Foray into Share Trading

Good news or bad is your call.

 

After a few good days on the market, things are looking a lot better than they were a few days ago, hopefully it holds up for a while longer.
Although the "system" I am using at the moment is a long term trend type system and there isnt a whole lot to do other than move the occasional stop upwards, I still enjoy following it daily and seeing what I can learn from how markets react to different things - international conditions, local announcements, etc.
I have had trading halts on 2 of my holdings, MAP (which came back on today with a 1.2% jump) and CIF, which has announced a rights issue. Having never thought of what to do when a rights issue pops up, I have no rules to cater for it. I would assume that after a rights issue with a discount from the market price, the shares take a step backwards in price but the overall cost base would also drop. I will see how the price reacts and what effect that would have on the position sizing rules and go from there.
I am glad things like this are coming up when i have small amounts on the line so I will have the system soundly in place by the time bigger money is involved.
Anyway, still having huge amounts of fun learning!

 

The good run seems to have continued for at least another day, whcih is nice. The shares in the portfolio that were approaching their stops have pulled back a bit. Although intellectually I know that getting stopped out is part of the game, it is still nicer to avoid it and make a profit instead!
Have had some interesting challenges though - my system is based on entry signals generated by my software. Unfortunately my computer died, so I had to get a new one. This meant reinstalling all the software. I tried to copy my data over from the old hard drive, but it doesnt appear to be happening for me - skips in dates and missing securities, not to mention missing all my lovely trendlines, notes, indicators, etc that I beautified my charts with.
Also, after recoding the system into my software, it is not throwing up signals correctly (based both on dodgy data and my mis-spelling something in the code I am sure!!).
Oh well, after I get everything sorted out I will ensure I learn whatever lesson there is about backing up etc!

 

That would be Navra wouldnt it? (assuming you had a few lazy million invested in it)

 

Trading Education...

Does anyone have any recommendations on some good quality trading educational material or home study courses relating to share trading (any aspect)?
Cheers!

 

Try this links:
JustData.com.au » Training
Guppytraders.com - Guppytraders Store
The Trading Game

 

Hi Coops,

Any chance of using this thread as a diary and posting your trades as they occur (similar to as done on some of the stock forums)?

 

I am happy to do that and see how it goes just with a few comments to start:
1) the system is a trend based system, so it aims to jump in on a trend as it is occuring and profit from some of the move. As such it will hopefully not trade very regularly, although with current volatility it is possible that some positions could be whipsawed out quickly.
2) I am in no way experienced at this so never take any trade that I put up as a recommendation in any way. I will also post some thoughts and lessons I have learned/am learning/am trying to sort out as I go.

My goals for the next year (on the trading front) are:
1) Learn from every mistake AND every success
2) Aim to be in the black for the year - ie just survive the year with my trading account intact and still trading
3) Continually evaluate and make notes about how I might improve my system and my own approach to trading - particularly working on focussing less on "how much profit/loss did I make today" and more on "am I trading within my parameters and making correct trades, and if not where did I go wrong and what can I learn from this for next time"

Current positions are as follows (over the last 3 weeks, including brokerage in & out, and including the worst case scenario cost for a stop loss if they are hit):
SSX - +5%
MAP - even
SPN -5%
CGF +2%
CIF -1%
NHC +3%
ARQ +2%
PBG -5%
TAP -1%
IWL +4%
These dont include 2 trades that were stopped out, so I am very slightly up with current positions, but down about 1% overall including the losses that got stopped.
Some ideas/lessons I am considering:
1) I have been buying these on the open on the day following the signal, which tends to be a pretty chaotic and congested time. It may be best to wait until the early noise settles down and enter after that.
2) I missed 2 trades that were signalled by my system because of not wanting to trade until I was sure the funds would be cleared and available in my account before purchasing. Hopefully nothing major, but I would recommend ensuring all your broker accounts are appropriately set up well in advance of placing your first trade. Those 2 trades have continued quite well since I missed them
3) Brokerage is a killer on small trade sizes. Initially my brokerage in + out + stop loss cost was 2% of my trade. This means I have to make more than 2% before I even break even on the trade. This may or may not be an issue long term, but definitely something I will remain aware of and monitor.
4) Alway back up everything, every day. A computer crash can make things a little annoying so you need to get all your software up & running again asap.
5) Monitor stops continually - for some reason they seem to get cancelled from time to time because the ATO "purges" the stock. Gotta make sure I am on top of this lest I come home and find my account in tatters.
6) Current maximum risk per trade is 1% of account size, there is some suggestion from Tropo and quite a few authors I have read that this may be too small, especially in the current volatility. My first trade to get stopped out hit my stop them immediately turned back up. At this stage I am comfortable with 1% but may have to relook at this in the future.

 

Coop don't mix account risk with position size.

1% risk has no relevance to volatility nescessarily, you can have a 20% stop on a stock for example and still only have 1% account risk.

One idea is to look at ATR stops for handling volatility when trading, I did well out of a 3ATR stop when I was trading Oz stocks, my average hold time was 14 days.

Entering on the open, I was usually selling at open and buying at close, though you need to do your own research and understand why what you are doing works. Have a look at what your stock does the next open after a down day and after an up day as a start.

 

Sorry, should have clarified a bit further - position size is always 10% of trading capital, and therefore to keep risk at 1%, stop is always at 10%. Also this ensures a maximum of 10 positions at a time. It is entirely possible that this is too many open positions at once, and if it was a shorter term system it would probably be very difficult to manage at my skill level with this number of positions at a time. I am definitely keeping these things in mind as I continue to develop my skill & experience.

Definitely a good idea and something I am seriously considering incorporating into the system, ATR makes a lot of sense. Thanks for the input!

Yeah that is probably the ideal way to go, Alexander Elder suggests that idea as well, I guess the major issue for me at the moment is I am at work when the market closes.
Thanks very much for your comments, they are greatly appreciated!

 

I learnt this from Van Tharp originally and think it's a good idea.

First you work out your stop distance, then you work out your position size, which is the opposite of what you are doing.

1% will get you whipsawed frequently; especially for position trading.

 

How have you been going Chris?

As ouytlined earlier I'd like to see actual trades posted and feedback from various forum members (if you were comfortable with that).

Today was a good day....AGO jumped 18% for me, I'll still hold though


Currently holding
ASX
MBL
CBA
PKT
BLY
CUO
OXR
TTY
AGO


and NAVRA

 

Currently held
AMP
ANZ
BBI
BHP
CCL
CGJ
FGL
HIL
HVN
IAG
JHX
LNN
MBL
MBLHB
MTS
NAB
NABHA
PPT
QBE
RIO
SGB
SUN
SUNHB
TAH
TAL
TLS
TWR - lost in the transfer between NZ reg to ASX one.
WBC
WOW
ADB - joint holding
2 managed funds one dating back to 86.
On my shopping list to be added in as well as adding to the above -
WES
CBA
ASX
CPU
CTX
WPL
AGK
ORG
STO
ORI
GFF
GUD
IPL
WOWHB
BLD
WOR
TOL
CSL
CSR
OXR
Navra Aust Retail
Vangaurd High Yield

I may of missed some that show up as bargins when I have the credit available. Not sure all will make it with materials and energy as my short term focus.

Wandered around most of today with some property stuff and shopping and did a lazy 0.65% increase in my trading account just checked on a Blackberry what was happening during the day.

 

Sorry mate, completely forgot about it!
I will try to post regularly about it, but sometimes struggle with time, coming home from work then doing another couple of hours on the share trading stuff, and trying to spend time with the wife & daughter also makes it a pretty full on week! My thoughts are you would have to put in such sacrafice to get any business off the ground, so I dont complain!
Anyway, since last post: code / last post / (update)
SSX - +5% (unchanged)
MAP - even (+3%)
SPN -5% (unchanged)
CGF +2% (even)
CIF -1% (-4%)
NHC +3% (+4%)
ARQ +2% (stopped out)
PBG -5% (even)
TAP -1% (stopped out)
IWL +4% (even)
New Positions:
WTP -1%
DJS -1%
HVN -3%

I have actually found my portfolio seems to fare better overall on down market days than up market days where it tends to stay fairly flat.
I am now down overall by about 3% (including the positions stopped out and unrealised gains/losses) in about 4 weeks. TAP was stopped out at the lowest point it reached (ie reached a low of 1.71, which was my stop). It is a little frusterating to watch this happen, but I guess that is part of the fun. I could widen my stops a bit, which is probably not a terrible idea, but I will continue to stick with the plan. I actually really like TAP though and think it will probably do well for a little while, but doesnt meet the criteria at the moment!
SPN is the next closest to a stop, as it went down a bit after it went exdiv. Some positive signs for it though.
The biggest battle at the moment is still transaction costs, when the stop kicks in they amount to about 3% of the actual position size, so with such small positions it will probably be a little while till it actually goes positive.
In the system testing I have done and seen, there seems to be a tendancy for a drop in equity initially. I am not sure exactly why this is, but my guesses are that it has to do with losers getting bailed early while the better stocks stay in the portfolio and tick along slowly, combined with the initial transaction costs. It is quite possible that if I doubled my position size and halved my maximum open positions (while keeping the same risk) that things would be a little more positive.
At the moment I am enjoying reading the success story type books of traders (you can only look at so many books about charting and technical analysis without your head hurting a bit!)
The more I learn about trading, the more I realise how little I know. Although my eventual goal is to get into commodities/currencies markets, I am keen to learn all I can about TA, money management, and psychology in good old shares before I grab hold of the massive leverage sword and hurt myself.
I certainly havent put all my eggs in the one basket, the main thrust of my plan still remains managed funds and property. My managed fund holdings are:
CFS Future Leaders
CFS Global Resources
BT Imputation Fund
Perpetual Ethical SRI Fund
Navra Aus Retail

 

I've got AGO too, but I won't be selling until they get to $124 (then my initial $5k in AGO will be worth $1m!)... it may seem far fetched by FMG was trading at 8 cents five years ago...

Today I bought $20k NAB at $40.07 and $5k GRR (Grange Resources, another WA iron ore play, hopefully set to bloom like AGO).

My top five holdings and today's portfolio percentage & ASX weight:
BHP (11.1%, 8.4%)
WES (10.8%, 1.1%)
CBA (6.9%, 4.8%)
ANZ (6.1%, 3.6%)
BWP (5.4%, 0.05%).

Clearly I'm considerably overweight in WES and BWP. So far so good, I really hope the Coles deal doesn't fall over.

 

I hope the Coles deal works out too, I would of taken 100% as script if it was offered.

Did you make it to 500 NAB shares to get the discount card?

 

coopranos,

New Positions:
WTP -1%
DJS -1%
HVN -3%

On the down side:
WTP - watch: $5.94/5.80/5.25.
Problem = NO volume !!! >> bottom line IMHO =1 mil on average/day.
DJS - watch : $ 5.32/30 & 5.24/4.99
HVN - watch : $ 5.09/4.96!
Keep on trading !!

EDIT:Volume is like the driving force behind the market (any market).
Low volume or no volume = no interest (even if price is heading in your direction) so you may not get out of your position if you wish to.
Do not ignore volume !! You may also consider to use OBV (on balance volume).

 

Tropo, as always thanks for your comments. As for those shares, my stop kicks in before the worst case on each of those numbers you listed.
I agree about the volume on WTP, and hopefully it wont be a drama.

I am looking through various volume indicators to incorporate into my system (if only to prioritise the signals currently generated). Will have a look at OBV
Thanks mate!

 

No... I don't bank with NAB. Your post did make me look through the list of shareholder perks, though, but none of them got me too excited.

I bought 500 because it was $20k, not the other way around. Generally I don't like to buy round numbers, that would make the mental arithmetic too easy!

 

I bought 500 as part of a long term ambition, I don't bank with them either ATM. I should have a few more tomorrow as part of the DRP. I also hold enough Westpac to get their card too and also don't bank with them.