Tuesday, May 09, 2006

Not happy, Jan

Day 26 - Wednesday
Total Account Value: $4569
Available Equity: $2402
Positions Opened: 6
Positions Closed: 7

Note: I accidentally overwrote Tuesday's entry with Wednesday's and have no backup. Being hopeful here but does anyone know about retrieving a backup copy?

Oh dear, what has happened? In what other realm can things turn pear-shaped so quickly? Somehow I've managed to keep the losses in perspective and not let them eat away at my psyche. This morning on the second day of the medical test I was engaged in deep conversation with a young lady for a few hours, unaware of the impending doom that was about to befall me.

It wasn't until she mentioned saving scrupulously for three years for a trip to Europe that it twigged. A self-confessed spendthrift, she told me that I can save easily too if I want to, and that all it takes to form a disciplined habit is 21 days. I didn't mention the sharetrading, but after 26 days the payoff has not yet come. The thought of this makes me feel a bit wasteful, even though money means very little to me. It's not that I think money grows on trees, but I don't believe that accumulating wealth at all costs is the key to happiness.

I came from a modest upbringing - I never had a lot of possessions so have learnt to live without them. It embarrasses me to say it, but at the conclusion of 2004 I had merely $50 to my name. Studies were tough and having never had a casual job (don't ask why) expenses took their toll. After working and saving I now have a comfortable stash of funds, which is why I took on this challenge. Based on my history neither greed or fear is driving me, just the desire to succeed. Surely this could not be my downfall in such a cutthroat "industry"?

Anyway, I like getting out there and talking to people, so until my conversation partner told me she had a dream about colonic irrigation, it was pleasant to be away from the PC. Back at home I almost expected the disaster that had happened. Fours stop loss orders were filled near 10am after yet more gaps appeared and sentiment for individual stocks turned full circle. I entered some positions based on my favourite, successful breakaway patterns - BNB is set to continue rising, NCM is showing bullishness and DOW finally broke out of its triangle pattern (I watched the thing for days when it finally happened I missed most of the action...).

When I first began researching trading and technical analysis the most common message was "beware of false signals, use suitable time frames on indicators to prevent whipsaws etc. etc." I quickly learnt that some indicators were largely useless because "signals" would appear on them much too regularly. For instance does anybody pay attention to Williams R% and the crossing of the slow and fast lines on a Stochastic?

The point I'm trying to make is that my daily charts for major Australian stocks are whipsawing just as badly. Signals say one thing, the depth screen says another, and then the price does its own thing. Yesterday I backtested a few signals to prove this unreliability. Moving averages are rarely respected. Check out a chart like Woolworths (WOW) or Ansell (ANN). Do you think you could have made consistent profit from these (without the gift of hindsight)? I've been looking at a few US stocks and their patterns appear so much smoother and sexier - does anybody else notice this?

Which brings me onto the "lamb to the slaughter" nature of the All Ordinaries. Just as in foreign affairs, Australia is America's and England's bitch. Our market is largely dictated by overseas markets and base metal prices. All I can say is thank god for the resources boom. All of this means trading on a day-to-day basis is low percantage and involves some luck, pure and simple.

I have therefore decided to go back to monthly charts on a four year time frame, complimented with weekly charts. Now these charts actually reflect the individual company rather than market swings. Support and resistance are significant and the 20 and 40 Exponential Moving Averages are reliable. Take a look at ILU, CEY and MAP and you'll see what I mean. This new strategy will involve looser stops, pyramidding, and holding for positions (and taking profits) for medium-term.



Anonymous Anonymous said...

very interesting

maybe you're missing the forest because of the trees

8:22 pm  
Blogger Trader Andy said...

You've hit the nail on head mate...

I need to take a backward step

9:49 pm  
Anonymous Anonymous said...

I've lost heaps trading options, way more than 5k.

options, cfd's, warrants, futures-it's all the same. you're borrowing heaps of money and exposing yourself to heaps of risk.

unless the rewards outweigh the risks, why bother?

fwiw, I no longer use indicators

8:33 pm  
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3:17 am  

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