Trial and Errors Journal

[rsd886647]

Made some money off the kazarkhyms deal, but should have made more. Sold at 633. I went out friday evening, thinking the sp would rise after a gap up at opening and some increase early on, but came back to find the sp had gone down from 650 to 633, and US futures pointed towards profit-taking after thursday's strong session. Shame that. Still holding 170 shares of Vedanta at a loss. Hoping the confidence returns to the market just a little to bring the sp back up. It lost 30% in a couple of weeks, but looks to have support at 1260. I think this will be tested Monday. Vedanta is growing fast, but unfortunately, the following didn't help my cause on Friday.

MARKET REPORT: Debt concerns batter Vedanta
By Geoff Foster
Last updated at 9:23 PM on 26th June 2009
Troublesome credit rating agency Standard & Poor's caused more grief in the City. Yesterday, its victim was Vedanta Resources, India's biggest copper and zinc producer, which touched 1,281p before closing 10p off at 1,305p. Investors exited on hearing the agency had placed the group on credit watch.
It reflected S&P's view that Vedanta's sizeable capital expenditure programme and appetite for debt-funded acquisitions in a severe industry downturn increases its risks.

Vedanta's capital expenditure pipeline remains sizeable at more than £4.7billion, which will place demand on its funding and liquidity during the current period of uncertain internal cash flow generation.

Anyway, I hope the previous posts/graphs give a visual example of why I believe in this system. I will post more accumulation signals as and when they arise.

 

[rsd886647]

Some of my momentum indexes appear to indicate many of the mining shares can't rise much more before they are due for a dip according to recent patterns, however I have identified more accumulation signals today. The first one is Antofagasta. It's current share price is 600.

 

[rsd886647]

The next one is Rio Tinto. It's current price is 2162. The AD line shows whether a stock is under accumulation or distribution and gives an indication of the stock price's movement in advance.

 

[rsd886647]

The market has just crashed after some poor consumer confidence data, so everythings taken a bit of a hit. Antofagasta is down to 590, Rio to 2115.

I read into it that the professionals were buying in to these shares in anticipation of a bullish period ahead. I imagine it would take quite a bit of negative data to convince them otherwise. I would probably still be holding if I had bought in. Although an issue may be under accumulation, that doesn't prevent it from being affected by some unexpectedly poor data.

I have a gut feeling that these accumulation signals may be starting to emerge as investors look to earnings reports driving the rally on.

 

[rsd886647]

The miners are making headway today. I can't believe how well Vedanta is doing, down to a power plant deal. My losses have lessened quite a bit today, and if tomorrow is a good day, as is often the case before a holiday (US), then I might break-even.

 

[rsd886647]

So I think one can get a clear picture of how the system works, that accumulation signals in the mining shares shown in my graphs yesterday gave advance warning of a rise in share prices today, indeed the ftse was driven up largely by miners today.

Of course, you wouldn't have made much money yet because of the poor data that brought about a bit of noise, but the system stands, traders are accumulating mining shares at last.


Edit; 25 mins after wall st has opened, and Anto is 620, Rio is 2190, and Vedanta is up 10%. Luvly.

 

[rsd886647]

Drawn up my charts after the market closed and got some more accumulation 'buy' signals today, and one distribution signal, which suggest traders are getting rid of the stock. So far the charts have done pretty well. Accumulation and distribution is measured using a formula and is not just based on volume.

Vedanta is a buy at 1369. Accumulation looks to be very strong. Traders are buying this stock.

Antofagasta is a buy at 598.50. Accumulation is fair and the momentum index suggests the stock price is ready to rise.

Anglo American is good for a buy at 1713. Again, accumlation is fair.

And this is where I either get shot down badly or the method is really on the money. The chart shows distribution is evident in Rio Tinto, the price now at 2026. Traders are getting rid of the stock relative to the fall in the ftse. This goes against recent news that says the take-up for the rights issue has been very strong.

 

[rsd886647]

This chart shows the difference between the ten day moving average of ftse gainers and the ten day moving average of ftse losers, plotted against an ftse chart. It is clear from the graph that a downward trend towards a greater propensity of losers preceeded the recent downward correction in the ftse. It also seems that the trend is heading upwards now. I hope it continues.

 

[rsd886647]

I've just started getting to grips with short term market timing charts, and I've drawn up a 5 day moving average of my trading Index, below. It suggests that the best time to buy was on about 29th June. This concurs with the last low point of the shares I follow. I wasn't working with this chart then, and the fact the accumulation signal didn't come until friday means I wouldn't have bought then anyway. The troubling thing with the chart however, is it suggests we are nearer a sell signal than a buy signal. So I'm a little cautious. I expect the shares to rise as per the accumulation signals, and if things look good tomorrow morning, I will probably buy Vedanta, but I would now be quite prepared to offload them fairly quickly.

 

[JRP2891]

How long will you give this method to hopefully become profitable for you?

Just because one person can make this particular strategy work for them, it doesn't mean you'll be able to make it work for you. A major part of the journey in trading is finding a strategy which best fits your own personality.

 

[rsd886647]

I felt that the approach made a lot of sense to me as I read up about it. I've found that I have adapted some of it to suit my way of doing things. Also, some of the readings give misleadings results and I have begun to adjust figures to compensate. If I just followed the method blindly, it would most likely fail me. That's not to say it has been a success as yet of course. But I feel I am on the right tracks. I am developing my own brand of the system all the time as I gain experience using it. I have been able to reduce losses of late, so my account is looking a bit more respectable. I am just about in a position to place trades that are sizeable enough to bring a profit but will not put myself at risk of going broke. Some of my posts of late have been based around paper trades. In terms of putting a time on it, I would say I will benefit from experience the longer I use the method, but I hope to be comfortable and making decent profits (hundreds per month) within three to six months, and if I attain that, then I will build it up from there. I can't think about this system failing to be honest, I can't see it happening, but there are many reasons why it could, and if that were the case, then I would hope not to be too financially burdened, and that I'd have the motivation to learn other methodologies. I am certain that all learning benefits one in some way.

 

[rsd886647]

The market fell 60 points early on, down to 4180. The mining shares dropped of course. I tried to find some things I could take from it all. I noticed that Vedanta and Antofagasta started out positive and stubbornly held back from dropping, while Rio Tinto dropped 2% straight off the bat without a blink. That seemed to be in line with what I was expecting, except of course, I wanted Anto and Ved's sp to increase. They ended up dropping too. So of course, the previous points at which I would have been happy to buy at could be revised down quite a bit. I bought back into Vedanta, but it was too soon at 1344. Looks like the price will carry on dropping and wall st is likely to add pressure.

 

[rsd886647]

It's 11am nearly. I think the conclusion is that strong accumulation in a stock doesn't guarantee that the stock price will rise, but in a falling market, it will suffer less.

Vedanta is markedly better off than its rivals.

 

[rsd886647]

Well, it's got worse and worse as the day has progressed. Vedanta is now in line with most of its rivals, 4.5% down, at 1307. The only good news is that it seems Wall St aint quite so down in the dumps. If I had wisdom, patience and money, perhaps now would be the time to buy. Whatever the case, when the market turns upwards, if it ever turns upwards, I am looking forward to seeing Vedanta do well.

 

[rsd886647]

Yesterday sure was a horror. It seems my charts simply give an indication of strength in a stock; being able to read the market well is where the money is made or lost. My momentum charts are making more sense after yesterday's fall, but the accumulation signals got somewhat wiped by the fall. I still value the readings they were giving me before yesterday, and it seems as though things might be better today. My stops are tight now so I hope the issue starts higher. Wish I had waited yesterday to buy in at the end of the day. I put too much emphasis on the accumulation signal, and simply didn't read that the market was in for a bad day, which would worsen, though it was kinda obvious. Another lesson learnt.

 

[Black Swan]

in some ways I admire you naked honesty in this thread/journal, however, I fel like I'm peeking through the curtains each time I visit it...
Why this obsession with the miners and if so why not simply spread bet them as a sector on IG/elsewhere? The spread can be huge, however....

 

[meanreversion]

I've just spent the last ten minutes skimming through this thread, and whilst at times it seemed as though rsd was trying to self-harm, I'm sure if we all wrote down our trading experiences and thoughts from day one it wouldn't look a whole lot different. I would second what someone else said earlier in the thread, read "Market Wizards" and "Trade your way to Financial Freedom". These should be COMPULSORY reading for anyone about to commit money to the markets (and should prevent very basic errors such as committing more than 5 pct of capital to one trade). Anyhow, been fun reading this, keep it up rsd, I hope you can last another month!

 

[meanreversion]

38 steps to becoming a trader

They are as follows:

1. We accumulate information - buying books, going to seminars and researching.
2. We begin to trade with our 'new' knowledge.
3. We consistently 'donate' and then realise we may need more knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our 'updated' knowledge.
7. We get 'beat up' again and begin to lose some of our confidence. Fear starts setting in.
8. We start to listen to 'outside news' and to other traders.
9. We go back into the market and continue to 'donate'.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get 'over-confident' and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge than we anticipated.

MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.

15. We get serious and start concentrating on learning a 'real' methodology.
16. We trade our methodology with some success, but realise that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate when we execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don't follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account
continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had always dreamed of.

 

[rsd886647]

Nice posts. I have looked into spread betting. I felt the methodology I embraced was sound, and still do, but to trade it successfully is another matter. Why miners? Because the volatility appealed to me . Not so sure about that now. I will get those books. Thanks.

 

[rsd886647]

I've started reading 'Trade your way to Financial Freedom' and I've found it very enlightening. It is encouraging to hear that most successful speculators have success rates of 35 to 50 percent, and that they are not successful because they predict prices well. There is hope for me yet.

I am starting to understand that the notion that the Holy Grail is not a magical trading system, but is rather an inner struggle.

I have definitely suffered from conservatism bias, lotto bias and the gambler's fallacy. I have often failed to recognise, or even see, contradictory evidence against the system I use.

I certainly did go through a period of betting more after a series of losses until my stake was so low that my chances of making it back were almost non-existent. I also find that I focus entirely on entries and fail to cut my losses short by employing effective stops. Thanks for the reccommending the books enough times to get me to read them.

I've still got money in the market, running at small losses now, and I get the sense that better news is coming out all the time now, and the market has spent long enough in fearful mode that it is worth holding the positions and seeing if an upturn comes in the next few trading days. I can't see the market going any lower, but then it always can.

My optimism comes from Vedanta's performance today, on the back of this rns;

July 10 (Reuters) - Vedanta Resources Plc (VED.L) said bauxite mining for its alumina plant in eastern India would begin by October and the company would invest $1.23 billion to expand its capacity sixfold by 2011.

I wonder if it is the case that the accumulation I noticed in my charts a few days ago was down to traders getting word of this.