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What are some strategies for timing a bottom?

Discussion in 'Investing Strategies' started by Johny_come_lately, 25th Oct, 2011.

  1. Johny_come_lately

    Johny_come_lately Well-Known Member

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    What techniques can you use to narrow down where the markets' bottom will be? Last time I bought in at 5000Aord. But the markets fell to 3111, and never beat the 5000 mark.

    Could somebody help with some strategies on picking a bottom.



    Thanks,
    Johny. :)
     
  2. Tropo

    Tropo Well-Known Member

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    Why would you try to pick a bottom?? :confused:

    Simon Super Trader: Bottom Pickers

    Theoretically the best price to buy is when stock hits a $0.00
    Only in retrospection you can see where bottom was.
    So far nobody invented a method which would tell you in advance where bottom/top would be.
    Below info may give you only an idea how to catch a falling knife (very dangerous approach).
    http://www.futuresmag.com/Issues/20...e-falling-knife-without-a-scratch.aspx?page=1
     
  3. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Thanks, Tropo.
     
  4. wdongli

    wdongli Well-Known Member

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    We all are in paradox in the market. Would this good system to others hit back at you before it could shoot out for your profit? Good system at the wrong hands is the most risky thing. It is because we could be much easier to be arrogant and magnify our ignorance and impulse us to hit the wall with our soft heads when we should protect them with great buffers.

    No absolute right in the market. No relative wrong in the market if you just buy the price always a little bit bigger than your price for stopping loss!
     
  5. wdongli

    wdongli Well-Known Member

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    If now is a good time to be buying stocks because its all so cheap?

    Is this a bull or bear market?

    Why do you want to buy then?

    Good questions but seems more questions are needed for enoughness!

    ***
    Cheapness is always relative in historical perspective. "This concept of cheap and expensive, high and low, is one of the core fundamental mindsets that a trader has to overcome." It depends on your holding time horizon and what your vision of the price movement in this time horizon. Could you hold to sustain temporary price lower than you paid? Is the lower price telling the trend change? Do you have the affordability if you are totally wrong? Could you hold steady or just rush to exit desperately without thinking about the risks of stampedes?

    "Stocks are now cheap, unless the market dives another 700 points and then they'll be expensive." You don't know whether or not it would crash 700 points? If so how could you know you buy at the rock bottom? You actually put your head on the slaughter table for the falling knifes. If you don't mind death and do so, in retrospective, you would cut into pieces sooner or later logically even you believe you have a great system to send your into the heaven. You deal with the swans or fishes in this world not see the rocket move toward to the Mars. Do you know this fact?

    ***
    Sure, you could say it was a bear market. All of us know that. Why do you buy in bear market if you just want to buy today and sell tomorrow? You are joking with your dollars. However how about you want to bet on XAO would be back to 5000 in a year and you have enough cash reserve and inflow, you could do a very job if you do all to get your vision right. You need to think what if EU crashes down to ground. You have invert, invert, and invert for the scenarios you don't want to see but you have to prepare for. Traders and investors both have to know when to buy, hold, run away, unfold, and know their personalities. Nature makes one thing with catches to this thing.

    No traders could understand why Buffett didn't buy into IT boom. Actually it is simple since it wants the market to fit his personality not he tries to catch up the fads which would put him into the hell. Why does this trader(seemingly very successful to deal with the daily matters of the shares) don't buy in bearish time, it is not because what market is doing but his playing approaches would lose shirts to buy in the bear.

    ***
    In October 2008 only Buffett cheered for the Pearl Harbor of market. What Soros did then? He tried to reduce the trading and took charge in full then. Could you say Buffett right and Soros wrong? No one could say so. They are different market animals for their hunting fields. What's the circle? A enclosed area which is familiar with the insiders but hard to know to the outsiders.

    A falling knife to a outsider may be a rocket to sky for future. Could we get the rock bottom? It depends on where you are and at what time you are, and whom you are. Don't use your knife to cut your protection. It is wrong and insane!

    How could we pick up fishes and swans at rock bottom? It is a not good question in my view. You should ask what if you fail to pick up anything at the rock bottom. When the market as a whole drops down, the risk is not rock bottom but falling knifes even the rock bottom could be very attractive for opportunities. Could be sure not falling knifes to you not anyone else when you try to pick up the fishes and swans at the rock bottom?

    No losses and fail-safe is a rule for traders and investors. A trader or investor if lose the shirts, at rock bottom, are losers. A trader or investor who buy anything at peak and could sell for profit before wild fire spread, are winners. All we could argue who is right or wrong and who is gamblers or not. In the market we just have winners and losers at last.

    Don't hit our heads against the ideas without knowing conditions and contexts to use them. If you don't know don't do, which is a rule of business. If you don't know enough don't do, which is another rule of business. The problem in the market who really care about them!

    Don't follow the great only but question them to convince that you know the ins and outs for what they said and did. Could you buy out the Coca Cola? No? Why do you do what Buffett said exactly? It doesn't work with 100% sureness. Why don't you bet against US central bank now as Soros did exactly? It doesn't work with 100% sureness too. They are different from you and the environment has been changed so much so that they would not do what they did before in operation levels.

    Mr Market is a expert to play the tricks with the guys who just know copy and paste. All of us need some creative capability to use the rules.
     
    Last edited by a moderator: 26th Oct, 2011
  6. Tropo

    Tropo Well-Known Member

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    Your confusion is bigger than a house you live in.
    Some people are obsessed with catching a rock bottom (like you), and that is why they have a problem.
    What is even worse, some people (like you), refuse to understand that nobody made money without losing some of it.
    Unfortunately losses happen to all traders. They are inevitable part of being a trader.
    It is clear that if the conditions that caused you to enter a trade are no longer valid then the trade should be terminated.
    Majority of people (incl. you), refuse to do it, so loss is getting bigger and at one stage is unmanageable.
    Without knowing how to manage your own money and when to enter/exit a market you are doomed.
    Trading/investing has nothing to do with picking bottom or top. Getting on the trend relatively early is the best way to go.
    All this come down to a system (tool), which you don't have.
     
  7. wdongli

    wdongli Well-Known Member

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    It is not right. Some traders/investors do pick up bottom and made some legend. Nothing is not impossible and nothing is possible without conditions and context.

    For example trend followers, they do. The problem is how you define the bottom, how you organize your resources to know the bottom, how you protect your human errors, and how you catch up the fishes not falling knifes. It is not the same "you try to pick up bottom" and "you fail to pick up bottom!" You don't need to pick up bottom to make money but you could not pick up peak to be rich too. At last most of our buying are between.

    I made my paper profit because I pick up the bottom with full protection. I lost my paper profit because I refused to sell at peak. You can not pick up bottom with a time horizon of a few days. Bufffett picked up Cigar Butts when no one wanted. Traditional value investors who survived from 1929 Great Depression did pick up bottom. Buffett gives up Cigar Butts at the bottom price partly because his business size.

    Picking up bottom is tough. Picking up bottom right is tough. Pickup bottom right and making profit is tough. Making money is always tough. Trading with right signal is tough. Trading with right signal but act exactly market wants is tough.

    As traders you are not Soros. As dirty-cheap fishes I am not Buffett. As traders you believe your system but as dirty-cheap fisher I don't want to trust any words in the market. I question and convince myself I got the real rock bottom and all of market warriors have shed the last drop of bloods. I don't see most of these warriors are bottom pickers but bottom criers. They picked up at peak in GFC and rushed onto the boat after V-shape recovery.

    Don't want you change but thank you what you post give me chances to change. Do hope when we cheer for our systems we could see the catches! We just could see the market at one angle by our own mental eyes. Don't want to protect my ignorant but don't want to "tell you" since I am not really qualified. Just a view from my angle and mixed with your view or others.

    ***
    What I want?:

    1. rock bottom buying price
    2. the price after I bought is always bigger than what I paid.
    3. if price would be lower than what I paid it was not rock bottom

    What's for?:


    To get maximum margin of safety.

    What is the margin of safety?


    Value(means) - price(you paid) > 0 and < maximum. This maximum > 0

    How to get the formula is right under all of conditions?:

    Pick up around rock bottom or after market move out of the rock bottom

    Don't stop loss but stop profit after you feel the market is over-optimism especially when you and most of people in trading forums become very optimism or euphoria.

    ***
    Failure of rock-bottom or failure to pick up it

    It is not failure of rock-bottom but the failure of picking up rock-bottom. You pay too much for your rock-bottom but market tell you it is not rock-bottom. You fail to pick up the rock-bottom with your wonder why you should pick up rock-bottom.

    Rock-bottom > the price you paid and never come back after market moves out of the rock-bottom. You paid at price higher than now, you fail to pick up the rock bottom.

    The most important thing is there is a limitation of time horizon for each rock bottom. It is a dynamic phenomenon and not tied at a price forever.

    You fail to see the time horizon you will fail to pick up rock bottom.

    It is your fault not that of rock bottom! Don't blame anything for your failure! Don't cheer for your wise decision for your system.

    ***
    Are you traders or investors? I don't care about anymore. I want to be a businesslike people to service the warriors who hit each other with advanced systems. What trading is? A zero sum game! What investing is? The dream to pick up the lottery in the market.

    It is a exploration and Titanic could sink. You could fail with your advanced system and your great belief. I want to service your exploration with least risks for my income and future capital gain.

    You are confused? Yes, why not? What is the uncertainty? You could not see anything for certainty. If you are not sure how could you not be confused.
     
    Last edited by a moderator: 26th Oct, 2011
  8. Tropo

    Tropo Well-Known Member

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    Not your imagination, feelings or tips, but your system should tell you where entry/exit is. There are different approaches (systems), for trend followers and day traders etc...
    No trading system is perfect. All of them may give false signals.
    Incurring a loss due to a minor "hiccup" is simply part of the business of trading. Seems to me that you do have a serious problem to understand that.
    The most important thing is to know how to control risk.

    On the other hand what most people do not appreciate is that they do not have a gift for trading.
    Being successful in one field of endeavour does not automatically translate that competency to the trading.
    Coincidently some players are able to pick top and bottom, but it does not mean that they can do it consistently.

    Well....you must decide if you are trying to be always right or make money.
    But If you are trying to become a legend, forget trading and go to Hollywood.
    AMEN.
     
  9. wdongli

    wdongli Well-Known Member

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    It sounds you know trading and can profit from trading. Actually I don't trade everyday since IT bust and since 2004 I do realize I could not trade everyday.

    Rock bottoms could not be a matter everyday. So traders if want to play rock bottoms usually lose more. You guess you have rock bottom in hand but at last you find you hold the peak. You have to stop loss or burn your money on the wild fire. My problem is I can pick up bottom, most of time I can sell before the crash since 2004, but sometime I was synchronized with the market sentiment and refused to sell at peak.

    All your words are about how great your system and how effective your system help you to buy and sell for great profit and all of the losses are minor. That is great but what's the catches of your system. To convince the veterans in the market, you need to tell what's your failure with your system. Even Soros and Buffett cannot say they are failure free and all of bad points are as*hol* on their bodies only!

    I want to be roughly right and not absolutely wrong. You can not be right in 100% but you should not hand your fate to the system you need to control. I like to be legend since life could be colorful. Hollywood is not only places for legend but popular stars. I really don't mind popularity but do what I want and I have to.

    Trading and getting your living is job and some can do and some cannot. You can do this way and another way if the underlying conditions and context can be understood. Why cut off my toes for your shoes or your toes for my shoes? It is not a art but cruel devil!

    What's about self-reliance? Don't forget every way could lead to Rome. I am happy on my own way with the worry about the catches on the way. Do you know your catch? If you know the catches why don't tell and let us all have lessons?

    I would never qualify to say "I told you and I always tell you but you don't listen, stupid!"
     
  10. drc133

    drc133 Member

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    You cannot time the market. its all about how long you are in the market for. Trying to time it is very risky indeed. The best strategy is to diversify buying across different asset classes to minimise risk. I wouldn't recommend you go into the market for any less than 5 years.

    However, this is my opion as a financial planner.
     
  11. Tropo

    Tropo Well-Known Member

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    Frankly, talking to you is like talking to a deaf panda bear.
    Personally the only tool I use is a chart which tells me all I need to know.
    There is no room for guessing, hoping, contemplating etc...
    Nobody is 100% right, but there is no need to be right all the time.
    Having risk/money management rules in place, and losing some trades from time to time does not worry me at all.
    Having tested robust system there is no need to control it or change it.
    All one should do is to follow it.
    I wouldn't be surprised if you do not understand what I am saying, because it seems to me, that you have a problem understanding yourself.
    Talking all the time about buying at a bottom is a very boring nonsense, and waste of time.
    Instead of trading you should date rich good looking girls and this may be your only option left.
    AMEN 2.
     
  12. wdongli

    wdongli Well-Known Member

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    Haha, are all you talk about "stop loss," how great your system is, and how easy to make profit? I can not say so. It is the same as about bottom picking. Around trading and bottom picking there are a lot of things need to be done for winning conditions.

    It is interesting to me and I don't think they are nonsense if you can make money. It is necessary you know your circle for you to repeat something. But I do feel somethings are missed in your words. Why do we oversimplify the complicated operations for us to be winners?

    How much have you got since IT booming, such as 1996? Few traders can get living from trading. If you can, congratulation. Could you tell your rules in a few words, what's your tech in your system to pick up the signals rather than the random noises? How much your capital and yield you target for each of your trading? You have system and then all of these should be white and black in the paper!

    My bottom picking also makes some money since most of time I could catch up with the conditions for sure. We all make the money but also lose. In 7 years since 2004, I still have made about 4 times profit to my initial capital that is why I could be full time students for 3 years. But I did lose a lot especially after big paper profit in hands. I do want fix the problems not 10 baggers' profit. If you are businesslike people you could not cut your feet for safety!

    I do make mistakes, some very big mistakes, and do feel I need to go deep into my own mind. It involves philosophy, strategic thinking and plan, life attitude, market sentiment, chart, and a lot. I do find there are catches, challenges, and rewards. When you do something wrong you have to be honest to yourself. Seriously saying I feel sorry for your boring but you have to find a way to fix your boring problems as I have to fix the problems and my mistakes in the market.

    I feel you are not bored but a little bit hurt in feeling otherwise you would not say so much about my stupidity and insanity. It is your weak points since you are still very emotional. It is very bad for you to stop loss and beat out at right time as a trader! If my words could let you feel so bad how could you follow your system without synchronizing yourself with market sentiment? I believe both of us are the humans and we are limited by our instincts.

    Good luck!
     
    Last edited by a moderator: 27th Oct, 2011
  13. wdongli

    wdongli Well-Known Member

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    Why cannot we time the market? Why is it very risky? Why is it best strategy to diversify? How could you cover different asset classes to minimize the risks as GFC which destroyed 35-50% clients' asset in some big diversified funds? Why do you have to hold 5 years if the market has overpriced our assets more than the nominal value?

    All of these things have to be considered with market conditions and contexts and our own personal profile. We have to choose whether we want to be active or passive market players first. I respect the work of financial planner but it is hard to convince your clients to tell what they should do without these conditions and contexts. Good plan is based on the good rules and deep understanding of the selfs of your clients and their personal financial environment.

    Planning could be strategic type or tactical type. You seem talk about strategy. However if we choose to be active market players, we have to know when to buy, hold, and sell, as a great baseball player has to know when he should swing his bar at what angle with how much force to the coming balls. He could not make every hitting great but he have to try and wait for his time for best probability.

    As any job we can take market playing a hobby or job. However balance to invest in bond-type and stock-type are important. As a job it should involve capital allocation, vision of economy and market trend, affordable risks, expected yield and gain, and the resolution to do anything to keep your investment running until you could not do anything.

    It would be grateful if you could focus on one topic such as capital allocation for risk management for a 50s active market player from a financial planning view.
     
    Last edited by a moderator: 27th Oct, 2011
  14. Johny_come_lately

    Johny_come_lately Well-Known Member

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  15. wdongli

    wdongli Well-Known Member

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    Thank you Johny. I am very happy to see this podcast.

    Timing the market is essential for success? Some said you could not but some said you could. Without historical perspective, future time horizon, right understanding of income stocks, growth stocks, or reflexive relationship of market sentiment, fundamental, different stage of cycles, timing or not timing the market would result in failure.

    1. You could not build a great Harbor House in a eye of tsunami even it could stay in Sydney as a beautiful scene.

    2. You could not in a sunny day cry for the future tsunami for profit.

    3. You could not get qualities at reasonable price when all are in euphoria and would like to pay premium for any growth stocks

    It is impossible to timing the price up or down tomorrow it is necessary to timing the seasons of the market or economic and choose right assets for your profit.

    Alan Hull gives good points about the stock market stages:

    1. consolidation after crash: mainly being driven by rationality
    2. Bull upward before market over-optimism: mainly being driven by fundamental
    3. Bull euphoric upward: mainly being driven by market sensation
    4. Bull overdone or in euphoria: purely being driven by market sensation and market turns to be crazy
    5. Bear appear: mainly being drive by fundamental
    6. Market in denial: mainly being driven by sensation and fundamental
    7. Market crash: mainly being driven by sensation
    8. Recovery and consolidation: mainly being driven by rationality.

    Based on the stage and market timing for the stage: market players need to reallocate the assets, such as cash, bonds, income stock, and growth stock. Most of traders could win great in bull market but few could allocate assets based on the timing and stages of the cycle for their life.

    Livermore was one of the greatest traders, and was called as "Boy Plunger" but he failed to manage or allocate his assets properly. Market gives some days to anyone. Anyone if could hold his days, could make some fortune. We all know "dogs have dogs' day!" However most of market dogs when chase after their days forget their days are in count.

    Alan Hull is right Buffett buy the income stock and high yield investment at bargaining time, usually it happens after crash. The high yield income stock would follow the bull to grow even not dramatic as some market darlings. He acted bargain hunters first but put growth into his playing to ride some great historical upward trend. He always uses the base ball as a example. He always tells we need to be patient for the best angle and position to hit ball. Patience is to timing the market for best position and angle for the best hitting at lowest costs.

    No any war masters could afford the risks if they launch the attack at wrong time, wrong position, wrong force allocation and management. Philosophically it is wrong to say we could not timing the market. A guy being blind philosophically would fail or get some in lucks.

    Timing or being unable to timing in the war and market would differentiate good or bad market players even some dogs would get great fortune in the dogs' days. The history tells us most of dogs would be in water when their days gone. Since April 2011, I turned to be a market dog in the water since I didn't count my days and don't know market is a war place.

    Look around and at yourself honestly. Ask the question about whom we are. Buffett wants to buy for his last defend line, no loss, and don't give up to grip on the growth with big enough margin of safety to each pieces of his asset, the asset sectors, the portfolios, and the business as a whole. A lot of retail market players think Buffett just read the financial statement but it is never true. He is a great asset allocators based on the every-changed macro and micro economies. He wants to get the assets at the price which could sustain the pressure and beating of fads and winds!

    What kind of dogs are you in the market? Where is your playing ground? When are your days? No timing, no patience, no analysis, no organization, and then no self-reliance. Do you want to sell your assets on fire? Wild fire only could be seen exceptionally, right? So why do you sense the fire to sell on fire? Why don't you sense the strength of fire until it extinguishes and then you buy the gems at crap price?

    Alan made a excellent timing call when all want to be rational even most of us would not be rational if the days are not ours. I do find I could not be a dog who could make all of 360 days as my happy days every year. I should think about which days would be highly likely to be my days and focus on these days to get profit, lock profit, and get out of the market in the days which are not my days!

    If the days are not my days what should I should? I want to update my minds to extend the amount of my days every year. You want but you don't have, right? You need to pay some cost. It needs cash reserves and cash inflow when I read and ponder in the days which are not my days.

    Each dogs have some good days inherently. The problem is we don't know how to use them for some long last good things. A lot of high educated guys are experts for their days but they don't know how much time they have put in for their days. Why could we buy at rock bottom? We are trained not to believe we should do and then of course it turns impossible to do!

    Most of us are the dogs in office and we feel everyday is our day. In the market we extend our feeling from offices and believe all of our days should be good days. If the days are not good it is not our timing problem since it is the problems of our bosses. Why do you let me design a product no one wants this year or next year? They were hot 5 years ago. It was your problem. Timing to me is very difficult if impossible!

    Unfortunately we choose the market and we have to decide when you should buy, hold, unfold, and run away. A lot of retail market players would never know it. You are your boss and do you know when you should do what to maximize your return. A bad boss would lead a business bankrupted. Time and timing is not important but everything.
     
    Last edited by a moderator: 28th Oct, 2011
  16. wdongli

    wdongli Well-Known Member

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    Don't be greedy said traders!

    Greed is a bad and poplular word since most of people have lost their money and the lost money let them fearful.

    Yes XAO led the world get into GFCII and you dare to play in the market, you are greedy; when all of market just have gut to sell on fire, if you dare to pick up the rock bottom and talk about timing of the market you are greedy; after all of the people in the market are in stampede, you talk about your corner and run around the corner under the rising Sun you are greedy. Yes if you dare to pick up gems in the ruins when all try their best to take the flights to the safety heaven, you are greedy. No greedy? Why do you buy the shares when all want to sell and forget the share market? You are greedy and you are gamblers!

    But I just want to cry "Greed is great; Greed makes fortune; Greed makes future stars. What fear does now? It just generate coward!

    ***
    There is a bit of short-term profit-taking. There is nervousness going into the weekend for shorter-term traders. We have got a few good days. What if tomorrow EU just tell us no deal for its debt? It is possible, right? We are rational now and possibility is probability.

    So the temptation to take a profit is pretty strong. Who said in consolidation market tend to be rational? In the fear, no rationality at all. The system tells me to sell. I could not follow myself and then I have to follow the system. Who care about difference about signals and noises? Cash is king. I don't want to lose any pennies anymore! I have lost enough!

    The deal in Europe is to fund their bailout of their banks. The bank will be recapitalised while the terms of the troubled Greek sovereign debt have been fixed. Is it fundamental good news for better EU? Sound it is and should be long term effective. But after you fail to sell at the peak since you were so confident about future, you don't have gut to wait for any longer. We all want to lock the up after surge in price in case it crash or correct it again.

    ***
    The acute uncertainty has led up to this announcement hopefully. All of the people felt reliefs but after they were beaten for 28 months, the fear take the charge for actions in the market. It is reasoble and acceptable if you don't know the market and economic cycles. However some of the volatility we’ve seen will start to settle down bit logically. Yes it looks like a sale for locking profit but actually it was not. It was the losers to sell for less losses even they still lose 70%, 90% or 99% after their so called profit taking.

    There’s still a possibility we could get into problems again. No one could deny it. Can this fund that they've got cope with a Portugal or Italy getting into further trouble? Who really know? After you lost $150,000 you would feel more valuable for even about $1000 you could get from the fire.

    Day traders are the best equiped with some great and advanced system. They could not forget the support line or resistance line. To them all could not be trusted. Turning points? Go to the hell! You have beaten me for 28 months and now you tell me the damned points? I would not hold for another beating. I have to stop the losses let alone, now I could get some losses back, but you tell me hold? It is joke!

    ***
    However no one could say it's not a great step in the right direction set by EU's deal. All of fears and profit locking are understood action or reaction. They trade with the hope and confidence. You could not cruelly ask them to hold in the ruins. In the ruins what could their system tell them? Nothing but the smoking from the burnt money. It lets anyone feel sorry!

    It is still sensational market. It is still a vote machine as it is allways in days. Don't tell them they need the light at the exit of tunnel. They have been in the darkness for 28 months. Why could you not understand their paradox and frustration? Let me to be greedy? Kill me first!

    You said bad comes from good. Now good comes in and you said I should hold the good for bad? Do you want me to be on the slaughter table setup by Mr Market again? I don't want to be right up in the night to worry anymore! Don't tell me the cycle. I have made a lot of mistakes. I could not lose any pennies any more.

    I just do what I could feel and sense or actually what my system said. I don't trust anything else but the chart and my system! I don't want to have a independent mind but I am an mechnical follower of my systems. If I don't sell I would lose the money which comes from the bounce back. Who could say it would not bounce back again!

    Let's me go! Let the turning points go to the hell. It is lie we could have rising Sun again!
     
    Last edited by a moderator: 29th Oct, 2011
  17. wdongli

    wdongli Well-Known Member

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    The most stupid way to timing

    It is a collective view for funds and financial advisers that it is very difficult or impossible to timing the market.

    All of market players know if anyone who bought shares with their money from their sold houses at GFCI peak and held their position in the GFC crash their financial life would be dire. They would have fried themselves on fire. Anyone who could sell in cool blood before GFC peak and bought the fishes between Nov 2008 - March 2009 with enough cash reserve would run under a few sunny days for better financial position. Of course these fishes should be strong enough for survival after the GFC tsunami.

    In hindsight, if we are not greedy on April 2011, we should not be very difficult to sell since:

    1. There were May and June as traditional seasons for XAO to sell collectively for better balance sheets and tax benefit from losses.

    2. May and June could be good months if the market have sold into rock bottom but XAO moved quite good between Oct 2010 - April 2011.

    3. It was more important that XAO had failed a lot trying to break though 5000. People seemed more and more sensitive about debt and leverage.

    4. XAO had hung over in its consolidation channel for 20 months. The remote smoking made more and more people fretted.

    However who could say we can get market timing right consistently? No one could! So a smart extension happens. If you could not get market timing right consistently, why do you timing the market? if you are wrong at any time it is very risky. Don't play the risky game. But how could you be safe with a fish which could give you 30% return more or less?

    You can not be consistently right, is true for everything we want. You can not be happy to work with your bosses consistently but why do you pick up your job and go to your offices everyday? You can not get everything right to your sensitive wife but why don't you want to divorce?

    You cannot be right consistently should not stop you try your best to get everything right if it is important to you. How could you get your profit in the market? You must be right and decisive in timing even it is difficult. Yes it is difficult but all of winners have to be right and decisive more than they are wrong and indecisive. We could not say it is difficult and don't try our best to be right. Is it easy to make money? Never but you have to spend more than a decade as least to get the qualification to punch a hole someone else want to get!

    I never think we could just find a system and use it for our easy money. If you can get money for your life you have paid enough before that!

    ***
    Nearly the whole financial industries want us to buy the concept, "we cannot timing the market." Their clients need this concept to allow their funds to lose money in crash and get the hopes in future. Of course, if the experts could not timing, you as a ordinary would do worse. So they can grab onto the easy fees because it can give the easy advices for ever trying but not for any hard advice on ''when''.

    Yes, if all of us could not timing the market, then the industries could sell another concept that "all would go up in the end if you would like to buy and hold forever." A great concept "buy the quality and hold forever until it is not quality" now logically become buy things and hold forever. Could you buy a dog(ins and outs) forever and expect this dog become a swan if no magic rod touches on it? So we see the joke become truth and popular everywhere.

    They are irresponsible but very effective concepts to get the fees. Don't say these experts don't do their jobs but for them not for their clients. In the last decade who were the winners and who were the losers?

    Just go though the charts of 100 shares which are picked up randomly. You could not say each one would fail you or reward you. You can lose all or win 10 baggers easily just because you pick up the things at different time. If you don't believe it you could extend the chart of XAO for 100 years. I wonder why the retail market players are so stupid but believe what they were or are taught. Are you really organized, analytic, disciplined, and self-reliant?

    ***
    As life is about options and market is too. The stock market is all about which stocks' and when, not all stocks and all the time to work for you. The global financial crisis, the current market have accelerated this realization and that you have to do better than lie that history would repeat itself. History never repeat exactly and any little difference for a decade to a individual could be fatal.

    Have you heard the song "the gambler?" It is helpful to listen it again. You have to timing but not all of the approaches would be right for your timing. Do remember not timing itself make you are gambler not but your approach and personalities make whom your are.

    "On a warm summer's evenin' on a train bound for nowhere
    I met up with the gambler, we were both too tired to sleep
    So we took turns a starin' out the window at the darkness
    'Til boredom overtook us and he began to speak

    He said, "Son, I've made a life, out of readin' people's faces
    And knowin' what their cards were by the way they held their eyes
    So if you don't mind my sayin', I can see you're out of aces
    For a taste of your whiskey I'll give you some advice"

    So I handed him my bottle and he drank down my last swallow
    Then he bummed a cigarette and asked me for a light
    And the night got deathly quiet and his face lost all expression
    Said, "If you're gonna play the game, boy, you gotta learn to play it right"

    You got to know when to hold 'em, know when to fold 'em
    Know when to walk away and know when to run

    You never count your money when you're sittin' at the table
    There'll be time enough for countin' when the dealing's done

    Every gambler knows that the secret to survivin'
    Is knowin' what to throw away and knowing what to keep
    'Cause every hand's a winner and every hand's a loser
    And the best that you can hope for is to die in your sleep

    And when he finished speakin', he turned back towards the window
    Crushed out his cigarette and faded off to sleep
    And somewhere in the darkness the gambler, he broke even
    But in his final words I found an ace that I could keep

    You got to know when to hold 'em, know when to fold 'em
    Know when to walk away and know when to run
    You never count your money when you're sittin' at the table
    There'll be time enough for countin' when the dealing's done


    You got to know when to hold 'em, know when to fold 'em
    Know when to walk away and know when to run
    You never count your money when you're sittin' at the table
    There'll be time enough for countin' when the dealing's done

    You got to know when to hold 'em, know when to fold 'em
    Know when to walk away and know when to run
    You never count your money when you're sittin' at the table
    There'll be time enough for countin' when the dealing's done"

    Actually never timing is a way to timing. However GFCI and charts for 100 years tell us it is a most stupid way to timing. Could you get a good enough timing approach?
     
    Last edited by a moderator: 30th Oct, 2011
  18. wdongli

    wdongli Well-Known Member

    Joined:
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    Posts:
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    Location:
    Perth
    I just wonder why Soros and all of B. Graham's disciples could do all the great work to timing the market by finding the best stocks or hitting out on the rock bottom strategically. Yes Buffett said he cannot timing the market but why did Warren Buffett buy the bonds in distressed US investment banks during and after GFC crash. You could not say he picked up stocks without sense about the timing of the market. He just use the margin of safety to be sure he would never lose the money even he timings the market wrong or he would timing the market absolutely wrong.

    Don't forget any public speech need audience and anyone could not just tell the truth without consider whether or not the public would listen. We are fed what we want to hear. Even B. Graham compromised his words to separate investors as active and passive ones to give the public room to choose their own options even he insisted in his last point, the margin of safety. How many passive investors could keep their margin of safety if they could not timing the market for this margin of safety? Who could buy RIO quality with margin of safety at the time RIO was at $135?

    If we buy the call that we can't time the market, we will not produce returns for ourselves except in a time when both genius and bum make the money; we will lose our shirts or desperately burn the money in a falling market. And after a few big losses, we lose the chances for life since a wrong timing for a decade to the market is nothing but you could lose your gut and confidence. How many veteran from IT boom, have worked in the market as part-time players? They lose their money forever since they timing the market as gamblers or buy and hold forever when the market was euphoria.

    Do you have the cash now? Do you have the cash reserve to hold? Do you believe you should find the turning points of the market? Do you believe the consolidation of XAO would last for another decade? All of the questions are not easy ones.

    So don't say timing is difficult since it should not be easy. Making money is simple but never easy! we should try to timing the market, we should use margin of safety to be sure we don't lose the shirts if our timing is wrong. We need to be self and environment-aware. We should get the opportunities when it appears with the preparedness for what if we are wrong.

    Don't blindly accept any concept sold by financial industries! They know most of us work in part-time in the market. They know we could not be active but passive investors. They want to get your business rather than to be sure you can get the return from your money. Be organized, analytic, disciplined, and self-reliant. Concepts if wrong could kill you without bullet!
     
    Last edited by a moderator: 30th Oct, 2011
  19. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    I'm a bit hesitant to offer my strategy because it's not really that complicated.

    Generally I'm always reading about economies and businesses doing basic fundamental analysis, so I like to think I have a decent idea of where most economies and major businesses are going over the next 10 - 15 years (it's a lot harder to guess where things are going over the next 3 - 6 months).

    Once I know what sorts of investments I like, then it just becomes a waiting game, until those investments become good value, which normally requires the prices to drop or the earnings to go up (the former is more common).

    For me it's not about "picking a bottom" it's about buying once good investments become good value - and by no coincidence when good value stocks start looking really cheap a bottom in the market is found.

    At the end of the day all investments are opportunity costed - ie if I buy stocks I don't have my money sitting in cash earning interest. Therefore it's a case of at what price do stocks need to fall to for me to be willing to forego the certainty of an interest payment in favour of the future earnings of a stock.

    The obvious answer might be when yield of the stock is higher than the interest rate, but it's a little bit more complicated than that.

    There are a lot of advantages to being invested in stocks, if you own them for over a year you get 50% CGT discount, most company's dividends are franked, company's earning tend to grow over time, earnings and assets offer protection against inflation, etc whereas interest on cash doesn't offer inflation protection and interest earned is fully taxed. So I think being positioned in stocks is a better investment over the long term. So most people will switch to stocks before stock yields reach interest rates.

    So if the market's earnings starts getting towards the market interest rate you know that the opportunity cost of buying those investments are getting really attractive and people will start switching into those investments and this has been happening a lot over the last 3 years.

    Yes there are times where people go crazy and will don't want any position in the market and would rather hold cash even at the expense of good buying opportunities, but another thing I have started to do more often is, when things are going crazy in one area of the world there will also be sell offs all around the world. So if the AUD crashes because commodity prices fall, I buy the ASX200, if the AUD rallies and there is a big sell off in emerging markets for whatever reason, I buy emerging markets. If AUD is strong and Euro has been hammered I buy Europe shares, if Japan has an earthquake and the world doesn't know if the Japanese island is going into nuclear meltdown, I buy Japanese shares as soon as I know the island isn't going anywhere.

    The most important thing to remember is it is just about buying good value stocks wherever you can find them, and then time will take care of the rest. If the companies or index continue to produce good earnings then time in the market is all you need to achieve a ROI, and with time good earnings will be reflected in good stock prices.

    Ie the other day I bought some BHP at $36 not because I thought that BHP had to go higher from there (I didn't care if it went up or down), but because I was like, at $36 the company has a current PE of 9 - meaning that if nothing changes for the company over the next 9 years I'll get a complete ROI and still own the stock. The CAPE over the last 10 years for the stock was 18, so a little on the high side but still quite reasonable, and the company has been around for decades, so it's probably not going anyway in the next decade, so at that price I'm a buyer.

    If the price falls further I'll buy more (of course it didn't because unfortunately the market began to agree that at that price it's worth owning), but I take the same approach to any share.

    Of course all my investments are initiated on liking fundamentals first and being able to envision the company or economy being around (and stronger) in 10+ years. So in the case of BHP being a diversified mining company the reason its price had fallen was based on commodity price falls over the last couple of months, but the reality is prices can only fall so far before supply constraint develop. So if you are confident in the likelihood that the majority of the world will continue to grow over the next 10 years reliable supplies of commodities will be required for the 3 - 4 billion people in emerging markets to build their economies so the downside risks become pretty small at certain prices.

    As for timing, I'm not as good at this, but my general strategy is when prices fall to the point where they have become attractive that doesn't mean I buy in straight away, I generally don't buy until I see at least one and a half days of recovery (normally after some mini crisis has been solved). Of course there are little mini rallies in general down trends all the time, but for me it's just important that you let the present fall run its course first. Yes, you will probably miss the 1 - 3% bounce that happens if you pick the bottom perfectly, but I figure there is no point trying to fight the market if it wants to go down further, you just need to wait until saner heads prevail then buy in (rationality always comes back eventually).

    Truth be told with this sort of strategy I'm generally pissed off when the market goes up because I'm not buying stocks to sell, I'm buying future earnings, which means I'm always looking for cheap stocks with good earnings.

    :rolleyes:

    So right now my personal opinion is that fair value is somewhere between 4000 - 4500, so I generally only get interested in buying once the market gets below 4100. So I have only recently been buying back into the Australian market over the last 2 months but I also enjoy seeing a high AUD because I see it as a good opportunity to buy abroad and diversify risk given that I feel that a big recession in Australia is somewhat inevitable over the next 3 - 5 years (but of course that'll make for a great buying opportunity when it happens). Also given my fears of a serious recession within Australia makes me a little concerned about future earnings which is why I tend to only become an interested buy right at the lower end of that fair value spectrum.

    Anyway those are my thoughts...

    I'd recommend looking into your ignore list. I know mine has been activated for certain forum individuals whose opinion I feel only cloud my own better judgement.
     
  20. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Just add some words to sort out the main points I want to learn.
     
    Last edited by a moderator: 30th Oct, 2011