Sharpening your trading and investing psyche
I understand the mental battles we all have, having gone through them myself, but successful investors and traders all eventually understand two things very clearly.
What’s locked into your trading memory?
Here are five things we should always know to trade and invest successfully.
Stock charts. What do they tell us and how do they help us?
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.
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The basics are vital for Trend followers
We all need a reality check and to get back to basics, The Stockradar stock selection process is based on three easy to understand common sense analysis setups.
Who should we trust when we invest in stocks?
Trust – What happened?
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.
‘Bare bottoms’
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.
Who will you trust with your retirement capital?
Take up the offer of a free two-week trial of Stockradar and see how it works
Achieving perspective amid the terror of stock market volatility
No matter what your analytical style of investing it’s the wise commentators who reinforce the perspective, wisdom and necessity of ‘not losing money’ as the primary focus during times of market volatility.
Stock Trends and Control – a winning combination
Catching trends is like surfing. Catch the wave, enjoy the ride and jump off when it subsides. That’s the simple message.
It’s the choices we make that shape our stock market investing destiny.
Portfolio Strategy – How does a profitable portfolio work? How do we keep our capital working hard? How do we make money in up trends? How do we survive during downtrends? Is your portfolio in good enough shape to weather all storms?
The Stockradar portfolio has been increasing in value over recent months, as have most other portfolios I would imagine. That has been a symptom of a rising market and that’s great but there is a reality that reminds us that although things are going ‘swimmingly’ we actually have to deal with all types of markets. A complete strategy must be robust enough or your portfolio will not survive. It is not necessarily about being a smart stock picker but rather being a good penny pincher. It is easy to build a survival portfolio if you take the necessary steps.
Corrections, big or little, occur regularly and that’s a fact. Another fact is we don’t how big or how long, just that they occur. How can we successfully ride these bumps not knowing? One of the fundamental truths of trading is that you don’t need to know what’s going to happen next to make money. Once we have a clear comprehension of that fact we can then move forward and develop a profitable process driven strategy that is prepared for all eventualities.
The key is to be prepared, as any good scout will tell you. And it’s very true we must always be prepared trade with a trend but also to protect our capital, as it’s our lifeline.
You can choose the safe and steadily profitable or the risky and most likely unprofitable. One way is controlled and relaxed and the other uncontrolled and stressful. These are the some of the many choices we make if we are to engage with the stock market as an investment vehicle. A good investment process by definition means one that makes money and the bad investment process is the one that loses money. That’s also a choice.
It comes down to this. If we intend to use the stock market as a good investment vehicle we have to do it properly and be very systematic about our investing. A choice.
A positive starting point is healthy and relaxed mind. It leads to successful investing. We then need to understand that we need to observe the market not predict it. We will win and we will lose; we have to have discipline to observe and respond appropriately so that winning becomes the norm.
So yes corrections come at regular intervals. You should have the confidence to be fully invested in a rising market but be prepared to get out take some small losses, wear some pain, and also lock in profits along the way. The good stocks will whether a storm best and they’re the ones you hold. The stocks that fail (at stops) need to go. The returns built up using a systematic process insulates you from serious damage and generates a steady profit profile, and ongoing absolute returns. That’s how a sound process must work.
It will all depend on how prepared we are and how we observe and react to signals generated. Our portfolios did navigate the sharp correction of the CFC in good shape because of observation and the ability to act appropriately. No guesswork and no hopeful praying! i.e just get out when stops are hit and don’t ever carry large drawdowns. It was one of those corrections that we didn’t know how big it would be but it certainly wasn’t one you wanted to ride out so taking that capital preservation route proved to be the correct decision as it always will, be the correction big or small. This also means you portfolio recovery will be strong coming off a much higher base then the market in general contracted to.
As an individual investor or SMSF manager you have a huge advantage over big funds.You can be nimble and move fast. Most funds are ‘stuck’ and are too big to sell. They have to ride the bumps and it’s the big ones that kill them as we have learnt. So to manage your own investment and keep the money in your name and your account is a huge advantage. It helps in many ways. As well as being nimble and having the ability to protect our capital at anytime, the next advantage is cost. Costs and fees can kill profitability, and there are many ways to pilfer your account – unless you manage it yourself. Online trading comes at a pittance these days. Why fritter away money when you don’t have to.
The next step is to have a process driven stock selection strategy that will ensure your capital is growing but at the same time keeps you safe so your investment process becomes a good one. Again it’s a choice. There are many common sense steps we can take. At each step we take we have a choice and this is simply a cognitive approach to realistically achieving our goals. Provided you make the right choices you will achieve them.
Finding the key to consistent stock market performance.
What is it retail and SMSF investors really want from their equity portfolio?
Growth in equity, plain and simple and that makes complete sense.
The Trend Intensity Indicator
Market sentiment plays a critical role in assessing share price movements. Stockradar delivers a consistent measurement of market sentiment using its unique tool, the Trend Intensity Indicator.
