Short term - knowledge library 2.0 (This thread is READ ONLY.... No unauthorised Posts), page-2

Starting out with short term trading
Collated by Freehold

This topic relates to what people should do when the 1st start short term trading :-

Poster: DrFork Date: 05/09/16
Time: 06:31:36
Post #: 18922884
I'd suggest firstly having a look at all the tips that have been compiled at the start of the thread and read the reasons for tipping either TA or FA. If you find anything that interests you, then probably a look at the stock thread is a good idea to get the vibe. Eg some stocks tipped are waiting on drilling results, others have been tipped due to strong fundamentals etc. Then see how far the price has moved since it was tipped and whether you think there are still gains to be had. If you have a grasp of TA, have a look at the chart of the stock you are interested in and interpret the action. One thing to also consider is your own investing style. Are you more suited to long term trades and can afford to buy in early and sit and wait for price movement or are you focussed more towards the short or medium term? Also look to see where you have an edge over the average punter in a particular area and see if you can leverage it. Eg someone who has a background in geology can better interpret core results rather than just what the company decides to highlight, or if you have a technological or biochem / pharma focus, you may have stronger FA skills in those areas and can see whether something is smoke and mirrors or the real thing. As an example of smoke and mirrors, you can't look past LWP and the graphene/aluminium battery tech they have signed up to that is not all it seems. Finally, if you are new to trading, it is a very bad idea to turn towards the D/T threads for tips. I speak from personal experience. Stay as far away as you can until you have a bit more time in the market. Also remember that everyone posting anywhere ultimately has an agenda so you should always do your own research.


Poster: Freehold
Date:05/09/16
Time:14:07:20
Post #: 18935691
STT is essentially a magnifying glass... It allows people to focus attention on a stock. For Expert tipsters it helps them to highlight and get attention for their picks and for novices to learn from the expert and also gain from their knowledge. Experts will get peer kudos and rightfully so ...Novices get knowledge and early warning of got short term trades/investments ...it s a win win. The market is too big for one person to be across but as a group we can more readily compete with the big end of town. In fact I think the STT threads routinely outperform the big end of town ... !! Looking at the Tips in this Thread it is important that this is a guide only ... It is imperative that you do you own detailed research and have you own methodology in place for entering but more importantly exiting a stock position... there is ample help with this in the STT Knowledge library above


Poster: TheGladiator
Date: 06/09/16
Time: 13:25:22
Post #: 18961854
Question from Saberx, Did come to the STT trading to hopefully get more of a better grasp of methodology on how to enter and know when to exit stocks, hopefully I can pick it up through following advice and posts here. One of the issues i find is that even with stocks such as XPE my posts or knowledge do not seem to translate into tradable profits. For example I should have taken the good run up from the 3s into the 9's/10s, but held on. One thing is emotion and listening to hot copper can be a detriment at times. If anything now I think I operate by listening to how much cheering is going on in a speccy on hot copper mums and dads to judge that the time to drop out is nearing haha.
Response from Gladiator
Hi Saber. I may be incorrectly reading between the lines here and apologies if I am, however are you getting most/all of your stock tips as well as when to sell from HC? If so that's the clearest answer as to the current predicament you are in. Most people go through this, including myself, and the only way I dug myself out of that was to commit to putting together a trading plan which had a number of conditions that had to be met before I would buy into a stock. I will insert a previous post I've made on this at the end. Then when it comes to exiting you can go back to your original reason you bought the stock to see when it becomes overvalued. For example if company ABC has a MC of 10m but it's competitors are worth 50m (extreme example obviously) then when it hits 50m it's fair value and probably time to sell. Obviously this is a very simple example but you will get better at finding the value of your stocks when you actually start to pick them yourself or put in your own research on top of those you find on HC. So once you have your strategy in place then use the tips from STT and see if they fit. If they do then go off and do more research. Final thing is never ever ever ever get your exit price from HC, especially individual stock threads. Most holders are deluded and will be waiting for their stock to hit $1 in the year 2400. OK this is really the final thing. Read the knowledge library.... and not just read it. Study it and practice what's in there. There is no resource available anywhere in the world as good as our knowledge library. OK post below I was referring to. 1. Market cap 2. Enterprise value 3. Valuation of peers 4. Is it in the right sector 5. How many do directors hold 6. How many do top 20 hold 7. Performance of current directors 8. What are it's upcoming milestones 1. Market cap Market capitalisation is the market value of a company's shares. This figure is calculated by taking the share price and multiplying it by the total number of shares. it can get a bit tricky deciding whether to use options. Options should be included if they are in the money or close to being in the money. For example, company ABC has a share price of 2c and has 200,000,000 heads (shares) and 10,000,000 options with a strike price of 3c. The market cap is (200,000,000 + 10,000,000) * 0.02 = $4,200,000. If the options had a strike price of 10c though I wouldn't have used them in the calculation. 2. Enterprise Value I can see sectorlead has already written a great summary. See http://hotcopper.com.au/posts/17358542/single 3. Valuation of peers When determining whether a company is "cheap" and therefore has more room to run, it's important to see how it's valued compared to its peers who are at a similar point in its life cycle. You should also look at those who are more advanced to see possibly how much room the stock can run if it meets it's objective. As an example let's look at SRT. Based on my research on fintech companies who are making $1m NPAT per year, they have a MC of $100m+. So SRT first performance milestone is $1m NPAT and if the vendors don't achieve this they pretty much get nothing. So SRT currently has a MC of 26 million and will have 1.55 b shares if milestone one is achieved. So 100mil MC = 6.5c. So theoretically srt will minimum 2 bag if milestone 1 is achieved. 4. Is it in the right sector As I'm writing this I can see others have already written great summaries lol. For sector analysis see freeholds posthttp://hotcopper.com.au/posts/17358262/single 5. How many do directors hold This is very important as when directors have skin in the game they will be more than likely look after themselves as well as shareholders. So no massive dilutions and being very prudent with company finances. They will also ensure placements go to sticky hands as they wouldn't want to see constant pump and dumps. Very good example is DUO which Peter wall had no shares in and was diluted to hell and back numerous times. Matthew walker though was very smart about it and raised at good prices most of the time to very sticky holders. 6. How many do top 20 hold The more the top 20 hold the tighter the register. This means there is less free float available of shares which will be sold on market. The less shares available to be sold the easier it is for the share price to run. The people in the top 20 are also important. If you have people in the top 20 who consistently back winners they will more than likely attract other good investors who follow them. 7. Performance of current directors This is extremely important. We are trusting directors with our money so if they haven't performed in the past what makes you think they will perform in this stock. Mark creasy in the mining game and Matthew walker in the shell game are great examples. Check what companies the directors have worked in and see the share price performance to work out how successful they have been. 8. What are it's upcoming milestones From a STT perspective we rely on announcements and big milestones to make money. If a company has no big milestones coming up then what will make the share price move up? These milestones are also important in understanding when to time our entries. Depending on our trading strategy you can time your entry. Personally I like to get in 6 weeks earlier than when a milestone is due so there is less competition from other traders. Remember this is the absolute minimum amount of research I will do to help me shortlist prospective stocks. Without doing the above as a minimum the risk increases substantially.


Poster : forrestfield
Date: 06/09/16
Time: 13:44:48
Post #: 18962646
Response to Poster Sabex Query.
@SaberX welcome to the world of trading where things are as complicated as life itself... STT has many gun investors IMO and quite often they are right with their entries and exits... However, no one is perfect IMO... Yes, sometimes people get lucky in picking the right entry and even luckier with exits... In other words, no one can get it right all the times and if some one claims it they are full of BS... so the trick is... we need to be right more often v being wrong... Easy said than done... So what shall we do to make the most of this wonderful opportunistic place called share market? By the way, this is also the most deadly place for gamblers... Gamblers here IMO are those who blind invest their hard earned with a desire to be rich over night... NO SUCH THING HERE... so IMO we all need to be very careful with what we do here... 1. Protecting your capital is as important as making money. So if you are not sure about something, it means its not for you. 2. Find your own way regardless the time it takes... may it be one year, two or three... It will come good if you keep trying IMO... till then perhaps paper trade or if learn as you go invest small... mind you no capital is a small capital... This is reflective from the performance of those who started a public portfolio with 5k and named it 5 grander... some of the skilled investors/traders are up 100% like @valen1828 and some are up 50% plus like @minoil, @TraderGT, @webbj, @Malaga... 3. Once your strategy is established may it be based on TA or FA, stick to it... of course you can improve it as you go along but keep the foundations IMO. 4. Work hard but don't try hard... Means keep researching to find the next winner but don't force yourself... A winner will come by when your mind and your gut will tell you... 5. One way I have found helpful with my entries and exits is the market cap of the stock... It helps in many ways like it tells me i. when to go nuts with buying for example MNE today... I am buying heaps as it has 135m heads on issue, 2.5m market cap and 1.2m cash plus its backed by decent management. They just need a good project and it might double bag IMO... nothing certain of course. ii. when to dump all and run... For example GMN at 10c had a market cap of 50m approx... I bought at 4.3c average... GMN made 18c but I was happy with 10c... Yes, it bothered me should have made more but the market cap looked good enough to me so I took my profits. iii. Lastly when to just hold calmly regardless the market reaction... IAM, PAK, JCS, WFE, AR1, FNT are few examples... Their market caps IMO are decent v their potential... So I am hanging in... 6. Market is uncertain so whatever you do, you still going to get some wrong... In some cases more wrong than right... In my case, I need only 2 to 3 winners each year... these are the normally the ones I hold large normally happened to be lucky enough to bought them right at the bottom or that's what I believe... Yet, out of many only few comes good... 7. Buying at the bottom... here comes the market cap thing handy again... Like FNT at 3c had a market cap of 1.2m with 400k cash plus other factors like 4 drill rigs, decent gold-silver-copper-zinc projects... Looked seriously cheap and did well with few weeks hold... Although I am still as I think market cap is too small at 6 plus cents. so picking up a right price works well for me. 8. Letting the runners run... when your stock happens to be in the right trend letting it run until you think the market cap is too high... Like IAM which I bought at average 0.9-1c... Happened to be in the right trend due to multiple factors which I have shared here quite a few times... So I have let it do its thing while increased my holding with small parcels... 9. Avoid lifestyle things... For example I largely invest in small caps and have learned the hard way that managements paying too much to themselves with holding small amount of shares tend to destroy share holders wealth... So its a big avoid IMO 10. Small caps are largely like 99% tend to fail... they follow a rinse and repeat cycle... for example, they go for every hot thing every cycle... raise funds buy a new project share price gets pumped and ultimately dies... By the time cycle is done, they have too many shares on issue hence they do consolidation, name change, management change and a new raise... and a new project in the next hot thing... at times, companies go into suspension ultimately but same people start new companies with different names... RINSE AND REPEAT... what I try to do? I try to enter when they start a new cycle quite often makes you decent returns... so just be mindful while investing in small caps... Yes, one out of few hundreds do become successful... 11. TREND IS YOUR BEST FRIEND... the more I trade/invest the more I feel that this is the only reality in the market... so try investing at the right place at right time... if you are not sure avoid... I know there are many more things and methodologies to consider and that's where STT knowledge library comes handy... thanks to @KDoc, @TheGladiator and @Freehold for putting this valuable resource together... P.s none of the examples in this post should be considered more than mere observation as I am still trying to find my own way to investing...
At the beginning, don't chase over hyped hot stocks on HC, avoid DT thread entirely, especially chasing stocks that have run hard and are still getting pumped in threads. Make sure you understand why stocks move over longer periods - Fundamentals/EV/Cash?Debt and Cash-flow and Catalysts (events). Play in hot sectors and find value. Have a few STT tips and challenge yourself to make that 25% trade within a month. Costs you nothing but solid research.


Poster: Freehold
Date:06/09/16
Time:21:32:17
Post #: 18975186
I think you must decide/define your own strategy that works for you everyones strategy is/will be and should be different. After reading the STT Library and defining your own set of "Trading Rules" ... start using them for paper or real trading (Lob in some STT Comp tips to keep it honest)... when a rule fails alter it or discard it keep the ones that work... in a while you'll have a functioning system. Mouse and GoldSpecbug are relative newcomers to STT and I think are either successful or becoming more so as time passes ..pay attention to what they post and their experiences and practices.. .


Poster: TheArchitect
Date:07/09/16
Time:18:25:34
Post #: 19002033
Hey Saber, seen and read a lot of your posts here, welcome to the trading world Won't go into lots of detail, not sure if it's already been covered by yourself or others. One thing I did years ago when I was losing money and buying into bad stocks or buying and then the stock would fall, I became determined to understand why and what I was doing wrong and realised technical analysis was fundamental to entry and exits and knowing if a stock was a good or bad buy. I looked at the catalysts for why the stock fell after I bought, what the chart was saying; candle patterns, formations, trend, MA, EMA, MACD, Volume etc. etc. I analysed my losing stocks for their charts and compared to stocks that were running or had run, also looked for what the catalysts were in the stocks I bought for what the right entry position was and doing the same for stocks I didn't own, analysing the chart, identifying where the buy signals were and then where the sell signal was and figuring out for myself what those signals were. I still do this today, when I come across a stock that dropped quite a lot i'll have a look and see why from a technical point and fundamental point and same for if a stock goes up significantly. Eventually over time you get a feel for trends and signals and since then I've fortunately been able to reduce my losing stocks to very minimal these days and finding the stocks I do lose on are the ones I get caught up on fundamentals and ignore the technicals sometimes. Hope that helps a little in anyway

Poster: 952i
Date:07/09/16
Time: 23:54:18
Post #:19008213
Saberx, Firstly sorry for late response I've had quite a long week. But im glad to see everyone else pitch in and give you a hand together, with so many perspectives from quality posters I'm sure everyones had a lot to learn and gain...I would TU all of them but it would seriously spam everyones notifications. EV is essentially what you're paying for the business itself. Funny I had no clue what EV was a couple months ago until @SectorLead taught me back on one of the weekend threads. He may be able to link you as it went into a quite deep effective discussion which covered alot of what you are looking for. For JCS I arrived at the $4.6m They have 333,656,900 shares on issue. At 2.1c that gives an MC of $7m They have $2.4m cash so EV = 7-2.4 = $4.6m which is how much cash I would need to buy out JCS at this price. May sound confusing but this should help - http://www.investopedia.com/terms/e/enterprisevalue.asp Just reading the other posts on this thread "Sometimes imagining the light at the end of the tunnel can be daunting. Especially when you don't know if you well successfully "click" somewhere up there down the track" I can assure you, you arent alone I've been doing this properly for less than a year and things will eventually click. I havent "clicked" just yet but I'm improving but still continue to question "is there light" "will I click". Some recent changes I've made that has helped: 1. Have a trading plan. I stopped buying or selling unless I've planned out the buy and sell(price, quantity, stop, volumes, support/resistance) nights before hand. Impulse decisions always end up nasty. 2. Keep losses as small as possible unless you have years of experience in the market. Unfortunately alot of the times you will cut a loser to watch it take a U-turn but sooner or later you will cop the mother of all losses. 3. Ignoring HC noise for losing picks, you need to have your own strategy and reason for buying a stock, as soon as your reason is proven wrong by price then its time to leave. Not to be persuaded to hold due to some HC comments "treeshake" "headings to $1 soon" "cheap at this price". 4. Patience - both when buying and selling. No rush to buy. Have a diary and note down everytime you couldve bought a stock cheaper than your entry price, and try reduce that statistic as much as possible each month. Fomo is enemy.


Poster: TheArchitect
Date:09/09/16
Time 17:55:12
Post #: 19059579
@SaberX In response to your last post to me.
My entries are all solely based on technical analysis; looking at the chart setup across the daily, 60min/30min/10min intra days charts and analysing what's going on, what it has been doing recently in the last week or two and even more, the overall trend, the current candle formations/pattern, ema and ma signals, macd, volume trading. Some stocks can make a quick trade (for me that's usually a $5k-10k parcel and making a minimum 20-25% or $1k-$5k profit within two days to two week time frame, but it's not a fixed system I allow it to be fluid as sometimes stocks can have stronger indicators that it will make further gains, also these parcels are pilot entries and just quick trades purely playing the technicals so it's in and out as quick as possible but not day-trade quick although sometimes day-trades are a happy accident when a stock moves quicker). For stocks I have researched more thoroughly; including the above technical analysis but also adding in some fundamentals like cash in the bank as well we more importantly amount of shares on issue, what sector they are in and if that sector is hot at the moment, who are the T20 shareholders, who are the management, what the company are doing/selling/mining etc. If all that lines up well with the charts I'll work out my entry based on the charts trend and depending on the stock and how strong it is I'll also plan my exits from the charts too, using a mix of Fib levels as indicators. Regards to your query on how to figure out what indicators were the reason/s that a stock went up or down when looking at a stock; pretty much what I've written above. XPE I sold out all of my remaining holdings at 10c-10.5c because it had formed a double top on the chart, it failed to break 11c and wasn't going to, I already had made substantial gains as my entry was 1.4-3.4c from RYG days so no need to risk it.
The chart will always usually give indications which you can look at for past stocks and work out what candle formations there were, what the macd was doing, volume, was there anything else maybe some bad news? But the chart is the first indication. PSC I bought at 1.7c and rode through to the 6c range and sold everything out between 5.8-6c because the chart started indicating it was getting exhausted, with it failing to break higher prices on higher volume, candles showing that with the long upper shadows and the MACD and EMA/MA lines showing signs of topping out, the volume was dropping off too, it went on to hit 7c but then crashed back down below 5c into the 4s not long after and I was able to move my capital into other stocks and doubled my money within a few days. Can't pick the very top or bottom of stocks but can get close a lot of times.
Yes it takes time to recognise patterns in the charts and trading behaviour (watching live makes a massive difference) and I'm still learning everyday. Not sure what you mean with whizzing back in time, on Commsec IRESS I can look at a stock and it will show a decent amount of it's history and you can then zoom in on specific sections, you can then turn to the weekly if you want to look further in the past but most the time not necessary. Every stock is different though, it just helps to understand what certain stocks did at points that made them either go up dramatically, e.g. a dragonfly doji after a downtrend with a bit of volume is a strong indication of a reversal and that the stock will reverse and go up but needs confirmation the next day with volume and price moving up, sometimes takes a few days, but also need to know what the stock is about as well. But knowing those candle indicators with other factors is what you learn to look for, or if an ascending triangle is forming with volume dropping off, usually will be a breakout following. Hope that's helpful.