I will be taking some action next week.
REX triggered an exit, gapped down and closed near the lows like an absolute champion.
I will also be exiting out of the takeover stocks that I inadvertently (foolishly) purchased on the first day, namely CSM, IWL, and COA.
The latter two have already finalised everything regarding the takeover. So I figured if I don't cash out now, then I will end up taking either cash or shares in a few weeks/months time. Might as well put the money to use elsewhere.
The funny thing is, every week since that first week I've been thoroughly checking the candidates from the weekly scans if they are currently under takeover, and there's been none! Yet I got 3/10 on the first week!!
I will be purchasing GMI, RRA, and pyramiding into STS, with the proceeds.
9 comments:
Why are you closing positions in stocks which haven't breached their stop losses (the takeover targets)?
Because if I don't close the position now, I will be forced to close the position at a lower price than the market price (since for CSM the takeover price is lower than the market price) OR at market price but in a few weeks or months time.
So by continuing to hold these stocks I either lose time or money.
It was lack of due diligence on my part to buy stocks which were already under takeover. It wont happen again.
Thanks for your comments.
Nizar.
Hmmm.
Is it all really so black-and-white?
The market seems to have an ever increasing view of the value of CSM. What will its price be tomorrow, next week, next month...? Is the market speculating on an even higher takeover offer, or does it know something we don't?
IWL - a choice of cash or conversion to a position in CBA. CBA's in an uptrend at the moment.
COA - do you take $6.50 now, or $6.70 later...
Ah, decisions, decisions and the joy of discovering something your plan didn't think of.
Well regarding your comments regarding CSM, its so easy to be a hero in hindsight.
Are you one of those hindsight traders?
Or do you trade live as well? ;)
I never said my plan had thought of everything, but thanks for pointing it out.
I spoke to some top traders about what they do when their stocks are under takeover, and they said they simply use their own discretion on a case by case basis because these things can't be backtested accurately.
Anyhow, thanks for your comments.
Nizar.
Wow - touched a nerve it seems. Didn't actually mean to, merely to provide some food for thought.
In regards to my trading, it shouldn't matter, but I trade several backtested positive expectancy mechanical systems on various universes of the ASX where I can find an edge. One of them is a long term trend following system. You referenced a thread on Elite Trader by acrary at one point - this is the journey I am currently taking with my trading.
ps Have you considered how/when you will extract profits from your system? From what I can see, very few traders consider this in advance in their trading plan.
Nice, a constructive post from which I can learn something from. Much appreciated.
I don't quite understand the question, are you asking me if I understand why my system will be profitable?
Trends are a fundamental part of any market. As long as there are markets there will always be trends. You can find them in any timeframe.
My system is designed to identify trends (though i must say 50% win rate isn't too flash) and ride them, and pyramid into my positions, and I will exit when the trend has come to an end.
Will there be times when I get stopped out yet the stock rebounds and goes to the moon? Yes, but according to my testing this should be exception, not the norm.
I tried several exits before I decided on the one I currently use.
I plan to use what works most of the time, over hundreds of trades and several years. The exceptions Im willing to let them go.
Acrary is a legend. I'm striving to be at his level as well. But one step at a time.
Do you trade intraday systems on the ASX?
Intraday systems hold great appeal to me due to the increased opportunity (higher frequency), smooth equity curve, and decreased market exposure.
Thank you for dropping by.
Nizar.
Apart from the long term trend following system, I have found most psychological comfort with closing out positions the same day (on the close). No overnight gaps to worry over, and it also means the systems can be backtested with a fair degree of reliability with EOD data (there are still caveats which mandate paper trading any new possible edge, but backtesting is at least a way to filter out potentially good ideas from bad ones). I don't screenwatch all day - so far every single intraday stop method I have tested produced inferior expectancy to simply exiting on the CLOSE. This observation continues to surprise me.
The question I was asking you was not about your system's positive expectancy (that's a given - it's why you've spent all this time backtesting and preparing your system), but about how you will pay yourself and the tax man in due course as your closed equity curve rises. You can't keep reinvesting profits forever.
Thanks for your comments.
Re: how i will pay myself. This long term trend following system was designed for capital growth -- not for income. So I will not be periodically paying myself a wage from the profits.
I'm about to start a fulltime job and my day to day expenses will come out of this money. I will in fact be adding money to the system every year or twice a year, to help it compound quicker.
The money from this weekly system I will eventually be taking it out to diversify but i can't see that happening for maybe the next 5 years at least.
Can you please tell me some details about your intraday system?
If you have several, then perhaps the best one.
What Im interested to know is:
*How many trades a week does it pull?
*What is average trade length?
*What is the win%?
*What is average win/average loss?
Thank you.
Haven't you forgotten about capital gains tax (or company tax if you've structured your trading business as a business) on your closed equity profits? Gotta pay the taxman.
One of my systems;
Trades per week: usually about 5 from 10-15 setups.
Trades are all closed on the close. Most open on or near the open.
Win % is 60% or so.
Win/Loss ratio is around 1.6:1. Nothing flash, but it'll do.
It's a start - long term trend following is in my view DEFINITELY the best way to engage the market initially. You shouldn't get distracted from that. You have a system with positive expectancy - now all you need do is withstand the tedium of the low trade frequency and the psychological pain of initial drawdown.
In time you will come to find that doing nothing equates with plan happiness, but doing something usually means the market is moving against you.
If it's boring, it's profitable.
Post a Comment