A share price is at the mercy of market sentiment and investors are often affected very much in their decision making by such emotions as anchor bias, and other such like confirmation, information, loss aversion and hindsight biases.
Definitions of these are readily available on the web and are recurrent examples of why investors make trading or investing mistakes and I discuss this in my YouTube videoMy 5 top tips for success on the stock market.
So, using the example of PGH above I would think now many previous investors are somewhat shy (anchor bias) of investing back into PGH. Righty so maybe but you might remember the ‘emoji guide to investing I showed in last week’s Radar Newsletter (25/1/19) demonstrating the fact that the key to consistently successful investing is to be poised and maintain a balanced perspective no matter what the market is doing.
Looking through the haze
Right now, PGH investors are suffering but realistically having halved in price back to its initial starting price at listing and is now showing potential demand at this support level the stock must go on the radar again of starting to look valuable and having to potentialfor a turn back up. Not that I want a long-term investment because that’s not how I play the stock market, but these points can often be scrambling points when a change of sentiment can take hold and trigger all sorts of portfolio rebalances, short position exits and fresh ‘value’ buying etc. Looking at the stocks afresh with clarity and perspective can be hard because of our biases but that’s what we need to be able to do.
Focus on your own style
My style of trading and investing is looking for those types of investor changes that can trigger sharp price moves and new trends to capitalise on. PGH and many other stocks are currently in this position and over coming weeks I will point you to a few of these opportunities that this falling market has now delivered.
Bull or Bear?
Whether the ASX/200 rises of falls from here is to a large degree irrelevant when assessing individual stock performances. Yes, a rising market offers more opportunities and a falling market less, but still opportunities always arise in any market and this one is no different. Are we in a correction phase or beginning a new wave higher? That is always the eternal question. Don’t even try and answer it because you can’t and it’s simply a major distraction. Keeping a clear head is vital.
How to play it
Smart stock investors always remain poised and have the ability to have good perspective without biases and emotions. This will help your success rate immeasurably.
https://stockradar.com.au/wp-content/uploads/2019/02/bias1-1.png8001028Richard Lie/wp-content/uploads/2018/03/logo.pngRichard Lie2019-02-14 14:44:402019-02-14 14:44:40Biases, Perceptions and Poise.
https://stockradar.com.au/wp-content/uploads/2019/02/cool.png8281028Richard Lie/wp-content/uploads/2018/03/logo.pngRichard Lie2019-02-05 15:13:122019-02-05 15:13:12Sharpening your trading and investing psyche
https://stockradar.com.au/wp-content/uploads/2019/01/Remember.png8281028Richard Lie/wp-content/uploads/2018/03/logo.pngRichard Lie2019-01-29 14:00:342019-01-29 14:01:51What’s locked into your trading memory?
A picture tells a thousand words and as you know I am a visual person and that’s the reason I use charts.
Perspective and clarity
Charts sum things up beautifully. They collate, reflect, simplify, cut through the distractive and unnecessary crap and also tell us what to do and when. Stock charts tell us where the money is going. To a large degree accuracy and benefit will depend very much on the quality of the analyst and this makes me a realist and not a dreamer. I am always prepared to expect the unexpected. Charts however provide precise price information at any point in time and are a great help in telling us all we need to know to trade and invest successfully
Rumour or fact
They provide a complete collection of investors’ perceptions based on the information available and yes that information can be based on fact or rumour. That is unfortunate but it doesn’t actually matter; what matters is what moves the price and rumour and perceptions are a part of that.
Human behaviour and ‘traits’
Certain traits are reflected in this price movement and that’s a reflection of human behavior and if we can determine or read, how this behavior is going to play out it can be of great advantage. We can’t read every jump, jive and nuance but what we can look for is a general trend in that behaviour. It is this trend in behaviour that I capitalise on. It’s just like catching that big wave in the surf when it breaks, you ride the momentum of the wave until it subsides, and then jump off before it stops. Simplicity is the essence.
Building a plan
Markets behave irrationally so our involvement requires cool headed actions at all times and as a part of the Stockradar service we help investors understand the engagement process and how to respond appropriately to what the price action is telling us. What are you doing and what should you be doing right now? An interesting question as the market currently tosses prices around with abandon. By having a rule-based approach it makes the trading process easy by telling us what to do, and when, and at all times. Armed with this knowledge it will help you grow your awareness and ability to succeed as an investor and to achieve the steady growth in your equity which we all desire.
Two key clues
In the end it comes down to two things, common sense and control. By following our real time examples and understanding the psychological motivations of investors your market insight becomes switched on and responsive allowing a clearer path to your investing success. The stock market is a fun and challenging place. Come along for the ride you’ll enjoy it.
Blogs, videos, newsletters and a fully comprehensive Trading Centre are all at your fingertips when you subscribe to Stockradar. Take a free 2-week trial.
https://stockradar.com.au/wp-content/uploads/2018/12/visual.png6851028Richard Lie/wp-content/uploads/2018/03/logo.pngRichard Lie2018-12-24 13:59:162018-12-24 14:06:53Stock charts. What do they tell us and how do they help us?
Why should we trust others with money we invest in stocks? I have had a nasty experience, have you? The productivity commission reports that underperformance and fee gouging is rife in the retail superfund industry and that eats into your returns. What a mess. Let’s see how the Royal Commission handles this one.
Activist short sellers
Thankfully the markets have now become the birthplace and playground for the activist short sellers calling to task rogue companies talking up their books or burying the truth in ‘accounting’ numbers while playing on the dreams of gullible investors. When it comes to dealing with ‘dollars’ we aren’t being very aware but often taking a more hopeful approach which is dangerous and somewhat lazy. Sometimes it is hard for us to establish the ‘real’ truth so bring on the rigorous short sellers that will keep ‘the buggers honest’. I’ll bet there are many highly paid company directors, managers and CEO’s all looking nervously over their shoulders right now. Who will be next? Let’s hope it will go some way to making the stock market a safer place to invest.
The comfortable ‘bedroom’ of ‘insular boards, complacent management, and index hugging institutional fund managers’ – (Rob Luciano short seller of recently targeted Corporate Travel Management) is also now being opened to the public and their ‘bare bottoms’ are being exposed.
Superfunds are tainted with the same brush as the banks
This is of utmost important to you as investors because it’s your money and your retirement and you are more than likely being ripped off if your money is in one of these institutions or superfunds. Or at the very least you could do better elsewhere. Yes, it probably isn’t fair and you are probably unaware of the double dipping, skimming and rorting. But these things come home to roost and these rivers of gold are drying up for the cosy superfunds managing billions and siphoning off just a little but here and a little bit there.
Will things change?
When money is concerned probably only slowly as greed remains one of the key three drivers of illegal activities with power and sex being the other two. However, there is hope, as it seems things are beginning to change as awareness is slowly being enlightened and processes such as the Haynes report brings to light these activities. We are disgusted. Really when you think about it a vertically integrated setup such as AMP’s can only encourage greedy and ‘untoward’ behaviour. In reality if companies behaved appropriately and honestly, as they should, we wouldn’t even need ASIC.
Who can you trust?
That’s a singularly easy answer, yourself plain and simple. The confusing money-go-round of explanations by money managers when you ask them for a simple explanation of costs and performance is an extraordinary thing to behold. It’s how you hide reality. The rorts as Mr. Haynes has found are rife and at the highest level. This is a huge problem for the industry because trust is vital to its survival.
‘Too often, the answer seems to be greed – the pursuit of short-term profit at the expense of basic standards of honesty.’ – Commissioner Kenneth Haynes
Cost effective alternative
The best and most cost effective alternative when investing your hard-earned dollars in the stock market is to do it yourself. Stock market investing is actually about common sense. Protecting and making your capital safe is the first and foremost objective and then investing sensibly and systematically with discipline and the right expectations would seem the common-sense approach.
You can have full control.
Having control of your money and your destiny is important and, in the end, very satisfying. With a healthy dose of common sense in our back pocket sometimes we just need a little help in selecting stocks. A simple strategyof selecting stocks based on historically sound principles of investing can help. Nothing more. I look at stocks in a systematically and controlled environment and it works for me. You ultimately retain full control of your actions but in the end the proof is in the pudding – the outcomes. That means getting what you need – solid, consistent and predictable growth in your equity.
The charts on our home pageshow steady growth and how methodical stock selection enables a degree of predictability and this gives us a lot of confidence. It’s about having a strategy and a discipline to invest in stocks safely. Knowing full well we can’t predict or forecast the path of the stock market, but you can very effectively manage a process of investing for your own benefit.
Our members stayed safe during recent rout, as they did in the GFC, using a simple but effective money management tool – The Stop. Exposure during down swings is cut when required and lifted when markets rally – it’s that simple.
https://stockradar.com.au/wp-content/uploads/2018/11/mask-3829017__340.png6851028Richard Lie/wp-content/uploads/2018/03/logo.pngRichard Lie2018-11-28 15:24:232018-11-28 15:25:09Who should we trust when we invest in stocks?