Short Term Trading Weekly thread week starting: 20th Mar

Originally posted by sharks37 ↑

Interesting discussion about the drive to find the next hot sector and how its done.

Is it a bad thing if someone like SGB champions a new sector he believes will be hot? If he truly was the one who first picked up on the Cobalt wave I wasn't reading the STT thread regularly enough at the time to know) then I would say he's worth paying attention to when he gets excited about something (I'm assuming he's a he). I understand that to be a champion of a cause requires someone to put themselves out there and push ahead with belief when nobody else is paying atention and they can actually appear to be a nuisance at the time but in hindsight we thank them for shaking us all up and making us paying attention. On the other hand, to champion a cause you can get your message across more effectively if you saturate people with your message which can and does turn people off or cause them to tune out.

The drive to find the hot new sector is an interesting question in itself. Of course the driver behind that search is to find stocks that have unrecognised multi-bagger potential. The STT crew collectively have shown you are very good at picking up on the next wave early - and as a result have attracted a growing readership and contributorship, which no doubt creates a snowball effect.

But find the next hot sector has its issues (imo). They include:

1. The time risk associated with getting set early before the wave starts. The risk here is it may take much longer for the wave to start than expected, causing opportunity cost of money sitting in stock not going anywhere while they continue their basing pattern (and in fact the sector may never take off).

2. For the followers, there is capital risk if getting on board once the wave starts - not knowing how high and how quick that wave will be, and how quicky it may fall back.

3. The pressure associated with searching for that next wave, or getting on board once it starts, all while keeping an eye for the next wave even while the current one gets going. The pressure I imagine is particularly high if trading full time for a living.

4. The skillset associated with researching to find the next wave, sorting out which stocks are the best ones, etc. Not all of us have that skillset or dedication/perserverence for that kind of reasearch.

So I applaud from the sidelines as I watch in awe as you guys do your stuff and generate winner after winner. But it looks more and more like a team effort from the STT, different members contributing in different ways.

I say in awe because for reasons 1-4 that I listed, I decided catching hot sectors isn't for me, because it doesn't match my skillset or psyche. Personally for me its about honing my trading skill - whether stocks or forex - and trade markets I know repetitively not making gains primarily from a research skillset, but primarily from a trading execution skillset. Hence why I, and presumably many other readers, are grateful for the great work shared here which highights possible new stocks or sectors to turn our attention to for new ideas.

Cheers, Sharks.

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Good post there Sharks and I agree with a lot of what you and Forrestfield are saying. I know we all have different trading styles and not taking anything away from the early discoverers like Min and Strauss, but there has developed a culture of everybody wanting to shoot Elephants and not Rabbits. I am convinced that employees of some tip sheets are actively posting on Hotcopper and hyping things up. The trouble with chasing hot sectors is most of the times the money was made in the first few days and then it becomes a case of pass the parcel to the next bigger fool. I am sure the good traders make money and I am sure a lot of traders get caught holding a dog and praying. Maybe not so exciting but there is plenty of good money to be made picking good companies with good FA and trading them when the conditions permit.
I am switching off to a lot of the hype of next big thing and having fun shooting little Rabbits.