Short term - knowledge library 2.0 (This thread is READ ONLY.... No unauthorised Posts), page-5

Delays
Collated by Aljini

Poster: sharks37
Date: 03/06/16
Time: 17:46:24
Post #: 17947578
Delays is a good subject for weekend discussion - it has been in the forefront of my thinking in the last couple of months since I decided to trade for a living.

The first thing I realised is trading for an income is a completely different ballgame to trading/investing when you have a job. When you have a job and it's essentially a hobby, you can afford to ket stocks sit if they don't make a move because you have an income already, but if you're trading for a living the pressure is on to generate an income on a weekly fortnightly or monthly basis - and like any business you only have access to a certain amount of capital (the trading business capitalisation in other words) which you have to preserve and if possible grow.

So from my perspective funds turnover is really important - so I measure the number of days I have funds invested in every trade and I measure:

1. Total funds invested as a % of capitalisation
2. The length of time (number of days) for each trade (i.e. between entry and exit)
3. The dollar weighted average length of time for each trade
3. The opportunity (bank interest) cost for each trade
4. Win/loss ratio in both number and dollar terms (so i know whether my risk/reward ratio is set right) and all trades are fed into a histogram so I can see the spread of results which I use as a basis for setting goals/objectives for continuous improvement

I also:

1. Set a blanket stop loss level for all trades and set trade size and risk/reward accordingly, and I record compliance / non-compliance to my stop loss rule for all trades
2. Set a threshold for funds allowed to be tied up in "bottom drawer" trades (no greater than 10% in trades longer than 90 days) provided I have a justification for each position in that category, and in fact I have set as a target to not have more than another 40% of capital tied up in trades lasting between 30 and 90 days, leaving at least 50% of capital for trades of less than 30 days (or sitting in the bank)
3. Have a continuous improvement program which covers a range of aspects in relation to my trading including setting objectives for improvement in trade turnover and actions to achieve those improvements
4. Do a monthly report covering all the above plus monthly P/L and balance sheet which I use to force me to review my trading to identify what I did well and what I could improve, and also to distribute to my wife as a key stakeholder for oversight and transparency

One strategic decision I also made at the outset is to divide my trading into market types of which there are 4 - stocks, indices, forex and commodities. I did this because I find timing entries for stock trades challenging not in terms of making a profit, but in terms of making a profit in a short period of time (i.e. Getting in just before a move). In contrast, trading the other 3 market types gives me 2 benefits:

1. They are a lot less capital intensive than stock trading - because I use CFDs for these markets I need less than 10% of my capitalisation for trading these markets, leaving 90% for stocks
2. I typically trade these markets on 1 min to 1 hour charts so the majority of these trades last no more than 1-2 days, and a small percentage up to a week.
3. I have set as a target to earn 50% of my income from trades in these markets, and 50% from stock trades, so in other words I have a base income of up to 50% of my target income, and the rest must come from stocks.

All the above has in only a few months taught me to be a lot more ruthless in cutting losses quickly, and managing my capital a lot more efficiently than I used to as a part-time trader.

Of course the more experienced traders here will probably know all this, but I thought I would share my take on it given I have decided to focus on capital management a lot more rigorously.

Cheers, Sharks.

Poster: Malaga
Date: 03/06/16
Time: 18:43:16
Post #: 17948002
I see delays as opportunities IF you really know understand the company. Different trading style to Sharks as I am Property funded. Delays with SRT presented sell offs as dreamers got hyped up on the forums and then exited in tears when said event did not happen. Sama with LOM it is color coded buy when red sell when green. You must know the company and have the funds to lock up till the next spike. Caution some companies delays are warning signs to run, eg CMY. Delays are part of the game so good topic..

Poster: Zand34
Date: 03/06/16
Time: 19:39:15
Post #: 17948354
With delays I will mention planning/ timing!
depending on your trading strategy/plan, every trade you enter into should have a plan, whether it's a quick turnover day trade, a few days/weeks STT, a few months mid term trade or in the bottom drawer long term investment.

If you've done your research on FA/TA and you're in early on a stock for the long haul then delays pretty much form part of the plan and that's when you should also try and stay away from the individual stock threads!

If your plan is to enter into a STT and you can't afford or don't want your money locked in for an indefinite period then IMO this is when you enter/exit based on TA signals, same goes for Day Trading obviously! Problem starts when many many traders get caught up in the hype of certain stocks buying in on the hype of forthcoming news and unfortunately not realising they've bought at the top and then all of a sudden profits have being taken and accumulation/soaking stage has began, delays kick in and they are left thinking what now? Sell for a loss or hopefully ride out the accumulation phase and either sell/hold into the new markup phase when news finally does arrive!

Prime example SRT, quite a few holders have accumulated since RSL days and have had a long term parcel alongside a trading parcel, the majority of news flow for the past 6 months was pretty much RE - change in timeline (delay)!

The thread literally became a battlefield with new & old holders battling it out! Put quite simply those that bought in late were angry with every delay because they hadn't planned on locking in their funds for quite so long, their thinking was to make a quick buck and move on but buying in without a pre- determined plan has them now either selling for a loss or getting shaked out for a few pips!

The long and short of it is- yes delays are annoying but timing and putting a trading plan into action are the key as to how you deal with delays.
Apologies for the long post, enjoying a few Reds (Bottles)....

Poster: Techmeister
Date: 04/06/16
Time: 09:53:34
Post #: 17950593
Delays...(there are only 2 major components of trading - the SP / and time - when time gets distorted it can play havoc with your strategy and results)

Even great stocks have massive retraces and significant time lapses - eg BUD ran from 5 cents to 24; back to about 12; back to 24; back to 11; back to 21; and now sits at about 12 - all over a 8 month period - staying on that ride would make anyone car sick

So as much as a LT holder might have faith and conviction there is a great deal of whiplashing to contend with - and a great deal of time waiting for the permanent re-rate

What makes it harder still is that sometimes these retraces are very serious danger signs - consider ZIP plummeting from $1.50 to 20 cents - or 1PG nosediving from over $4 to 50 cents...will they ever recover???? how much time should you give these???

So delays are not just inconveniences - they are possible signs of impending disaster

Consider ODN - the mammoth wait for consolidation details could well be a portent for the whole deal falling through - same goes for FCN

Traders need to have a strong sense of the meaning and value of time - and need to able to differentiate how long it takes for a business to build from the signs that the business is failing.

Poster: Dazedandconfused
Date: 04/06/16
Time: 10:33:27
Post #: 17950809
Delays...

All good things come to he who waits

Irish rebuttal... A man has to wait a very long time before a roast duck flies into his mouth.

IMO...
If you happen to spot something really good before most others ... you will get a good buy price, but, the trade-off is you have to wait for others to see the same thing.
If you buy just before a move ... TA can help ... but its more than 50% luck involved.
If you buy in anticipation of a well flagged trigger ... any delay is going drive the price down.

I am definitely FA inclined. If the FA is solid ... then delays can work in favor of the patient. ​