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whiteheron
07-02-2005, 12:35 PM
I am essentially a short to medium term trader

There seem to be a number of ways to assess share trading performance , firstly external comparisons with appropriate indices or benchmarks of which there are many depending on your individual circumstances and the shares being traded and secondly , self set performance targets
It is the self set targets that I am particularly interested in and on which I comment below
I have set myself two targets

TARGET ONE
To achieve an annualised return in the region of between 30 % and 35 % on average funds invested , net of direct costs such as online brokerage and margin lending interest
Presently I am exceeding this by more than double , largely as the result of some exceptionally good trades in the last few months , but I do not expect to continue at this rate

TARGET TWO
To minimise leakage from unprofitable trades to no more than 20 % of returns from profitable trades , thereby achieving a net return of not less than 80 % of profitable trades
I have not yet completed figures for this but expect that I will have at least achieved my goal

I see target two as a strong discipline to consciously strive to minimise losses from bad trades by setting stop loss orders and not amending them downwards , sometimes exiting even before the stop loss point has been reached if the trade looks like going bad
A losing trade exited early to minimise potential losses is just as important as maximising returns from profitable trades ( think about that , I consider it to be most important )

I will be pleased to hear from other traders about the disciplines and systems that they use to enhance trading returns , what their targets are and if they have been achievable

My philosophy is to take reasonable but not stupid risks to maximise the upside and to minimise the downside by quitting bad trades before they become too big

duncan macgregor
07-02-2005, 12:59 PM
WHITE HERON, I know you are familiar with my time line strategy, which gives me at a glance how a share is trending to expection against other shares at different prices in my portfolio. We both think five maximum which means close watch, and strict stop loss systems. I think both our buy, and sell strategies are on the right track what is in question is when to let a share go that goes side ways. My time line is drawn in advance and will take me out as it did with HQP when it went side ways but still held the sp. My idea is to look for new opportunities on a continual basis, with straight out fundamental analysis, and a touch of TA, and let my systems do the selling. The point being, it is finding the new opportunities that is our problem, we dont have a sellers problem. macdunk

limegreen
07-02-2005, 01:19 PM
I am an investor rather than a trader, although in the medium term I won't discount developing a trading portfolio. I have a mortgage over my hut, therefore my performance target is to keep my investment portolio ticking over at a level greater than my the rate of compounding interest. It is also my general aim to keep each of my single investments likewise beating those odds. Currently I'm doing rather better than that, so I'm happy :)

And I agree with Macdunk that working out when to liquidate a share moving sideways is my biggest issue. I currently have 3-4 on the block in that respect.

zyreon
07-02-2005, 01:45 PM
equity curve

it doesn't lie

[value positions at net realisable value i.e. at current bid - the market may be $2 but if bid is at $1.90 you can forget about $2; it exists only in the past.]

whiteheron
07-02-2005, 02:08 PM
MACDUNK

I know that our philosophies are fairly closely aligned , except that I probably hold for rather shorter periods than you do except for my portfolio shares which are long term holds
--- I normally hold trading shares for between a week or two and a few months , occasionally for a year or so if all signals are good and the price is still trending up

Although I dont use a time line strategy exactly the same as yours what I do is pretty similar , I have to keep my capital working so any trade that is dragging the chain doesnt last too long before being replaced

I spend quite a bit of time just searching for shares that look very promising but for one reason or another are well priced --- not yet discovered or temporarily out of favour for one reason or another
Virtually all of my research is now done via the internet , the place where opportunities tend to first emerge (eg , exchange announcements , company websites , charts , rises / falls , metal prices and stocks , broker reports for leads , etc , etc )
Newspapers are too late and not very good anyway

The shares in my trading portfolio come and go on a daily basis and at any one time I may hold up to a dozen or so , as distinct from investment shares of which I only hold four
Trading shares are reviewed at least once a day , sometimes several times depending on what is happening
I am considering reducing the number of trading shares and dealing in larger parcels to firstly simplify matters and secondly to reduce brokerage costs , at present costing me something like $10,000 to $12,000 per year

It is a system that has worked very well for me for just on two years now , being refined as time goes by
Not so before March 2003 though when I lost plenty --- new to the game , making all the usual mistakes and bad markets ; not a good mix

I have found much the same as top sportspeople --- the more I research (train ) the more luck I seem to have !

KJ
07-02-2005, 10:16 PM
I have the bulk of my $ in LT shares.

Over the last few mths I have commenced share trading as well.I have restricted myself to $30k for trading and usually have about 3 trades on the go at any one time.

My goal is to achieve a return of 50% (on a pa basis)on share trading.So far this yr I have completed 10 trades and have exceeded this 50% return.(after broker costs)

I look to complete a trade in the 1 to 8 week range.I only trade stocks that have strong earnings growth and are in an uptrend.

Phaedrus
08-02-2005, 07:47 AM
Assessing your performance by comparison with an arbitrary fixed percentage "target" is a flawed concept, in my opinion.
Say you had decided on a 25% "target", and made 15%. What are you going to do - mark your report card "Must try harder"? Give yourself a bit of stick? What if the Index that year went down 10%? The fact is that you have performed brilliantly.
Say you had decided on a 25% "target", and made 30%. What are you going to do - mark your report card "Excellent performance"? Shout yourself a new car? What if the Index that year went up 40%? The fact is that you have performed very, very poorly. You clearly have an inferior system - one that needs a major rethink and maybe should be ditched altogether.
You can only make what the market will give you. The market is bigger than you - you must tailor your expectations to the current conditions. I suggest that it is more logical and more realistic to assess your performance by comparison with the appropriate Index, rather than by whether or not you met some completely arbitrary target.

duncan macgregor
08-02-2005, 08:28 AM
PHEADRUS, You missunderstand the concept. You are not targeting anything. A fixed percentage line drawn at a percentage rate only gives you an indication of the percentage rate in comparison with your other shares. It also gets you out of a share that goes sideways. HQP was my example. If a share trends up at a much faster rate, all you do is raise the time line to your stop loss level. In my case 20pc for the time line. There is no ultimate price, nobody knows what price anything will be next week, this only shows me at a glance what is the best and worst in my hand. The biggest mistake is to sit on a share that stops working time catches up and you get out. You do it in a different way, which i understand this is the easiest and simplest system that works for me.
CHEERS MACDUNK

KJ
08-02-2005, 09:15 AM
Phaedrus-very valid points.I am new to trading so will give myself time to get to grips with it.I have been a LT investor for a long time and consider myself successful there.

In terms of trading,if I cannot beat my LT returns by at least 15% then I would think that it is not worth doing because of the added risk and tax that needs to be paid.

In terms of my LT portfolio I measure this against the NZX50 which I set to beat by at least 25%.More importantly I look to average over 20% return over the previous 5 yrs.Anyone can have one good yr-if we just looked at the last couple of yrs we would be fooling ourselves.

whiteheron
08-02-2005, 10:49 AM
Thanks for the replies folks , some pretty good points raised

Phaedrus
I did not make myself clear that the personal goals I have set for annualised returns are long term goals to be assessed over at least 4 or 5 years and I am no where near having data for that length of time yet

The points you raise are all very sound and well reasoned , as are all of your contributions on ShareTrader --- thank you

I agree with you that on a year by year basis you can only make what the market will give you so comparison to an appropriate market benchmark is essential
I was not suggesting that comparisons to market benchmarks be ignored , I was trying to see if I could have a couple of personal goals as well , together with some fairly good disciplines

macdunk
You are a great exponent of the time line ! and I can see where you are coming from
My technique is different , but in many respects achieves a similar result , especially with the shares that end up going nowhere

Any further contributions will be welcome no matter who you are or what your experience is

Good robust discussions are beneficial to us all

zyreon
08-02-2005, 11:17 AM
if you want to set targets I will point out a method i thought of one day:

3 levels

level 1 - The basic minimum: This is the minimum performance standard.
e.g. make 2 times the risk free rate, or 1.5 times what you'd get in a term deposit.

level 2 - The goal: this is a target that will stretch your ability a little, but not too much, i.e. it must be achievable.
e.g. 15 to 25%

level 3 - The dream: this is designed to let you be ambitious, this target must be in the realm of possibility, yet seem a little beyond what you are capable of achieving, half the time you wont reach this goal. The purpose of this is to let you dream a little with out committing to an unrealistic target.
e.g. 50%+

The aim is to exceed level 1 as that is minimm performance, and then to achieve level 2.

be wary of setting your goal beyond what you are capable of in trading as you could end up making stupid mistakes and taking drastic measures to try and get it.

zyreon
08-02-2005, 11:19 AM
Sorry, *flicks through book* actually I didn't think of it, I adapted it from "Come into my trading room" - A.Elder

whiteheron
08-02-2005, 12:08 PM
zyreon

Whatever your system , I agree with you that you should never take stupid and unnecessary risks to reach the rainbows end , as chances are you will never make it and will just end up in a no win situation between a rock and a hard place instead !!!

I have found that taking some controlled risk is okay ( and profitable most times ) so long as you protect the downside by having stop losses in place and not reducing them if the share price falls
Never get so attached to a share that you can not bring yourself to sell it

Unrealistic goal setting and taking unnecessary risks will surely leed you to the poor house

As a matter of interest I have been stopped out of a share in the last half hour --- TOUGH !!!
This proves to me that I have given it enough rope and I am presently looking for a much better replacement

Halebop
08-02-2005, 12:56 PM
Phaedrus is bang on. The concepts of business excellence (and really any form of excellence) is built around self awareness and improvement.

Setting an arbitary number as a benchmark is futile without some meaning behind the numbers. Benchmarks are built around peer performance which is why they are used for this purpose. Nobody gets excited watching the Olympic games and seeing 5 athletes in the same race beat their personal best. We get excited watching the one guy in front beating the world record. This is benchmarking 101.

Even keeping records of your own results and bechmarking those is merely an exercise in self indulgence. It tells you nothing of your skills or ability to outperform. If we didn't want to outperform we wouldn't be investing in shares to start with - we'd put the money nice an safe in a bank deposit or a hole in the ground. In order to know if you are outperforming you need to compare yourself with the performance of others.

So while we don't know who did best in a market, we do know how everyone did via indexing and this is always the place to start with any benchmarking excercise: Beat the average. The market is too highly variable to apply absolutes anyway.

Zyreon: If Mr Elder gives this as an axample of goalsetting then he is not the worlds strongest goal setter. I've never written nor read a business plan that had 3 goalposts for the same goal.

While benchmarking can say: The risk free rate of return is x%, the sharemarket rate of return is y% and the best share growth fund rate of return is z% and your return is a%, your goal should be one number based on relative performance. If you have 3 basic Key Performance Indicators better to say something like outperform the the risk free rate of return, the index and the bottom three quartiles of fund managers by 10%+ than set 3 conflicting goals (and of course, as a winner your ultimate goal is actually to top the list too!)

whiteheron
08-02-2005, 02:25 PM
Halebop --- Good comments

NOW FOR SOME HELP FROM ANYBODY
I have been trying to track down a chart or tabulation of the index for Australian mining stocks but without success
There seems to be something on the ASX site , but I have been unable to latch onto it
I am good at doing the things I am used to , but am inclined to get lost when searching out something new

If anyone can point me in the right direction or supply me with a link I will be most grateful Thanks

Halebop
08-02-2005, 03:17 PM
ASX provides some basic data on indices here:
http://www.asx.com.au/statistics/l3/GICS_IndexDescription_MS3.shtm

S&P have limited constituent data of their indeces. Check out there site here:
http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/Page/IndicesConstituentsPg&b=4&r=7&l=EN&s=6&ig=42&i=78&xcd=ASX300&f=1&az=all&pg=1&bp=0&so=1&dt=07-FEB-2005&fs=15

I just had a quick look but the "Materials" constituents listed are limited to the 59 companies that are also in the ASX 300.

Not sure if this is useful.

duncan macgregor
08-02-2005, 04:02 PM
I used to marvel at the ignorance of some investors when PHEADRUS was explaining his technical analysis. It went right over their heads, they shot off in a completely different direction, nothing like what had been explained in simple terms. I put explaining what a time line is, and how easy it makes it, and watch in utter astonishment at some of the off track replies. If you have a new way of doing it that makes it easy,dont bother to share it. The answers and comments have nothing at all any connection to the theory. It matters not if you agree or not, but there is not one of you on track its gone clean over your heads. Perhaps it is a good thing that people have fixed ideas, and cant expand their brain to give an honest negative if they think a system is rubbish. It might be that nature sets people up that if they have a good system it cant be explained to the herd that swim the river and fail to see the bridge. For petes sake get on the wave length if you say anything is wrong, or go down as a complete ignoramous macdunk

whiteheron
08-02-2005, 08:07 PM
Halebop , found the indices figures and very useful

As a start I have compared my performance against the ASX 300 and the ASX Materials indices ( for the last four months )

Figures (rounded slightly ) are;

ASX , up by 12.1 %

ASX Materials , the index that best fits what I do , up by 13.5 %

Whiteheron , up by 24 %

I am pretty happy with that , but there is quite a bit goes into achieving it

I now have some benchmarks to compare my ongoing performance to

Thanks

Halebop
08-02-2005, 08:46 PM
I'd be estatic with it Whiteheron! You've beaten the ASX300 by a quantum of 100% while earning a positive (and high) return to boot. Nice going!

whiteheron
09-02-2005, 10:04 AM
I have been thinking about the return that I have been achieving
Although it looks pretty good , things are not always quite what they seem

I have calculated that if you take into account the time I spend on share trading I need to continually beat the market by a margin of around 10 % to 12 % on an annual basis to get a reasonable return for time expended , however as I am retired and share trading is my hobby and addiction this is not too important to me
What I earn will hopefully pay for the education of my five wonderful grandchildren relieving them of the burden of student loans

The reason that I mention the time factor is that it could be important to someone who is treating share trading as an occupation --- there would be no point in expending a whole lot of time ,energy , capital and taking on risk if you could not beat the market average by some margin and make a reasonable return for time expended

The return I achieved during the period quoted was influenced by two especially good trades that are going to be difficult to repeat ( but who knows ! ) and if these are excluded my return works out at around 10% to 12 % above the market average on an annualised basis , returning me very approximately $25 per hour for the time that I put in ( not too shabby for a hobby I suppose )

Taking all factors into account I have decided to set my foward target to beat the ASX 300 by a margin of 12 % per annum

What applies to me will not necessarily apply to others ; we all have our own circumstances

Steve
09-02-2005, 08:27 PM
WH, I do something similar in accounting for 'MY' time:

(Expected Hrs * $Hourly Rate) / ($Value of Trading Portfolio)

which in my case equates to 8.7%pa currently.

My 'break-even' mark is thus (Annual% NZX Total index + 8.7%pa)

IE: I measure my performance relative to the annual return on the NZX Total index after allowing for my time.

Tinker
09-02-2005, 09:42 PM
Good topic thanks.

My objectives are more modest (I am after all just a humble Tinker) and are:

10% after tax return on average (to make sure that it is worth the trouble and provide real returns) and
ASX 200 all accumulation index in NZ$ +5% (this index is untaxed) to be competitive and make me stretch.

With the recent market run my boat has risen with the tide so am close to my objectives.

However what prompted me to write is Whiteherons comment. An aim to to help much loved family with ones experience and skills is, I perceive, one that I aspire to. Thank you Whiteheron. I think you are blessed with much good fortune to have 5 grandchildren that are so loved!

For those with families perhaps ones real wealth walks through the door. It does for me.

Cheers
Tinker

PS Won the third round of company cricket tonight so will pay dearly tomorrow. The heart is willing but the body isn't keeping up[}:)]. I'm buggered!