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I'm a trader not an investor. But, statistically speaking... stocks trading at or near their highs are much more likely to continue higher than otherwise. Along the same line of thought, stocks trading at or near their lows are statistically more likely to go lower. This is not my opinion but a matter of fact and anyone that takes a few minutes to check out some long term charts will see it as well. Of course, there will always be exceptions to the rule.

But to play devil's advocate... what if you uncover a greatly undervalued company and buy it. And wait.... maybe days, maybe years for everyone else to make the same discovery? Your return on investment is dependent on others uncovering your contrarian play. And once they do join you and start buying, days or years later, the trend would reveal itself and those using trend analysis would get involved! Slightly smaller return but capital tied up for far less time.

2008 was a great play for contrarians! I still regret not buying banks at their lows (sort of). But has anyone heard from contrarians from the 2000 collapse? Nope... cause they're broke!!! It's an ok strategy for portfolio managers that have to manage huge amounts of money and invest for years at a time but otherwise I'm not a fan.
 
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CanuckDuc said:
Consider this though... investing is like going to a track day. If this is your first season of getting out and you are trying to lead the pack (quick buck), in all probability you are going to end up in the rhubarb. Those that have been training for years are the ones that will push you until you crash. (ie, take your money) Markets are the same. So, dont be greedy and dont try stupid ****!
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This is pretty much what happened to me. My first two years in the stock market I day traded a lot of volatile stuff and I more than doubled my money each year. It then led me to think "why are all these suckers happy with like 5% a year gains? What a joke when I can make more than that in a day!" But then in my third year, I was just too cocky, I was heavily margined and I got royally smashed by a few of my plays and I lost most of what I gained the previous two years.. That was a big learning experience for me and I came out better for it but it taught me a lot about controlling greed, capital preservation and being a lot more cautious.

I know a lot of people dont like to admit their mistakes but I don't know anybody in the stock market that hasnt made mistakes and that doesn't continue to make mistakes from time to time. So, got to be careful regardless of what approach you take.
 
There's not enough bandwidth for me to get into the mistakes I've made! When I started I was told it's OK to make small mistakes, bad to make big mistakes and unforgiveable to make the same mistake twice. My best education was watching my trading account get smashed to the ground during the tech wreck, listening to those CFA/MBA/Professional talking heads on CNBC and BNN (RobTV at the time) that were telling me to buy the dips! Thats when I went full on Technical Analysis and no looking back. I still make mistakes, but they are usually small and never more than once.

It sounds like we need a "Motorcyclists that like to talk markets ride". It'll make the pint afterwards interesting!


toshison said:
This is pretty much what happened to me. My first two years in the stock market I day traded a lot of volatile stuff and I more than doubled my money each year. It then led me to think "why are all these suckers happy with like 5% a year gains? What a joke when I can make more than that in a day!" But then in my third year, I was just too cocky, I was heavily margined and I got royally smashed by a few of my plays and I lost most of what I gained the previous two years.. That was a big learning experience for me and I came out better for it but it taught me a lot about controlling greed, capital preservation and being a lot more cautious.

I know a lot of people dont like to admit their mistakes but I don't know anybody in the stock market that hasnt made mistakes and that doesn't continue to make mistakes from time to time. So, got to be careful regardless of what approach you take.
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^ well those talking heads are NOT CFAs/MBAs you can be sure, and there's not a shred of evidence that technical analysis works for stocks.

In the whole of the CFA study materials there is maybe a paragraph on it.

Try to find even one portfolio that's run with technical analysis. You can be sure Buffett doesn't look at charts.
 
johnp said:
Try to find even one portfolio that's run with technical analysis. You can be sure Buffett doesn't look at charts.
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I see them every day. TA is one input to decision making. Chart hokus pokus doesn't carry much weight though, but lots of other stats matter big time.

Not all portfolios are speculative (by which I mean intended to make as much money as possible given a certain risk level). Some are intended to be market neutral or wealth preserving or income producing or cash flow matching.

Managed futures for commodities and currencies are heavily run with TA. It's not a macro decision factor, but it enables sizing and entry/exit points. It works because these are almost purely supply and demand markets, with a dash of news and policy (well more than a dash for JPY or EUR).

Also HFT/algo portfolios are obviously using TA, maybe not the hokus pokus chart patterns, but multivariate stats are going into play. They wouldn't work otherwise.

TA is also helpful in the rate and vol markets for timing trades, since they are mean reverting and seasonal. When the fed or the BoC is priming the pumps over a period of time, you start get a read on where they will go rate bashing when there is upward pressure.

And Buffett is just one guy doing one type of value investing. Not everyone wants to copy Buffett. So just because you are sure he doesn't look at charts doesn't mean anyone should. I stare at them all day (when I'm not trolling GTAM).

Rant over. Just needed to point out TA exists for a reason. I also wouldn't rely on it.
 
^ OK then point me to just ONE portfolio that's run using technical analysis.

And quants/HFT/algo portfolios are NOT obviously using TA.
 
I don't know how to answer your question without copying/pasting what I wrote. Google managed futures, you'll find a whole bunch of service providers. Here's the first Canadian fund I found: https://secure.globeadvisor.com/gi/db/gaf.fund_pro?fundname=Man+AHL+Diversified+(Canada)+Cl-I

They aim for low vol, 0 beta, so I'd struggle to imagine how to pull that off without TA. It's typical of market neutral strategies.

And if algos don't use TA, then what are they using? Electronic feelings? Every stat arb requires some crunching of real data, with on day or micro intervals. You can't back test whims.

johnp said:
^ OK then point me to just ONE portfolio that's run using technical analysis.

And quants/HFT/algo portfolios are NOT obviously using TA.
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johnp said:
^ OK then point me to just ONE portfolio that's run using technical analysis.

And quants/HFT/algo portfolios are NOT obviously using TA.
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Just thought I'd add this. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2202060
It would be tough to do a study on sample size = 0.

I'm not defending TA anyway. I just think it's stupid to say no one uses it. You know it exists, studies are done, people discuss it's efficacy. Someone uses it. I suppose you are looking for the fund that says "We use magical chart patterns to invest". I doubt anyone will say that.
 
Also, a +1 for khanacademy. I found it through TEDtalks, but that website is actually one of the greatest resources for someone who likes to learn. He has a really good philosophy when it comes to testing/teaching/learning and you can learn about almost every single subject. Covers all levels and it's completely free!

johnp said:
[2] now, about getting good at stocks and then making that kind of money? it's probably just not going to happen. If you're amazing you will beat the market by about 2%/year after fees - I made up the 2% number but most participants underperform after fees. I'm sure google will confirm very few do market returns + 2%. So let's assume the market will go up by 6%/year (which is on the high side of current estimates) so you are great and make 8%/year. The "rule of 72's" says 8%/year doubles your money every (72/8=) 9 years. Now, starting with what you now have, you figure out if you can make the needed $2million in your lifetime - even if you're an amazing investor. For example if you have $125K now it will take you 36 years to get to $2million - assuming no taxes are paid.
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Really enjoying following this thread.

So given that, it seems like it would actually make more sense to grind it out really hard for 4-8 years and come up with that money vs. maybe making that by investing (which is a generous estimate, to begin with).
 
I manage my own portfolio. I don't use technical analysis (I think it's a load of baloney) but I do look at charts ... and quarterly reports, and I pay a lot more attention to the reports than I do to the charts. Two parts to the portfolio that are about equal in size. One part sits in a variety of dividend-payers that aren't going to go bankrupt any time soon, and I almost never trade these. Another part, I'll buy shares in various companies when they are trading below their near-term average (or if there is some other strong reason for them to go up in the near term) and write covered calls against them.

I've never had any luck with momentum-trading or day-trading of any sort, so I don't do it. "The trend is your friend until it ends" - but when it ends, the reversal tends to be a lot stronger than the trend leading up to it - so buying a stock on the way up is begging to get slammed by a reversal - so I don't do it. I have a real job also, which means I don't have time to watch this minute by minute.

As for mistakes ... oooh yes, I've been wrong ... it happens. Being a little bit wrong is part of the deal - you'll never buy at the lowest point and you'll never sell at the highest point. As long as I'm right a little more than I'm wrong, that's good enough.
 
I think the important point to make about T.A is that even if you don't personally buy into it, many people do believe in it and High Frequency Algo Machines are also programmed with some sort of T.A.

So its important to know that others are looking at stocks that way and that it may help you understand/anticipate what a stock might do based on the chart, resistance levels, breakouts etc.. (in the short term anyway).

I try to acknowledge all of the approaches in making decisions now but I am a firm believer in Mr Buffet's rule of always buying quality. Thats something that perhaps T.A by itself does not fully address. Lots of stocks can have remarkable run ups that maybe some T.A guys latch on to but end up being pump & dumps where the dump can end up happening after hours and may not be a smooth enough decent to trigger a stop-loss to save you.
Got to look at the balance sheet, fundamentals and the story of where the company is going. Got to take it all in.
 
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My first real boss that came from "old money" gave me the best advice for stock choices when I was asking about trading and learning. Never put the family house at risk, like using the equity for a line of credit to invest and dont gamble with money you cant afford to loose.

I was using two financial planners, sort of by accident. BMO guy got us involved with a line of credit to invest, broke rule 1 and we lost a big bag of cash on the correction.
The other guy I met through social interests, hes doing ok for us with a very conservative approach through Edward Jones. His approach is if you meet a guy thats a stock market genius and gifted, he'll be retired and living on an island not working at your local bank branch.
 
crankcall said:
BMO guy got us involved with a line of credit to invest, broke rule 1 and we lost a big bag of cash on the correction.
.... meet a guy thats a stock market genius and gifted, he'll be retired and living on an island not working at your local bank branch.
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Lol.... bank investor guys are muppets that have no clue.
 
SunnY S said:
Lol.... bank investor guys are muppets that have no clue.
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Lol......Just because 1 might have left a bad taste, doesn't mean they all fall into this category.
Try turning $.25 into $6.00 over the course of 3 market crashes without one, (a CFP that has a clue), by yourself.
I can pm you his name if needed. (long term plan).
On the other hand, a local 'branch investor person' gave advice on what to do with my kids' trust funds. I should have left them in the hands of the guy mentioned above. (different bank though).
 
TA is no BS. Majority of my portfolio I buy and hold strong blue chip dividend payers for the low tax rate on them and basically dont touch them, just add on dips, however I do swing for the fences with TA and options with a small percentage. There is great potential for early retirement this way. The key is consistency and confidence, both of which I am still working on. Making a thousand percent in a few days or a few hours is an incredible feeling and doesn't hurt the portfolio one bit. It is possible and not BS.
 
Saying you do not believe in technical analysis is like saying you dont buy into human psychology. Trust me... we're all lemmings. We can be counted on to feel either fear or greed at identifiable points. By tracking volume and trends you can get a general idea of who is feeling greedy and who is fearful. Once you've determined this, the probably outcome at certain prices can also be determined. Humans are predicatable... like the loser runing his cage down the dotted line... and charts help us establish the points that they are most likely to act. And it doesent matter if you are the electrician putting money aside to retire or the portfolio manager of your pension fund.

As for funds using TA!? I suspect they use it more than they say they do. I know that when I started in the industry saying you used any form of Technical Analysis was like saying you appreciated voodoo. Today many will acknowledge that they do employ some form of pricing history to guide them. But its difficult to manage huge amounts of dollars based only the past. Unlike you or I, they cant simply press a single button to get in or out of a position. When they come and go it leaves marks on the market. These marks are identifiable if you take the time to learn them and that is why TA works.

And I should point out that these funds you are looking to have qualify Technical Analysis (show me one...) are averaging returns of less than 5%! Take inflation out of there and you are risking a ****-load of dough for about 3% today, though traditionally closer to 2.5%. Anyone working with these numbers could do a lot better learning to read charts and investing for themselves!
 
knowledge said:
......

So given that, it seems like it would actually make more sense to grind it out really hard for 4-8 years and come up with that money vs. maybe making that by investing (which is a generous estimate, to begin with).
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I think that's right. The management of the public companies are the ones scoring the big hits. The public shareholders' share of the pie is dwindling. Also bizarrely when management gets caught doing wrong, the company i.e. the shareholder (NOT the management) gets fined.

So if you want a cosmically weird example, the management of Bank of America lied to their own shareholders about the Merrill Lynch takeover, and as a result the Bank of America got fined! So the shareholders paid a fine as punishment for a lie told to shareholders. And nothing happened to the management.

So the fast track is now to become a big shot manager, not a shareholder.
Failing that, get a good govt job and you don't even have to save.
 
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Gary said:
Lol......Just because 1 might have left a bad taste, doesn't mean they all fall into this category.
Try turning $.25 into $6.00 over the course of 3 market crashes without one, (a CFP that has a clue), by yourself.
I can pm you his name if needed. (long term plan).
On the other hand, a local 'branch investor person' gave advice on what to do with my kids' trust funds. I should have left them in the hands of the guy mentioned above. (different bank though).
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I know my fair share of bank people, the "investment" people are merely puppets for the bank and have no clue and work from a bank manual. This is just a perfunctory job for them.

The true good guys start their own companies, like this guy :

http://www.theglobeandmail.com/repo...-to-6-billion-investment-house/article597737/
 
SunnY S said:
I know my fair share of bank people, the "investment" people are merely puppets for the bank and have no clue and work from a bank manual. This is just a perfunctory job for them.

The true good guys start their own companies, like this guy :

http://www.theglobeandmail.com/repo...-to-6-billion-investment-house/article597737/
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I'm think I've seen his face on BNN.
Not every CFP has his asperations.
I hope you have no more than 5% of your total assets with him?

I'll bet this guy was a true "good guy" at one time too:

http://www.biography.com/people/bernard-madoff-466366

Not everyone thinks like these guys. Some are actually content assisting clients, while still maintaining their job at 'said' bank / investment house.
Not every electrician / cook / plumber / landscaper etc opens up his / her own business, yet many are capable, and could / should.

Back to "Investing"............With all the new 'gadgets' coming to town, don't forget about Corning. (GLW - nyse)
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