Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Hi niceboat,
Yes that is were we all started: losing money. I am still a starter, and I had the back luck to start just before the top of the recent bull market, so I am in the same unnice boat with you: I lost about 40% overall.
I think the important thing is to get your feet back under you first. I think you get a lot of excellent advice to start using X_DEV, but perhaps you'll need a bit more caution. And you'll need money! It is not for nothing that Myst's X_DEV examples have a $30,000 size. Anything below $3000 per stock will strain X_DEV's performance, because of commission costs. X_DEV likes to trade, and trades cost. If you don't have enough money, try building up. Do it in cash, or by Dollar Cost Averaging into an index fund or an ETF like QQQ, SPY, or DIA.
In the meantime, start paper trading some stocks with X_DEV. You could use the three stocks of the evaluation version of X_DEV, but better would be to invest in the package and see the cost as learning money. At least for this money you'll get something in return!
Look very well at what happens. Evaluate not only whether the stocks make a profit, but also whether you are beating a benchmark you want to beat. (DIA, SPY, QQQ, or why not! BRK.A - beat Warren Buffet!) And very important: evaluate whether you understand the X_DEV action, whether it "feels good", whether it fits you. (That's the main reason why I stay out of X_DEV currently, because I don't think its trading style will fit me.) Ask questions on this board when you don't understand or like what you see happening in X_DEV.
Do this for at least 6 months, or better: a year. When you have found some confidence, you can make a start.
In case you might be interested in a more laid-back style of investing, try http://www.investorshub.com/boards/board.asp?board_id=949 (that's AIM). The folks over there also know about some alternatives to dollar cost averaging.
And now I really have to go back to work.
Good luck,
Karel
Paging drbandage
Hi Doc, I am one of the freeloaders here, so I can't answer your private mail. Please post your e-mail address here, or to qarel@hotmail.com.
Sorry everyone, for the bother.
Karel
Niceboat, the problem is not that you don't know what the market is going to do. Neither do I, neither do the other people on this board, including (surprise!) the great Myst himself. Your problem is that this worries you.
That's why these people use X_DEV (I myself use AIM, besides momentum investing). We have a plan. It keeps the worry out of investing. You may lose money once in a while (my stocks are down 17% overall right now, bought from april through september), but when you have thought your plan out really well, you don't worry. Of course, once you keep losing, it might be time to re-evaluate your plan.
Don't ask other people to make your decisions for you. Try asking them how to formulate a plan.
Regards,
Karel
Thanks Mark,
the upgrade went very smoothly. I had to check the users guide on how to import models, but that was easy enough. Everything fine over here!
Regards,
Karel
Rien, I don't think futures have a strike price. The "strike price" is the price you want to pay for them now. Generally, that price would reflect the value of the underlying index or stock. Of course, when you think the underlying will go up, you might be inclined to bid more, but then someone else will be able to chalk up a quick profit.
Futures mainly seem to be a way to get leverage, which is interesting on its own, or useful for hedging.
Regards,
Karel
Hello Tom,
That is a truly terrible accident.
It is a bit strange to consider that just over 5 years ago my wife and I went visiting my sister and her husband in the US of A. They were living there for a couple of years, now they're back. One weekend in the spring, we traveled from Menomonee Falls to Door County to do some camping. Luckily, there was no fog.
Regards,
Karel
Tom, your Even at 45 points a day on the NASDAQ, it's going to take quite a while to get back to 5000!!! inspired me to post something I posted some time ago on a very different board ( http://groups.yahoo.com/group/mrmarketishuge ). Not that you fell victim to that fallacy; I just like to spread my idea around a little bit :)
== The "A drop needs a bigger rise" fallacy ==
While lots of us are looking at portfolios that are in the red, I started wondering about the old saw: "When a stock drops 50%, it needs a 100% gain to get even." It's true of course, and it does look pretty hopeless. But despite the truth in the saying, are things really that hopeless?
I set up a spreadsheet and entered 100 in the first cell. I then calculated .99*A1 in the cell below it, and copied that formula 68 rows down. In row 70, the result was down to 49.98. I then copied that value to the right of the first cell, and calculated 1.01*B1 in the cell below it. I copied that formula 69 rows down. In row 70, the result was 99.31; in row 71 the result was 100.31.
So it needed 69 1% drops to halve the value, and 69.7 1% gains to get back at 100. See? A drop needs a bigger rise! Yeah, right!!
== End of Yahoogroups post ==
Of course, this just a cumbersome way of showing that a 50% drop and a 100% gain are geometrically equivalent (more exactly: they are inverses), and for prices you need geometrical series (percentages), not arithmetical ones (dollars).
Regards,
Karel
Hi Mark,
you are right of course about your test being a comparison. Which makes my smart remark sort of a moot point. Thanks!
Regards,
Karel
Those results are very impressive indeed! There is however a fly in the ointment, and it is called survivorship bias. No companies currently in the N100 existing 10 years ago have gone kaputt, obviously. But some now in the N100 will not survive another 10 years, or will get kicked out of the index somewhere along the line.
Regards,
Karel
Nice quiz, especially since I scored 100%! Thanks for the link, Tom!
Karel
[chxrt]www.vortexcw.nl/wsn2483.gif[/chxrt]
Regards,
Karel
Rien, you didn't think your way through the problem completely. Betting big in relation to your total amount to bet doesn't give you a better chance to win, but it does give you a better chance to win big. It also gives you a better chance to walk away with nothing, so that is where the overall chance remains the same.
You want to bet $1000:
- Bet it all at once: you go away with $2000 (18 out of 38 times) or $0 (20 out of 38 times) >> average $947.
- Bet it in $1 parts: you go away with on average $947, but practically never with $0 or $2000.
Regards,
Karel
Impressive analysis, Don! I think this basically validates Lichello's work, especially with the kind of stock he had in mind. I think one possible problem is the evaluation of the outperformance of the MACRO variations. They seem tailor made for a Bubble and Bust scenario, but how often will we get a Bubble and Bust as in recent years? For less-than-bubble stocks, the timing might kick in at just the wrong moments.
Regards,
Karel
Hi Toofuzzy, no, Price/High = Cash is not equivalent to Low/Price = Stock. The easy way to show this is to refer you to your own High=10, Low=2, Price=3 example, but I am going to bore you:
We have
1) L/P = S (my rule of thumb)
2) P/H = C (your version)
With S and C as fractions (f.i. S=.7 and C=.3)
We also have
3) S+C = 1 (Stock+Cash is the whole of one investment)
Which is equivalent to
4) C = 1-S
We could plug this into 2) and get
5) P/H = 1-S
Now we add 1) and 5)
6) L/P + P/H = (S + 1 - S =) 1
The S's cancel out! Now let's give the fractions on the left the same denominator:
7) L*H/P*H + P*P/P*H = 1
Multiply with P*H to get rid of the stupid fractions
8) L*H + P*P = P*H
Bring P*H to the left side and write P*P as P^2
9) P^2 - H*P + L*H = 0
Now 9) looks an awful lot like the general quadratic equation:
10) a*x^2 + b*x + c = 0
with P for x, a = 1, H for b and L*H for c. Now 10) does have at most two solutions for x, for any a, b, and c, so 9) also has at most 2 solutions for Price, for any combination of Low and High. That means that 1) and 2) are only equivalent for a maximum of 2 prices given any combination of High and Low, and not for any price, which was what you supposed.
Toofuzzy?
Karel
Hi niceboat,
X_Dev determines the buy and sell points almost purely based on recent price action. X_Dev needs significant action for abuy or sell. (You need to define "significance" first for every stock by backtesting.) So when prices drop, the buy and sell points drop too. All other information is ignored by X_Dev. What you do with that information is up to you.
Regards,
Karel
Hi TooFuzzy, initially we were talking about stocks that were close to or making new highs, so the simple formula would apply. I think your formula may result in too little cash when you are near the bottom of the cycle. In your example, with a Price of 30 and a Low of 20, 24% cash is very optimistic. Perhaps simply (Price-Low)/Price would be best as a rule of thumb(!) for cash allocation, or the equivalent Low/Price for stock allocation.
Regards,
Karel
Hi Lostcowboy, I like your simplification. It is of course, the exact equivalent. I also agree that it could make people wary to invest in possible bubble stocks. Remember that Lichello uses a 10-4-10 cycle, and everyone seems to agree that this is outrageous. Whenever the Stock%=(Low/High) formula asks you to invest less than 40% (using yearly high/lows), you should ask yourself what you are doing. In your 5 year example, 20% looks OK as a danger signal.
Of course it is perfectly possible for stocks to sustain an extended climb. In your 5 year/400% gain example you are looking at an annualized return of just under 40%. Stocks like that might be in an extended growth phase and in that case are not be the best stocks to AIM. Just B&H or a Buy and Add scheme like Reverse Scale Investing might be better suited for those stocks (when they are looking OK fundamentally, of course). For AIM, I would like to see at least one cycle over at least half the High/Low range in those 5 years, or lots and lots of smaller cycles.
Regards,
Karel
Hi Leapyear,
We can hardly call deep divers a Lichello Flaw, as they are flaws of the stocks/companies/hyper bull markets. Lichello in fact advised to stick to blue chip stocks. It's only in our greed that we stumble over the deep divers.
Regards,
Karel
Hi TAB,
I can't say do or don't of course: that's your very own privilege. But when you have figured out that you want to own this one, you could do two things:
- Buy it, and when you see from the chart that it is remarkably high, reserve more cash. Rule of thumb: Cash% = (High - Low) / High (in %).
- Put it on your watch list and decide on a buy target. Again, AIM can be your guide: use a buy at the most recent high as virtual entry point, and make your real entry at the first buy point. Reset your entry point when the stock makes a new high.
Just two ways to overcome paralysis.
Regards,
Karel
Warren, on Minimum Trade:
MT's apply with any Safe setting, not just 0. MT just requires that there is a meaningful amount to trade. If the order size stays below that value, you stay put.
In fact, Lichello uses a MT in Ch.6 (A.I.M. the Reality) of his book (I have the 4th edition, so page numbers don't help us). In the example, when the Stock value has become 5600, he finds he has to sell $40 of stock, and suggests to ignore any orders under $100. Also, in the Q&A section, there is a question on commissions eating up profits. Here Lichello says that he is happy with a $500 transaction and $24 commission. Obviously, this was before the days of deep discount brokers.
The MT has as a side effect that the stock needs to rise/fall an extra amount, thereby making AIM with Safe = 0 at least feasible.
Regards,
Karel
OK Warren, your explanation is clear enough, and I thought something like that might be the case. I'll guess that even AIM with Safe=0 and an Order size minimum wouldn't get orders of a size you like. That brings to my mind the old timers on the AIM board, who don't mind one or two trades a year. But you seem to be interested in trading the volatility. Have you already heard of X_DEV, a creation of Myst? It is commercial software by now, but the priciples are explained in the early and not so early posts on the board ( http://www.investorshub.com/boards/board.asp?board_id=1074 ) I might even still have one of the old spreadsheets.
And it's yes, and yes: Qarel is my Nick, as Karel too often is already grabbed.
Regards,
Karel
Hi Warren,
a GTC order is a Good Till Canceled order. In the context of AIM this would be a limit order at the next buy/sell level. Pro: no missed opportunities; Contra: you might buy/sell early. (Both compared to fixed period AIM.)
About selling for a lower price than the real price: in AIM, you consider this on a Last-In-First-Out basis. When prices are low, you put some cash in stocks, when prices rise again, you reverse the procedure. (What you do for taxes is something else entirely.)
I like your shop. "Bang-bang" controller indeed! In original AIM, SAFE is not only a bang-bang controller; it also lowers the order size (Advice = difference between Share value and Portfolio Control; Order size = Advice - Safe).
Regards,
Karel
Take THAT one and THAT one and THAT one.
Take QLGC (X_DEV)
Take STKL (AIM)
Take QQQ (ETF)
Take ASML (Dutch)
Take ... (well, I'll leave one option open ...
Is that better?
Regards,
Karel
Hello Conrad,
I think I prefer the term Retarded AIM.
When I plugged the Floating Safe into the Lichello cycle, it very much killed the action. I think one of the ideas of Lichello is to buy/sell proportionally more on dips/tops the deeper/higher they are. See Twinvest, see Synchrovest, see AIM. When you dampen that action with a floating safe, you are left with a sorry critter. It might show a little action with very small swings, because the safes are low then, but I don't think this compensates for the lost action with bigger moves.
Can you show some attractive points of Retarded AIM, apart from the fact that it conserves your cash longer with a deep diver and you keep your stocks longer with a winner? A backtest perhaps?
Regards,
Karel
Hello Conrad,
an ideas for stocks: why not pick good X_DEV and AIM stocks? Look at Myst's X_DEV page to see which stocks are doing well, and pick one (or two). Then visit Tom's place to do the same. Throw in the QQQ's, and one or two stocks you would like to Vortex yourself if there is still room, and you are set.
Suggestions: QLGC as a prime example of an X_DEV stock, and STKL as a succesful AIM stock. And perhaps you could throw in a Dutch stock, like AHOLD, PHILIPS or ASML!
Regards,
Karel.
QQQ is a fund tracking the Nasdaq100. It is traded on the exchange like a stock, therefore an ETF (Exchange Traded Fund). The other two "classic" ETFs are DIA(monds) for the Dow Jones Industrial Average, and SPY(ders) for the SP500. For more ETFs see http://www.nasdaq.com/ under Investment Products. (BTW, the QQQs are nicknamed Cubes.) They are relatively popular because of the diversification, but they usually are a lot less volatile than a stock. QQQ comes close. Newer ETFs follow market sectors, and may be even more volatile, depending on the sector they follow.
Regards,
Karel
Hi Conrad!
I like your idea of a demo port. It may be scary to do, but it is fun too. (I am running a demo port mimicking my guru, MrMarket, on http://groups.yahoo.com/group/mrmarketishuge )
Two questions:
- Why a fixed number of shares to start with, and not a fixed amount? (USD/EUR)
- What about QQQ as one of the stocks? Easily downloadable! Or some sector ETFs? They might not e as volatile as stocks, but they attract a lot of interest.
Regards,
Karel
OT: Hagar's take on optimism and pessimism
http://seattlepi.nwsource.com/fun/hagar.asp?date=20020802
Regards,
Karel
Buy from the pessimists, sell to the optimists!
:)
Karel
Right. Of course, the psychologist would say that your "confidence" has a liberal dose of optimism (her/his definition, of course, not yours). As long as we keep the different definitions in mind, there need not be a problem.
Regards,
Karel
Robo, you made yourself perfectly clear. With your definition, there is no problem at all with your rant. (Obviously, I might add.) The problems start when you realize(!) that yours is not the only definition floating around. Some people will insist on optimistic realism (using other definitions, of course). But I think we all agree that realism isn't a bad thing at all.
In one of the links that Google search turned up it was remarked that "optimistic athletes have more succes". You might translate that as "realistic athletes have more succes", but I cannot but think that some information has got lost in the translation: the fact that these athletes have a positive mindset. Not your definition of optimism, but an acceptable one nevertheless.
Regards,
Karel
Myst, thanks for the explanation. It seems that people sit with their noses glued to the screen, enter buys and sells as they fall in the day, and expect X_DEV to do the same in the backtest, which is unrealistic.
You still want to help those people out, therefore the (imperfect) fix. Have I got it right? But now you have left out in the cold all those golfers with their good-for-the day orders! (Just kidding, Myst...)
Regards,
Karel
Sorry: optimism etc.
First of, this started as a rant, and I respect rants. I like to rant myself once in a while. But now this threatens (or threatened) to develop into a serious discussion! There are of course several definitions of optimism, pessimism and realism. Now pessimism and optimism are always opposites (when you pick analogical definitions) and with some definitions it is possible to have realism squat in the middle of them. In that case, you have to define both optimism and pessimism as unrealistic. Psychologically speaking, the jury seems to be still out on this qualification. There are cases where it is realistic to be optimistic (or pessimistic), so to say.
http://www.google.com/search?q=realism+optimism+pessimism+psychology
Have fun
(or should I say Get Real ?
Karel
Myst, concerning the double signal, why is there a problem? Is it because you adjust the amount to sell/buy after a buy/sell? If I would use X_DEV, I would enter good-for-the-day limit orders before market open, grab my golf clubs, and after market close I would have a look whether nil, one, or both orders had triggered. As long as both orders are unaffected by what happens intraday, where is the problem? OK, after a buy you might want to sell more and perhaps vice versa, but isn't that wanting too much?
Sorry if this has been answered already, but I couldn't find it in the massive history...
Regards,
Karel
Rien, I am quite unclear about how to respond, in order to make such an obvious point, which is so ardently contested. Let's face it, with your example CSCO:
The float is 98%, so almost all shares might go round. During the top of the bubble, when CSCO traded at over $50, almost twice the total number of shares changed hands. IE, some shares changed hands more than once.
Assuming that all shares participated, something you will rightly contest, we get all 7.3 billion shares (split adjusted) for an average price of (over) $50 split adjusted, for a total of $365B.
The calculation now becomes easy: let's destroy the trillions. In order to do that, we have to get rid of the $365B for Cisco alone, because that's almost a Trillion in itself. Let's reduce it to $3.65B. That would then need to be the outcome of your calculation. For this result, only 1% of the Cisco shares may have changed hands, ever. To rephrase: all the trading in Cisco is then supposed to be an endless recycling of that 1% of shares. Let's lighten up a little on our 1% restriction, and let it only hold for that bubble year 2000. 99% of the shares never got traded, the 13 Billion shares traded that year were the same 73 Million shares, merrily going round.
I can't believe it.
Regards,
Karel
But it is a bit of an ironic stance for people on a board that is devoted to make money on fluctuating prices. AIM is perfectly designed to capture those "imaginary" trillions, or at least part of them.
The trillions were real, for people paid them. On the way up, people profited, on the way down, people lost. The lost money is real. Just talk to an Enron employee who lost his/her retirement money in Enron stock. Just don't try to explain that the lost trillions were never real. Or take a big stick.
Regards,
Karel
Hello Conrad, as long as we keep in mind that it is a simple, rule-of-thumb like solution, I don't think there is much of a problem. I stated that the assumption was AIM BTB, or something close to it.
I forgot to mention the other assumption: that all buys come at the minimum buy level. In a way, this is a worst case scenario, as you will be able to buy into a deeper dive when the price drops are greater than required for the minimum buy.
But I wouldn't for the world keep you from an exciting problem!
Regards,
Karel
Thanks Conrad, Vortex seems to perform admirably, even when not tuned!
Regards,
Karel
Thanks Conrad,
Those results looks very good, and the fact that Vortex is out of cash is good too, for that means it has been buying in the downturn
If it is not too much trouble, could you also give an unoptimized example?
Regards