Using TA to time entries and exits

[blu3]

Much appreciated KW, thanks again!

[Snoopy]

This is a thread on timing entries and exits - not on picking stocks.

It was you in your post 142 that said when talking about:

"It is exceptionally useful for managing long term investments that would traditionally be categorised as "Buy and Hold".

Then you went on to demonstrate this with a traditional 'buy and hold' investment that plunged by 90%! I put it to you that most traditional buy and hold investments do not do plunge by 90%. From my own experience the one that came closest to behaving in this way was Telecom New Zealand. For a while there, I was down between 30 and 40 percent on my invested capital. However, time heals most stock market 'income generating asset' wounds. Taking into account the pro-rata Chorus shares I got, and a capital return, I am now back in the black in 'capital terms' on my original Telecom investment capital. Of course I have had a steady steam of dividends at a good yield rate while I was waiting for my capital to recover. With hindsight, buying more in the downtrend helped too.

It discusses what to do once you have already committed to a stock - not whether you should buy it or not.

I do my own research when 'committing' to a share. That involves reading at least five years worth of annual reports cover to cover (usually more). That gives me enough background knowledge to be able to ride out any market noise. IMO you shouldn't buy a share that would give you any distress if the market were to close for five years.

Plenty of REITs are exposed to single customers (BWP = Bunnings Warehouses) and there are thousands of unlisted real estate trusts that hold a single commercial building.

I wouldn't have a problem owning a REIT exposed to largely one customer provided I had say ten of them. But if I had ten, then a 90% plunge in the value of FET would represent a 9% fall in my overall REIT portfolio, so not a major drama within a wider REIT investment strategy.

Regardless, TA is most valuable in pointing out that you have made a mistake in your stock picking - by signalling an exit! Which is why its better to listen to the market than trust your own stock picking skills.

A mistake is when you need to sell something to buy something else. Selling a share to Mr Market is always optional. There is no point in being constantly worried about market volatility.

There isnt a single person alive who has a 100% perfect record of picking stock winners. You work with what you've got, and use things like TA to help you see the things that you dont know about.

You don't have to have a 100% perfect record to be a successful stock investor. TA will not give you a 100% accurate signal to adjust your portfolio by either.

SNOOPY

[Longhaul]

Does anyone know where to get historic Volume Weighted Average Prices from?

[ratkin]

But in another classic illustration of why buying and holding is for fools

Using the stock to claim that buy and hold is for fools, is ridiculously simplistic, naive and unnecessary

Why do so many traders feel the need to take constant swipes at buy and hold?

[ratkin]

Feel free to start your own thread on how buy and hold is better than timing trades. Prove us all wrong.

Nothing to prove, it not a competition. Just picking you up for saying Buy and hold was for fools

[ratkin]

Lets go back to the chart, and take a look at what happened between 2013-14. KW seems to think that good traders would have held this stock from .4c all the way up to the top. Would they really have , in real time? Rather than the hindsight wonderland that KW inhabits.

Lets be generous and assume, those lucky few who were in at .4c didnt take profits when the stock doubled, or any of the other tempting sell out points along the way.

I have shown the chart with a conservative , weekly impulse system, where red bars equal a sell signal. That big red bar in December 2013 would have had most traders heading for the exit door. And why not, if they sold at 40c they made a very healthy profit. .4c all the way to .40c.


If that wasnt enough to shake out the die hards then the next correction almost certainly would have From .69c in April 2014 all the way down to 37.5c just a couple of months later. In KWs own words, only a buy and hold fool would stick around for those losses.



Attachment 7729

[Hoop]

Lets go back to the chart, and take a look at what happened between 2013-14. KW seems to think that good traders would have held this stock from .4c all the way up to the top. Would they really have , in real time? Rather than the hindsight wonderland that KW inhabits.

Lets be generous and assume, those lucky few who were in at .4c didnt take profits when the stock doubled, or any of the other tempting sell out points along the way.

I have shown the chart with a conservative , weekly impulse system, where red bars equal a sell signal. That big red bar in December 2013 would have had most traders heading for the exit door. And why not, if they sold at 40c they made a very healthy profit. .4c all the way to .40c.


If that wasnt enough to shake out the die hards then the next correction almost certainly would have From .69c in April 2014 all the way down to 37.5c just a couple of months later. In KWs own words, only a buy and hold fool would stick around for those losses.

Nice example Ratkin....A successful buy and hold scenario...this doesn't always happen with penny stocks gone mad though does it..so a buy & holder takes a big risk investing in a penny dreadful stock to begin with with the die hard strategy of staying in even after it became a 17 bagger..... compared to the trader.....

But remember we are using a trader as the alternate player..If the buy & holder thinks this is an excellent stock and willing to take the big risk of staying "in" then its natural to assume that the Trader will also have the same views that it is an excellent stock and after the disciplined trader sells out on the sell signal, he/she will wait for the next buy signal to re-enter (lets be very safe and conservative and use the confirmed up trend at a higher high of 44+c) so lets say the conservative trader re-enters at 45c and rides it up again only to exit once again after the candle stick island containing the engulfing bearish candle at the exhaustion gap around 57c and being conservative the trader is probably still out ...but will be watching closely now as it must be close to triggering a buy signal again

so with the buy & holder having the "see I told you so" ideal situation over the trader whose TA discipline didn't have ideal conditions and was forced to sacrifice some profit with annoying entries and exits, who is better off?..

Lets say both bought 100,000 shares at 4c
B&H = 100,000 *4c = $4000...now has $54,500.....$50,500 Gain with increased risk
Trader=100,000*4c = $4000...out at 40c ...$40,000... in again at 45c cost $45,000... out again at 57c collected $57,000 less the extra $5,000 cost = $52,000 Gain with decreased risk.

A mute point but the trader may have to fork out an extra couple of hundred bucks in trading fees.

[ratkin]

Nice example Ratkin....A successful buy and hold scenario...this doesn't always happen with penny stocks gone mad though does it..so a buy & holder takes a big risk investing in a penny dreadful stock to begin with with the die hard strategy of staying in even after it became a 17 bagger..... compared to the trader.....

I only provided the chart to point out to KW that traders would not have held all the way up. By the same token, while buy and hold merchants would have possibly stayed in all the way up, they would likely have given up most of the gains when the stock plummetted a few months ago. Mainly because there was no news to indicate failing Fundamentals just a falling Shareprice, a tricky situation for fundamental buying and holding.
In that regard KW has a valid point that Buying and simply holding would have not worked out to well on this particular stock.

The only people who possibly would have ridden the share all the way up, and still managed to sell at a reasonable point on the way down would have been active investors. I would term an active investor as someone who buys based on good fundamentals, but also uses rudimentary TA to help avoid trouble. Especially useful at the more speculative end of the investing spectrum.

An active investor would still have a stop loss in place, however it would likely be further from the price action than most traders, which might have allowed them to stay in all the way up (although its doubtful with the 40% decline in 2014.

Active investors are a more accurate discription of buy and hold investors. KW seems to believe buy and hold to mean, never, ever selling, this clearly isnt the case. Most active investors when on a ten bagger would have taken some profits on the way up simply to rebalance their portfolios , as their holding in this particular stock wouod have become very overweight leading to an unbalanced portfolio.

Then on the way right back down in 2015 at some point most buy and hold investors would have realised all was not well, as the price began to plummet, and sold out.

Just to sum up i showed the chart not as an example of buy and hold versus trading, it Was KW who bought buy and hold into the debate. I was merely ppinting out that traders were very unlikely to have held all the way up, as KW claimed.

[Hoop]

NZ Herald Quote:...The New Zealand dollar, after a stellar run last month, has been brought back down to earth as concerns about China, world economic growth and lower commodities prices take hold.

"Stella" ...."bought back to earth".....huh?..Really!!

Well..there's a good chance media will be right about this latest fall ...the 65c support is under all sorts of Bear cycle pressure and is expected to break at some point in time.

The media are always late especially when it comes to investing....and seem to make up for it with dramatics..
The NZ$ has been falling for 18 months now...so the news is a bit stale...closing the stable door after the horses have bolted.....eh?

[Hoop]

A simple rule when timing buys.."Don't buy into a down trend"***
When to buy in?...after the downtrend has ended ...a higher high after a higher low.

***On the IQE chart below..I have included small blue/red arrows using a bear market investor strategy used by TA advanced investors..the sucker play..It's a dangerous game as one can get burn't with a sudden fall as was the case in November 2015