Readings: Week 19 - 25 Jun 2017

25 Jun 2017

 

 

 

Why I Don’t Talk About My Stocks Publicly, And Why You Shouldn’t Either - VISHAL KHANDELWAL

  • Public Commitments are (Often) DangerousSpeaking Publicly about Stocks is (Often) a Bad Idea

  • Public commitments tend to be lasting commitments. And as Spier writes, even when you come to regret your original decision, it’s difficult to change your mind because you have committed to it publicly.

  • Whenever one takes a stand that is visible to others, there arises a drive to maintain that stand in order to look like a consistent person. We all love consistent people, and always want to look like one. After all, someone who is inconsistent is looked at as fickle, uncertain, or unstable. On the other hand, consistency is a hallmark of being rational, assured, trustworthy, and sound. 

  • Michael Burry (The Big Short): “I hated discussing ideas with investors,” he said, “because I then become a Defender of the Idea, and that influences your thought process.” Once you became an idea’s defender, you had a harder time changing your mind about it. 

  • Most individual investors would also benefit from keeping quiet about their current investments since this talk only makes it harder to operate in a rational way. It’s so much easier when you don’t have to worry about how other people might judge you. 

  • The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard.

  • You don’t live life on others’ terms (Outer Scorecard), but only yours (Inner Scorecard)

  • The act of comparison with others – or seeking validation from others, that is one of the key intentions behind speaking publicly about stocks – is what is driven by living with an Outer Scorecard.They will remain stuck in a status quo mode because they now hate to admit publicly they’ve lost money.

  • I have seen several other investors fall in love with their stocks in the garb of “buy and hold”. They will remain stuck in a status quo mode because they now hate to admit publicly they’ve lost money. They will even put a higher value on the stocks they already own than they would be willing to pay for the same things if they didn’t own them. All this because they’re too rigid to change their ideas, even when circumstances are shouting at them to do so, and because they are facing the public’s glare.

 

IMPRESSIVE SIGNALS FROM DEMARK - THE TECHNICAL ANALYST September/October 2004

  • DeMark is essentially a risk-reward strategy and its stoploss positioning means that even when the indicators occasionally underperform, losses are cut to a minimum. In my experience, the TD Sequential Indicator is more than 70% reliable; it is closer to 90%.”

  • The Sequential is perhaps the most commonly used DeMark indicator and has an impressive record of identifying and anticipating turning points across the FX, bond, equity and commodity markets. 

  • The Sequential Indicator identifies when a trend is becoming, or has become, exhausted. The TD Sequential Indicator consists of two patterns, a TD Setup and a TD Countdown.

 

TD Setups are the shortest in duration, lasting for exactly 9 price bars when completed.

  • For example, a Buy Setup exists when there have been nine consecutive price bars in which each bar's close is lower than the close four price bars earlier. When a price bar closes below that of four price bars previously a '1' appears below the bar. If the next price bar also closes below that of four bars earlier a '2' appears and so on. 

  • If before price bar 9 is reached a price bar fails to close below that of four bars previously then the Setup is abandoned and the numbers are automatically deleted.

  • Once nine consecutive price bars have been completed the trader will be looking for a "perfected" Setup; one that is now valid for trading.

  • A buy Setup is perfected when the low of either price bar 8 or 9 is less than the lows of both price bars 6 and 7. Perfected sell Setups look for a high of either price bar 8 or 9 that is greater than the highs of both price bars 6 and 7.

 

TD Countdown occurs after a completed Setup.

  • A Buy Countdown consists of 13 price bars whose close is lower than or equal to the low two bars earlier. The corresponding numbers appear below the price bar.

  • Unlike the Setup, a Countdown doesn't have to consist of consecutive days.

  • The Countdown is a bigger pattern than the Setup in that it can take months for a Countdown to form and often signifies a larger market move once the trend changes.

  • Like the Setup, the Countdown also has "perfection" criteria. For a buy Countdown this requires that the low of price bar 13 be less than or equal to the close of price bar 8. Similarly, Sell perfections require that the high of price bar 13 be greater than or equal to the close of price bar 8.

"The DeMark indicators are proprietary market timing tools that are really only available to professional investors. These indicators are not to be confused with conventional technical analysis that relies more upon subjective interpretation of price charts. Rather, they are quantitatively derived and grounded in market psychology and are totally objective. Many traders, even if they are fundamentalists, rely upon the indicators to time their trading decisions. Conventional indicators are typically trend followers whereas DeMark is designed specifically to anticipate trend reversals.

 

 

My 4 best momentum indicators - Mark Rose, Trader's Bulletin

 

Using simple overbought/oversold readings is really blunt instrument, because as soon as a trend gets going, we can be stuck in overbought or oversold conditions …And this is why we need to be a bit smart about choosing the right momentum tool for our trading style, and applying it correctly.

 

1. Stochastic Oscillator: a favourite oscillator for many traders, and is generally considered to be a good tool for getting into trending markets at the right moment. By watching the ebb and flow of momentum during a trend, you can better judge your entries and exits.

 

2. RSI: The RSI and Stochastics look very similar, and are often used in much the same way by traders. However, the principles behind them are surprisingly different. RSI measures the speed of price movements. RSI is more suited to finding overbought/oversold or divergence in range-bound markets, while Stochastics are better for pinpointing an entry in trending markets. When the price butts up against Resistance and we have an Overbought signal, then we have an opportunity to profit from a sell trade. When the price meets Resistance at the bottom of the channel, combined with an Oversold signal, then we have a Buying opportunity.

 

3. MACD: MACD reaches parts that a normal moving average can’t … it measures the rate that the moving average is changing – telling us just how powerful a move is. But I want to show you a slightly less conventional way to use this indicator … It just looks at the histogram, and will only take trades when the histogram size is large enough to indicate clear momentum in a given direction.

 

4. Candlestick: Let’s put it bluntly – if we see a series of massive long green candles, we know there’s some upward momentum in the market. That’s why traders use candlestick charts, rather than line charts – they give us a great picture of momentum and its implied volume.

 

Stock Picking: Keys to Successful Investments - Russell Wayne

 

- Keep in mind the reality that successful stock picking is an effort to maintain a good batting average. No one gets it right all of the time and it's not even close.

- The key is the awareness that patience will be required and that typically means the better part of a year, if not several.

- What takes place in the short run for individual stocks and the market generally is unknowable and is driven primarily by psychology. It is over longer periods that improving fundamentals that push stock prices higher become meaningful  

 

 

 

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