort? Any advice welcome. Thanks

Phaedrus
15-01-2005, 10:31 AM
"What makes one market more worthy of attention than others?"
Markets have different characteristics. If you know exactly what you want, the idea is to trade in the market that best meets those needs. For example, I require a good dividend income to provide all my living expenses. The NZ market is the obvious choice here, no contest. I am also interested in short-term trend trading. For this I want very liquid, very volatile stocks, and I need to have access to intraday, live, self-updating online charts and indicators. I want to trade both short and long, with very low brokerage charges. The USA is best here, without doubt. I trade medium-term in Australia. Here there are good volumes, and good volatility with compatible time shifts. So, I am in 3 different markets, for 3 different reasons, using 3 different systems, each utilising different tools.

"Is a market as small as the NZX worth spending much time on?"
Absolutely. Quite apart from the very high dividend yields here, the local market has been one of the best performers in the world over the last year or so. There are plenty of adequately sized companies listed in NZ and there are plenty of tiny, tinpot, illiquid stocks listed on the NASDAQ.

I would suggest that you start with the NZ market and then move some money to Aus when you are making steady gains here. Make certain that you are well and truly competent before tackling the US market. They play hard-ball - it is a tough market that eats little boys for breakfast. Do it right, and you will make more money faster there than anywhere else. Do it wrong and you will lose money so fast it will make your head spin.

duncan macgregor
15-01-2005, 04:14 PM
I only get involved with the NZ market. Simple reasons for a simple man. I have no requirement to worry about exchange rates, or political situations for starters, which must be taken into account.
It makes it easy for me to get first hand information on a company, and more importantly my money is working in the country that i live in. The last point being that i am dead against our silly gov putting our money in the hands of money managers to squander overseas. my basic buy system is more FA than TA, and my sell system is total TA, so i dont really qualify to answer your question.
Best of luck macdunk

ruethewhirl
15-01-2005, 11:59 PM
Phaedrus,

Interesting comments.

I'd like to pick your brain on the topic of full time trading,
specifically, what level of capital does one need to make that a
reality.

I've been focussing on the ASX for about two years, but want to
trade the NZX and the US too, and realise that all three are really
essentially for a full timer.

It's gotten to the point where I've become less concerned about my
career development in my current field, because the only future I
see for myself is being a full time private trader, using my current
situation as a way to stack up the necessary capital.

I've perfected the art of frugal living.

I've read Zen and the Art of Motorcycle Maintenance.

What next?

Phaedrus
17-01-2005, 08:12 AM
RTW,
The amount of trading capital you need is directly related to how much income you require and how well your system performs. If, having perfected the art of frugal living, you require only a very small income and are a very disciplined successful trader making, say, 30% pa, then you only need around $40,000. In theory. If you require an annual income of over $200,000 and can only make 10% pa, then you would need $2 million - $3 million. I can't remember where, but I did once read an article on just this topic that calculated the minimum capital requirement needed to provide financial independence to be $400,000. (NZ$???) I don't see how "one size fits all" though.

As with any business, undercapitalisation can cause many other problems. You will have to withstand years where your return is less than usual. You are not in a very good position if a few consecutive lousy years or even a bad run will drive you out of the market and have you begging for your old job back!
Adequate capitalisation gives big economies of scale. At US$11/trade (regardless of size) a $100 trade costs 22% brokerage, a $100,000 trade only 0.022% brokerage. In NZ, an optimum trade may well be about $30,000, depending on the brokerage setup.

So, where to from here? Well, how is your reading programme? Have you read all you can find by Murphy, Elder, van Tharp......? If so, and if you are trading well in Australia, it might just be time to open a US account. I strongly recommend Ameritrade. I have tried many US brokers, and while at $11/trade (short or long, any size) Ameritrade are not quite the cheapest, they do provide the best online monitoring facilities that I have found. Any trade that takes more than 5 seconds is free. You have to pay extra for some of their best features unless your account is over US$100,000.

zyreon
17-01-2005, 08:42 AM
capital requirement:

Capital required = required income / % return

e.g. required income is $50,000. reasonably estimated return 17.5%

Cap Req. = $50,000/0.175 = $285,714.3

To test that you got it right - and to illustrate 17.5% of $285,714.3 = (0.175*285,714.3) =$50,000.0025

Shamrock
17-01-2005, 11:34 AM
Thanks, Phaedrus, interesting stuff. I'm in the same boat as Ruethewhirl.

Re Ameritrade: "Any trade that takes more than 5 seconds is free." - it would be great if a NZX broker would offer the same sort of guarantee...

Steve
17-01-2005, 04:55 PM
quote:Originally posted by Shamrock

Re Ameritrade: "Any trade that takes more than 5 seconds is free." - it would be great if a NZX broker would offer the same sort of guarantee...

It would be great if the NZX did not create an uneven playing field by delaying announcements for 20mins to those who don't pay the comparatively high charges...

rotsevni
22-01-2005, 01:05 PM
Thank you all for you comments and advice. I would just like to pick up on one subject which is particularly relevant to me.

Phaedrus, to respond to you point about choosing a market based on needs/wants... What I am interested in is the market which is best behaved in terms of TA (so that I only have to hone my TA skills and not have to know or read about too much else) as well as minimising paperwork and tax issues. I am mostly interested in short-term trading and not at all interested in long term.

So that leads me to some more questions about the US markets:
1. Is it just a simple matter of tranferring funds to Ameritrade and then all systems go? Are there any US tax issues? Does NZ tax become any more complex as a result of US trading? Are there restrictions on how much US trading you can do or (my ex-broker once told me that there is, but I usually do the opposite to what he tells me, quite a productive tactic :-)
2. You said "Make certain that you are well and truly competent before tackling the US market. They play hard-ball - it is a tough market that eats little boys for breakfast. Do it right, and you will make more money faster there than anywhere else. Do it wrong and you will lose money so fast it will make your head spin".
I understand this on a business level but not on a TA level.
Are you saying that the US market is more prone to false signals, undetectable insider activity, manipulation of SP by large traders or is prone to sudden unpredictable price movements... or what exactly? As long as these influences don't stop TA working, then why should I care?
3. I usually like to start things a little bit before I'm really ready but start small. I find it easier to learn and remember from books when I put it into practice immediately. If I make a total mess of it, then at least my exposure was small and the lesson will be well remembered.

I look forward to some more pearls of wisdom. Thanks for your contribution.

duncan macgregor
22-01-2005, 01:59 PM
ROTSEVNI, PHEADRUS undoubtabely is the master in this area. May i suggest a method that only costs time. With any new system i paper trade it first which costs nothing. Impatience costs money do it on paper first over a period of time, learn the flaws and potholes in the road first. Rally drivers inspect the road before the race and this is a race to beat mr market. macdunk
PS good luck but america is going down stick to winning markets.

zyreon
22-01-2005, 05:53 PM
if you're gunna paper trade find a partner to email your theoretical trades to.

when somebody else is looking at your trades you can't then go and ignore the losers or fudge the numbers. It makes you accountable and adds an element of psychological pressure, which although pales in comparrison to the pressures of actual trading will serve to uncover any skeletons in the closet of your mind...

Phaedrus
24-01-2005, 06:23 PM
Rotsevni,
I do not feel competent to advise you (or anyone else) on international tax matters. You need to seek advice from a proficient accountant. There should be no restrictions on how much US trading you can do - is that why he is your EX broker?!

The most important feature of the US market is the extreme volatility. It is nothing for a stock to rise (or fall) 10% - 20% "overnight". I have always assumed that this is due to the high levels of "Short" trading there. All movements are exaggerated. Get yourself caught in a "Short squeeze" and you can lose a lot of money very quickly indeed.

Generally speaking, the higher the volume, the better TA works. I am not sure how experienced or knowledgable you are, but in many ways, the Australian market is a nice compromise. Lots of different stocks with adequate volume without too much volatility. I would recommend that you start there.

This may be a rude question, but do you have a system? One that you know works? Is it written down? Have you back-tested it? Have you paper traded it? That's 5 rude questions I guess!

It is quite true that you can "learn by doing", but such lessons tend to be very expensive tuition.

zyreon
24-01-2005, 07:30 PM
they're not rude questions they're -important- questions and if you're offended by them then you will lose money because you don't know what you're doing (this i can say by looking at my initial haphazard months of trading as i attempt to evolve from a fumbling amateur to an advanced beginner)

you have to be very honest and realistic with yourself, trading is no place for games of self delusion

enough talk - how can you apply my assertion in a meanginful way, use a diary, the extent to which you use your diary will be a good predictor of your success. Why? because it is easy to selectively forget or dust over important information e.g. entering a trade because of boredom rather than a high probability situation

kittydashwood
24-01-2005, 07:39 PM
All markets offer long, medium and short term opportunities. Volitility of the US markets creates great buying opportunities for the the long hold if the trend stays intact. And believe it or not there are some US and international stocks that offer dividends that rival the NZ market. ( MSK runs at 9% and sells more corn chips than any other company in the Americas)

Stateside I use Schwab, 19.95 per trade if using the full service or 9 per trade if using the coach class internet service. However Schwab's strength is their research and the analysis, stock screeners are pretty common but the screeners on Schwab are superb.

"2. You said "Make certain that you are well and truly competent before tackling the US market. They play hard-ball - it is a tough market that eats little boys for breakfast. Do it right, and you will make more money faster there than anywhere else. Do it wrong and you will lose money so fast it will make your head spin".
I understand this on a business level but not on a TA level.
Are you saying that the US market is more prone to false signals, undetectable insider activity, manipulation of SP by large traders or is prone to sudden unpredictable price movements... or what exactly? "

In a word Yes sometimes so much static is generated by market makers that the TA is not only useless it's downright misleading. Fund managers have rooms of TA folk watching the same signals you are watching and many times they help cultivate and create trends to enable smart money and insiders with deep pockets to act on hidden agendas. Also I recall P on another thread mentioning OBV is useless for the Nasdaq, as the trades are counted twice.

Maybe even think about emerging economy etf's Last two years Australia, NZ, Mexico and Austria have outperformed very well. so... where's the next sweet spot globally, India? China? Chile? Brazil? Agrentina?

Not really one for SPY or DIA or IWM or DVY reflecting the index never beats it so a hedge is always best in cash.

This year make mine 20% not just for capitial preservation but to take advantage of opportunities.

Remember it's election year in NZ so things could stagger to a stasis until the picture is clearer in August.

As mister P points out volume is crucial to accurate TA although big gains can be made from illiquid stocks, if you have the patience.[|)]

bull....
25-01-2005, 06:40 PM
Rotsevni , Agree with others America offers the best trading oportunities by far mainly due to very liquid markets and nice volatility to trade in and out with ease.
Brokers rates are great as are the platforms they provide my trades are executed in less than 1 sec which is a necessity for good trading as slippage will kill your account as will a high brokerage.
I find all brokerage offers in nz pale in comparison guess we put it down to being a small market.
Trade based purely on T/A, works fine as long as you can read thru the whipsaws as P says you wont last long trading in this market if you dont know what your doing personally have made 10s of 000 in minutes only to lose it all the next day + interest in other words you need balls of steal to trade the us but it can be done based purely on T/A and you can make money very quickly if your right.
I only Trade futures by the way in the US.

rotsevni
28-01-2005, 12:06 AM
Thanks again for your collective wisdom. Pretty much confirms most of what I am doing and encourages me to do it more rigorously. With regard to back-testing, I could do this more rigorously if I had some software with years of data, as I am presently using free data from sources like fat prophets. I mostly need each days close price and volume going back about 10 years. I am only working on NZX for now, but ASX will be next. Any advice? If I have to buy software to do this, I'd like to be able to customise it later on to optimise my own oscillators, trendline-generation etc by back-checking. I'm not averse to spending money on good software, but just want to start with the right one so I'm not changing systems in 6 months time. Thanks in advance.

ruethewhirl
30-01-2005, 09:33 PM
For someone who knows next to nothing about the US markets,
anyone recommend a universe of stocks to look at in the US?

I watch the ASX200 in Aus, and any other stocks hinted at in
forums. 200 is about right for me!

Just help to narrow things down a bit.

kittydashwood
31-01-2005, 06:05 AM
SIRI - Sirius satilite radio is being installed in in many makes of new cars here.
Very widely followed on the Nasdaq, recently displayed an inverted head and shoulders when closing at 6.50.

Recent quater failed to make expectations, wider loss per share HOWEVER subscription rates have decreased and only competition are XM - stailite radio.
Ready for a big move pon Monday. If you can get some for 5.90 -6.15 should be good for 25%

zyreon
31-01-2005, 07:21 AM
http://screen.finance.yahoo.com/newscreener.html

you could use the screener to come up with a short list or use the standard pick a sector method and go with the top 1 or 2 of that sector

ruethewhirl
01-02-2005, 10:51 AM
Thanks Z, I'll check it out.