Let’s talk stocks

[airdale]

And I wonder if that took into account transaction fees and/or short-term capital gains taxes.

I didn't ask, but my guess would be that it was net of fees but not net of any taxes the traders would have paid. The brokerage house would have no way to know the latter even though it eats into the net by a substantial amount.

But actually, the more important thing is that it almost certainly could not have considered survivorship bias. This comes from traders who close their accounts during the year, most probably because they lost money. It would be very hard to identify those accounts and include their losses in the 1.5% net, so the net is probably based only on accounts that existed for the full year. My guess is that if survivorship bias was properly considered, the net for the year would be negative.

 

[optionizerSS]

Actually if you took the time to look into The Strat it is not standard 'technical analysis'. The Strat creator (Rob Smith) even argues against technical analysis. The Strat focuses on price action, and price action is what controls everything. Technical analysis fails more often that it works. That is mainly because it relies primarily on past performance. Moving average lines, MACD, and other oscillators all are calculated on past price. True price action only relies on what is happening right now.

And no, I don't post on those sites that were listed, never even heard of them other than Facebook and Twitter and I'm not on Facebook.

So seems I'm one of the few mature ones here. My philosophy is if you are making money I don't care if you are pulling tickers out of a hat, keep doing it until it doesn't work. But if you aren't making money then go take a look at The Strat. I don't care if you do or you don't, makes no difference to me. I'm just posting it to try to help others. But since there seem to be a few on here that think they are Warren Buffett then keep doing what you are doing if it is working for you. But I'm guessing it isn't otherwise you wouldn't be bashing the ones that are successful.

FastEddie...I have seen a few posts where you were pretty disrepectful to other members here so sounds like you have issues that you need to work through. Whatever.

Good luck to you guys and if you want to learn more then take a look at the links I posted earlier in this thread. If you don't then good luck with whatever strategy you use

 

[schmookeeg]

Calling an entire forum immature before doing a full dramallama exit? Classic.

 

[optionizerSS]

Glad to see how well you guys treat your members here by running them off.

And where did I say the whole site was full of immature people? I was referring to a few in this thread only. I have met a few good people on here.

And I would expect a little more professionalism out of an admin, schmookeeg

 

[denverpilot]

The serious money:
3M, PG, Apple, Chevron/Texaco, Ford, GE.

Texaco died in 2002.

“On February 8, 2002, Chevron Corporation merged with Texaco and Shell purchased Texaco's interest in the Equilon and Motiva joint ventures.”

Equilon - what a fustercluck. Don’t get me started.

Anything you see labeled Texaco after that date is just the Chevron morons using the name.

The actual value divisions of Texaco was sold off to the Brits. Who then did their usual bean-counting and destroyed the culture.

Chevron polished it off by destroying the brand.

Chevron. The only company who proudly showed off their rapid response emergency communications vehicle to me, and then told me it never moved from its parking spot in Walnut Creek, CA ever... because someone didn’t ask the government the height and weight dimensions necessary to stick it in a transport aircraft.

At least we accidentally played Jimmy Buffet’s “Why Don’t We Get Drunk and Screw” to every single person waiting on music hold to the entire Chevron West Coast telephone system once on a Friday afternoon. I can say as the contractor I did vote to put Buffett on during the maintenance visit and testing, but someone else chose the albums to toss in the CD changer. Haha.

The funniest part was just how fast a bunch of old telecom engineers can run across a data center and crash into each other trying to hit a stop button. I stayed out of the way. Haha.

Oh well. I liked visiting my buddies there in Walnut Creek. That was my Appeasement Engineer days and we had enough product bugs that I got to visit regularly and look at the screen and say, “Yep. Looks broken... I’ll see if they can get us another patch before Friday...” and take them out to a nice dinner or three while we waited.

Patch Friday meant cranking the tunes by way of the CD changer normally full of copyright legal classical music and the monitoring speakers.

I often wore one of my many Texaco hats just to get a rise out of them.

 

[FastEddieB]

FastEddie...I have seen a few posts where you were pretty disrepectful to other members here so sounds like you have issues that you need to work through. Whatever.

I will stipulate that I have issues. Don’t we all?

But I do strive to be objective in my posts and try to avoid personal insults or disrespect. As such, I’d be genuinely curious as to the few posts you found disrespectful, and I apologize in advance if they were. Thinking back, my “Gibberish” comment may have been disrespectful, but that’s truly how your post came across to me. I apologize for my choice of word there.

I view these topics as food for thought and exercises in logic. If a “candle” reliably forecasts something, what happens when it’s effectiveness is so abundantly clear that everyone starts using it? What effect does it have when a supercomputer sniffs out the predictive values of a “candle” and executes trades based upon it in a few nanoseconds? There do seem to be fundamental issues with using past perceived* stock price patterns as a predictor of future moves. “Price Action” is new to me, but doesn’t seem to offer anything new - you are still limited to what the price has already done to allegedly influence future moves. It still sounds like a “flavor” of technical analysis, no matter what you call it.



*I say “perceived” because I have my doubts as to whether such patterns actually exist in the real world. More to follow...

 

[FastEddieB]

Humans have evolved to be “pattern seeking” animals. Historically and evolutionarily, it was better to have false positives than false negatives - that stick on the ground mistakenly being misidentified as a snake was safer than assuming it wasn’t. So, we tend to see random craters on the moon as a face, a few stars in a row as a belt or a sword, that sort of thing. Neither the face nor the belt nor the sword are really there, of course, but there’s usually little harm in seeing them as such. Astrology, Tarot Cards, I Ching, etc. are all based on pre-scientific “false positives”, finding patterns and meanings where none exist.

Speaking of Astrology, do “Leo’s” exist? Of course, in the trivial way we can define them into existence based solely on birth date. But do they exist in a meaningful way that allows us to assign personality traits to people born under certain signs? Of course not.

What I’m leading up to is do “inside candles” exist? Do “bearish gravestone doji’s” exist? Going back in time, how about “Elliott Waves” or “Head and Shoulder formations”. Of course they exist in the trivial sense that we can define criteria for them. But beyond that, do any of them have precise, repeatable predictive abilities? And would such patterns still show up even on a random number plot?

Here’s Apple’s daily chart from Friday.

Can anyone here draw lines and arrows and circles on this chart to show at what point in the day’s gyrations money could have been made? Where are the candles and doji’s and waves? And what if I told you that chart was, in fact, not Apple’s daily price moves but was randomly generated. Could you prove it wasn’t? And what would that tell you about our innate drive to find patterns in even random data?

Anyway, I enjoy the intellectual challenges such discussions provide. And it gives me something to do while Karen is in the DMV getting her motorcycle endorsement added to her license. (Yay!) I try to be a skeptic, but not a cynic, so I do my best to stay open to the fact that someone, somewhere, may someday beat the system and get very, very rich using technical analysis or “The Strat” or whatever the latest scheme is. But in the immortal words of James Randi, “I doubt that!”

 

[airdale]

Glad to see how well you guys treat your members here by running them off.

Actually I think you raised the possibility of leaving when you were whining about not being appreciated.

Re your "success" we have only your boasting. As far as we know, you could be a 22YO barista with a Women's Studies degree, living in her parents' basement and placing $2 bets on RobinHood. Though to be fair, 22YO's are generally not arrogant.

And I would expect a little more professionalism out of an admin, schmookeeg

People who live in glass houses, ... etc.

Humans have evolved to be “pattern seeking” animals. ... our innate drive to find patterns in even random data ...

Excellent post! Investors interested in useful information would do well to develop an understanding of our baked-in human behaviors like pattern seeking and risk aversion. Behavioral finance has described us in pretty good detail. I suggest Richard Thaler, "Misbehaving," and Daniel Kahneman, "Thinking Fast and Slow." Also, for the biochemical angle, Jason Zweig's "Your Money and Your Brain."

 

[David Megginson]

Actually if you took the time to look into The Strat it is not standard 'technical analysis'. The Strat creator (Rob Smith) even argues against technical analysis. The Strat focuses on price action, and price action is what controls everything. Technical analysis fails more often that it works. That is mainly because it relies primarily on past performance. Moving average lines, MACD, and other oscillators all are calculated on past price. True price action only relies on what is happening right now.

And no, I don't post on those sites that were listed, never even heard of them other than Facebook and Twitter and I'm not on Facebook.

So seems I'm one of the few mature ones here. My philosophy is if you are making money I don't care if you are pulling tickers out of a hat, keep doing it until it doesn't work. But if you aren't making money then go take a look at The Strat. I don't care if you do or you don't, makes no difference to me. I'm just posting it to try to help others. But since there seem to be a few on here that think they are Warren Buffett then keep doing what you are doing if it is working for you. But I'm guessing it isn't otherwise you wouldn't be bashing the ones that are successful.

FastEddie...I have seen a few posts where you were pretty disrepectful to other members here so sounds like you have issues that you need to work through. Whatever.

Good luck to you guys and if you want to learn more then take a look at the links I posted earlier in this thread. If you don't then good luck with whatever strategy you use

I still can't tell if this guy is a scammer or just a well-intentioned, innocent dupe of this "Rob Smith" person.

 

[airdale]

I still can't tell if this guy is a scammer or just a well-intentioned, innocent dupe of this "Rob Smith" person.

Possibility #3: He is Rob Smith.

Your post got me curious so I did a little searching. "Rob Smith" sells a $600 training course. https://www.tradingreviewers.com/strat-trading-course-review/ He sells newsletters. https://www.linkedin.com/in/rob-smith-2884a515/ IOW a typical huckster.

The thing about all these guys is that if they actually could reliably produce profits, they would not be out hustling training courses and newsletters. Two possibilities explain: 1) They don't have enough confidence in their systems to even try to live off of them. 2) They have tried and failed.

 

[NealRomeoGolf]

Possibility #3: He is Rob Smith.

Your post got me curious so I did a little searching. "Rob Smith" sells a $600 training course. https://www.tradingreviewers.com/strat-trading-course-review/ He sells newsletters. https://www.linkedin.com/in/rob-smith-2884a515/ IOW a typical huckster.

The thing about all these guys is that if they actually could reliably produce profits, they would not be out hustling training courses and newsletters. Two possibilities explain: 1) They don't have enough confidence in their systems to even try to live off of them. 2) They have tried and failed.

That's how I always felt about Robert Kiyosaki.

 

[Crashnburn]

Buy beaten up ETFs when you have money, and don’t sell them. Have a target weight for each of the market segments you want to be in and don’t add to that sector’s ETF when it’s over weighted. Rinse and repeat as long as possible and you’ll do a lot better than technicians and other market timers.


Edit: Disclaimer: on rare occasions I use technical analysis. Last year, I didn’t sell when CoVid-19 hit and the market tanked. However, I waited until the market made a double bottom before I reinvested dividends and realized capital gains. But, generally I just put money into the ETF that’s been beaten up the most and is under weight.

 

[Torque beast]

Humans have evolved to be “pattern seeking” animals. Historically and evolutionarily, it was better to have false positives than false negatives - that stick on the ground mistakenly being misidentified as a snake was safer than assuming it wasn’t. So, we tend to see random craters on the moon as a face, a few stars in a row as a belt or a sword, that sort of thing. Neither the face nor the belt nor the sword are really there, of course, but there’s usually little harm in seeing them as such. Astrology, Tarot Cards, I Ching, etc. are all based on pre-scientific “false positives”, finding patterns and meanings where none exist.

Speaking of Astrology, do “Leo’s” exist? Of course, in the trivial way we can define them into existence based solely on birth date. But do they exist in a meaningful way that allows us to assign personality traits to people born under certain signs? Of course not.

What I’m leading up to is do “inside candles” exist? Do “bearish gravestone doji’s” exist? Going back in time, how about “Elliott Waves” or “Head and Shoulder formations”. Of course they exist in the trivial sense that we can define criteria for them. But beyond that, do any of them have precise, repeatable predictive abilities? And would such patterns still show up even on a random number plot?

Here’s Apple’s daily chart from Friday.

Can anyone here draw lines and arrows and circles on this chart to show at what point in the day’s gyrations money could have been made? Where are the candles and doji’s and waves? And what if I told you that chart was, in fact, not Apple’s daily price moves but was randomly generated. Could you prove it wasn’t? And what would that tell you about our innate drive to find patterns in even random data?

Anyway, I enjoy the intellectual challenges such discussions provide. And it gives me something to do while Karen is in the DMV getting her motorcycle endorsement added to her license. (Yay!) I try to be a skeptic, but not a cynic, so I do my best to stay open to the fact that someone, somewhere, may someday beat the system and get very, very rich using technical analysis or “The Strat” or whatever the latest scheme is. But in the immortal words of James Randi, “I doubt that!”

Yep, not a good day to make money on Apple. I never look at the day trend, week or even monthly trends. I look at 6 months to 2 years to see how it’s performed then research to see if that trend will keep going. It’s definitely a gamble but I do not do ANY day trading because if I did I would be broke. I look for something I can buy and leave in for the long haul.


Sent from my iPhone using Tapatalk

 

[denverpilot]

Verizon sold Yahoo and AOL for $5B.

Must have been all that deep wisdom at Yahoo Answers that added all that value.

LOL.

 

[David Megginson]

The thing about all these guys is that if they actually could reliably produce profits, they would not be out hustling training courses and newsletters. Two possibilities explain: 1) They don't have enough confidence in their systems to even try to live off of them. 2) They have tried and failed.

It's amazing how many people don't get this. If there were such a thing as a system for picking stocks that consistently outperformed the indices (there's not) and I knew about it, I'd be sitting back enjoying my billions, not hawking books or courses, or working as a financial advisor in a little office in a strip mall.

Most genuinely-good advice is way more boring than picking the Next Big Stock. As others have mentioned in this thread

1. Diversify your portfolio to reduce risk
2. Buy and hold, because you lose a bit (in various ways) every time you trade
3. Choose the lowest fees (e.g. ETFs, not actively-managed funds)

Like good flying, good investing is calm, carefully-planned, and predictable, not a screaming adrenaline ride.

 

[optionizerSS]

1) I am not Rob Smith...lol
2) sorry if I sounded 'boastful'. I truly am just trying to help anyone that is interested
3) a few people questioned my results or my system so i posted my results for a few days

FastEddie, I can get past all that other stuff so water under the bridge. Yes I agree about the head and shoulders and whatever else you mentioned. They fail at least 50% of the time so why use it? I use to and kept losing money. I no longer look at patterns but rather look at candles. You question candles? Candles show the psychology of the market. A hammer candle opens high then bears take control and it sells off but near the end bulls step in and overtake the bears to push it back up. Same with other candles. I'm not the beat at explaining it and I'm not a great teacher but if anyone is interested they can research it. The Strat mainly looks at no more than the last 3 candles for an entry. We do look back further for targets though.

I posted my weekly/monthly watchlist to my Twitter this morning before market opened. DIS and HD both triggered right at the open and I got in HD. Target 1 and target 2 were both his. DIS hit target 1. BIDU short just triggered a little bit ago and I bought puts. I have my stop set and my target set. It might work and it might not but I have about a 47% target and 17% stop set. I do have losing trades but the winners far offset the losers. And I'm not the best at The Strat, which is why I posted links to other stratters earlier in here. Those guys/gals are better at it than I am.

As for AAPL Friday...here is where I would have entered long. And it will be sort of cherry picking because The Strat relies on multiple time frame continuity so I would have to see multiple timeframes at once and that is hard to go back in time to see if they all agreed at a particular point. But here it is...Firstly, the strat has you change your chart to start aggregating at market open so in thinkorswim there is setting to select so it starts at 9:30-10:30 instead of 9:00-10:00. if you look at the AAPL 60 minute chart at 10:30AM there was a shooting star after the opening big green candle. The low of that shooting star was 133.06. Puts )or short) entry would have been a break below 133.06. Target would have been the bottom of that big green opening candle (131.36). Looking at the daily chart on it there was a big outside candle on Thursday (3 candle in strat lingo) after a bearish day so I would have been leaning towards a short but it AAPL wouldn't have been on my list anyway as it didn't fit my criteria. But as you can see we hit the target of 131.36 later in the day.

As far as Rob Smith, he has done a great job in creating this. He was a floor trader on the CBOE for something like 30 years. He does sell his course and has a room that he charges a monthly fee for but if you look on youtube or twitter everything else is free. I didn't buy his course. I did subscribe to his room for a couple of months but it didn't do me any good and personally I wouldn't recommend it. He doesn't tell you what to buy or even what he is buying but just goes through his screens saying AAPL inside 30, TSLA 2 up 60, etc. But everything he teaches in his course he already provides free on his youtube channel but just in a more organized manner. I have never seen another trading guru give away that much for free and I have been with alot of them.

Also, like I said, I don't care if you pick your tickers out of a hat...if you have a system that works for you then great. I have never said that any other system sucks or doesn't work. I don't believe in head and shoulders or cup and handle, etc, but I do know people that use those and make great money with them. Good for them. If you buy ETF's at lows and hold them and make money then good for you. I'm glad. And I'm not saying that in a sarcastic fashion...I am glad you have a system that works for you. If you don't then check out the strat. One thing about Rob, he hates anything but the strat and will bash people on twitter for it. I don't agree with that. But that is partially why I got defensive earlier because I felt like I was getting bashed for my system and I don't do that stuff. Like I said, if you have a system that works for you then great. One thing that Rob has instilled in us stratters is the idea of helping others. I have never seen a community so happy and eager to help others but I don't force it on others. Some do. I have been at this about 7 years and blew out my first account and some of my 2nd account before I started learning The Strat. I'm finally making money so believe in this system.

In my 7 years or so trading I have witnessed about 20 people that have quit their full-time jobs to trade full-time. Not just people that said they trade full-time but those that have actively quit after I got to know then and hang out with them in trade rooms. I'm not at that point but will be in a few years.

From my watchlist this morning I hit HD calls on an inside week break. NOT BRAGGING...lol but explaining my logic here. I ran scans this morning since we have a new month and new week now. April was an inside week (1 candle in Strat lingo). This means the April candle never broke the March highs or lows. This is called consolidation and gets alot of attention. When it breaks either direction it will usually move quite a bit I Iike to go with the direction of momentum so looked at the yearly, quarterly, and monthly charts and though the upside was a better direction. So I set an alert in my thinkorswim for the high of April (325.83). We actually opened above that so I waited until it pulled back a little and got in. My first target was a recent high on the daily chart of 327.91. Then I went back a little further and found the next high on the daily and that was 328.83. Since that was an all-time high I decided to get out just below that 2nd target. I could have stayed in longer and looked for a reversal on a lower timeframe chart but since I have a full-time job I can't watch it every minute of the day so got out. Same with DIS but it gapped up too high for me at the open so I got in HD instead. But DIS hit target 1 also.

And yes, there are algos that do buy based off of charts. The Strat takes advantage of that. Something like 70% of all buying is done by algos. Computers run the algorithms and do most of the buying and selling today.

I studied Steve Nison, who is considered the king of Japanese candlesticks but even though I understood it it was still sort of 'gibberish' to try to put into practice. Rob took what Steve did and added a few things then decided to number the candles. That made it so much easier to understand. I have scans set up to look for 3-1 candle setups. A 3 is an outside candle and a 1 is an inside candle. The 3 represents a large move and the one represents a tighter consolidation. The 3 gives it the range and once the inside candle is broken then the range is to the top or bottom of the 3 candle. It doesn't work 100% of the time but realistically about 70-80% of the time. If you use your stops and stick to them then money can be made.

ok...this post wasn't to try to convert anyone. I personally don't care if you ever use it but I'm putting it out there so others can see what it is and why it works. If you wanted to trade longer term stuff off of it then maybe look at the yearly, quarterly and monthly charts. Maybe fine tune using the weekly. Make sure all timeframes show green candles before buying or all red before shorting. That is one of the keys. When all charts are in agreement then the algos kick in so you are using them to help you.

Also, according to Rob (and I can't confirm this) Merrill Lynch just alloted $1 billion to teach The Strat to all of its traders.

So again, sorry for getting a little feisty but like I said, I would never tell anyone their system doesn't work if they are making money with it. Some of you here were basically calling out my character and I don't like that. I pride myself on my character and am always trying to help out while expecting nothing in return.

 

[airdale]

... Like good flying, good investing is calm, carefully-planned, and predictable, not a screaming adrenaline ride.

I tell my Adult-Ed investing students this: "Investing is boring. If you're not bored, you're not doing it right."

 

[optionizerSS]

Here is the annotated AAPL chart to go with what I talked about above. Friday ended after that last red candle in the middle of the screenshot. That 2nd big green candle was the opening candle today.

Airdale, you are right, investing should be boring. What I do is not considered investing. I'm trading. Flipping for a few $ here and there. There is definitely a big difference between the two. Things move much quicker on the smaller timeframes and especially with options that expire in a few days. I see 50% moves all day long. Doesn't mean I always catch them or that I rode them the whole 50% but they are there. That HD call I got in this morning was the May 21st 330 call. If I played it perfectly I could have got in at $490/contract and the high was 785/contract. I got in at 545 and out at 610 in 12 minutes. I caution anyone that tries to catch the tops or bottoms. Very dangerous way to trade. I just want a piece of the middle. If I had played this weeks expiration on the same $330 calls I could have got in at $134 and out at 375. Yeah, almost triple my money (179%) but current weeks are riskier and since I was trading based off the weekly chart I thought I might have to hold a couple of days to hit my target so I was more conservative.


My HD trade:

 

[airdale]

ROFL. So with perfect hindsight you can make a lot of money? I already knew that. So you have a profitable trade to crow about? Everybody has profitable trades from time to time. In Jason Zweig's "Your Money and Your Brain" he explains how we get a behavior-reinforcing dopamine hit when we win, but no hit when we lose. We remember mostly the hits and this reinforces the gambling behavior.

Nassim Taleb discusses a concept he calls "silent evidence." His story to illustrate the concept is this:

"Diagoras, a nonbeliever in the gods, was shown painted tablets bearing the portraits of some worshippers who prayed, then survived a subsequent shipwreck. The implication was that praying protects you from drowning. Diagoras asked, “Where are the pictures of those who prayed, then drowned?”​

One pernicious aspect of the internet is that people frequently post crowing about winning trades, but the losers don't post. Silent evidence IOW. The result is an extremely distorted picture. The truth in this type of trading is that most people lose, some people get lucky for some of the time, but almost no one stays lucky for a long time. The lucky ones wear their lucky tie every day, believing that it is important to their success. Others, I guess, believe in lucky candles, shooting stars, and hucksters.

You have snarked a couple of times about how successful you are and how others must not be as successful. Just for the record here is a screen shot of the last two trades in one of our accounts:

I'm done discussing this topic with you. Your arrogance and, really, naivete is just too annoying.

 

[ebetancourt]

This has been an interesting and fun thread so far. I thought I would comment on newsletter writers. The newsletter business can be very lucrative. Some newsletter writers have long and successful histories. One I subscribe to has an annual audit by a third party; he has beat the S&P500 every year for a lot of years. He specializes in a very small niche, has a 10 stock portfolio that he might make 2 or 3 changes to in a year. Usually less. Subscriptions aren't cheap, though.

EDIT: another comment, FWIW. Investing, trading, and speculation are not closely related and many of the arguments here seem to be about trying to conflate two or more. I don't choose to do much trading, but I trade a few options. Mostly work out, but I would hate to do it full time or have to have dependable income from trading. So I invest and speculate. Right now more speculation than investing. I think we are in an everything bubble and don't see much I would buy and forget for even five years.

 

[NealRomeoGolf]

Shoot, I'll write a newsletter. I just sold two that gave me 70% returns in 6 months. I will leave out of the newsletter the oil bankruptcy that I lost on.

Also left out of the newsletter....everyone should have made huge returns in the past 12 months thanks to the covid bounce.

 

[Sam D]

Shoot, I'll write a newsletter. I just sold two that gave me 70% returns in 6 months. I will leave out of the newsletter the oil bankruptcy that I lost on.

Also left out of the newsletter....everyone should have made huge returns in the past 12 months thanks to the covid bounce.

Here's a suggestion, start 8 letters. In half (4), predict that the market will go up in the next quarter. Predict the opposite for the other half.
After the quarter, half your newsletters will be wrong, kill those. For the other half, repeat your market up (2 letters), market down (2 letters) prediction
After this quarter, kill the 2 letters that were wrong. For the remaining two, predict up market in one, down market in the other
After this quarter, kill the 1 that was wrong.

The remaining letter has correctly predicted the stock market each quarter for the last 4 quarters. Huge value! (send me royalties)

 

[David Megginson]

Here's a suggestion, start 8 letters. In half (4), predict that the market will go up in the next quarter. Predict the opposite for the other half.
After the quarter, half your newsletters will be wrong, kill those. For the other half, repeat your market up (2 letters), market down (2 letters) prediction
After this quarter, kill the 2 letters that were wrong. For the remaining two, predict up market in one, down market in the other
After this quarter, kill the 1 that was wrong.

The remaining letter has correctly predicted the stock market each quarter for the last 4 quarters. Huge value! (send me royalties)

Absolutely right!

This is a common thought exercise for new statistics students, but sad thing is that it actually happens all the time to naïve investors. It works like this: Big Fund Company launches 10 new high-load mutual funds in 2000. After 5 years, 2 shut down because of poor returns, after 10 years, 2 more shut down, then after 15, two more shut down. Guess what? In 2020, the four remaining funds (the only ones now listed) all have above-market returns over the past 20 years, so obviously, you're better off paying Big Fund Company 3%/year for a managed mutual fund than just investing in cheap ETFs that track stock-market indices.

 

[FastEddieB]

The above reminds me of this excerpt I posted once to another thread:

I think I read about it in Taleb’s “Fooled By Randomness”.

“My favorite example is this story, told about the Italian physicist Enrico Fermi, newly arrived on American shores, enlisted in the Manhattan nuclear weapons Project, and brought face-to-face in the midst of World War II with U.S. flag officers. So-and-so is a great general, he was told. What is the definition of a great general? Fermi characteristically asked. I guess it’s a general who’s won many consecutive battles. How many? After some back and forth, they settled on five. What fraction of American generals are great? After some more back and forth, they settled on a few percent. But imagine, Fermi rejoined, that there is no such thing as a great general, that all armies are equally matched, and that winning a battle is purely a matter of chance. Then the chance of winning one battle is one out of two, or 1/2, two battles l/4, three l/8, four l/16, and five consecutive battles 1/32—which is about 3 percent. You would expect a few percent of American generals to win five consecutive battles—purely by chance. Now, has any of them won ten consecutive battles…?”

 

[optionizerSS]

I'm confused. I'm here sharing my knowledge that can work for any size account and being called arrogant for it yet there are a few here that are sharing a system that only works for very large accounts and telling everyone that if you don't do it their way then you will lose. So while I have said 'if you have a system that works for you then great', a few here are saying if you don't trade my style then you are doing it wrong? And I'm the one being called arrogant?
What about the guy with a $5000 account? You are saying to buy $5000 of their favorite stock or ETF and ride it out? So let's say you have a great year and net 20%. It will take an awfully long time to make any headway. You guys are assuming everyone has a huge account and if you don't then you might as well forget about investing or trading. If everyone had a > $100,000 account then sure you could buy and sit on it. I don't have a $100,000 account (am I arrogant for admitting that?). What happens to the 50 year old that has saved up $5000 to try to make some money for retirement? Under your direction they are screwed and just forget about it. You are implying there is no other way possible for that person to ever get ahead. I'm saying there is a way and being called arrogant for it? I'm anything but arrogant. Yeah I may have came off a little harsh after feeling 'attacked' by a few here but it is what it is. I am not a member of any trading sites, forums, newsletters, or anything else like that. I do not get paid for any of my stuff I put out there and have never asked. I do pay for any services anymore either. In fact, I trade better without the noise. I tend to try to jump in everything that is mentioned if I'm on a service where tickers are being thrown all around. Do I have losing days? Yep. Everyone does and if they tell you they don't I promise you they are lying. I lost money today. Yeah I made money on HD but I followed a guy into FSLY the other day and he was looking for an earnings run-up. I don't normally trade that stuff but I did and today I sold it for about a $100 loss and only made $55 or so on HD. Which brings another point...if I was arrogant I would have said I made thousands on HD. My plan was to add to the trade as it went up but it went too fact so only had 1 contract. Oh well. I know the process worked.

Keep doing what you are doing if it is working for you. But what you do won't work for me or others with small accounts. I know what I do works. Let me ask this (serious question here)...a few said buy when they are bottomed out. How do you know when they are bottomed out? Trying to catch a bottom is called 'catching a falling knife'. You need to see some type of reversal to know when it has bottomed? I have seen $50 stocks go to pennies and seen people lose everything cause they thought 'well this is the bottom, let me get in here'. Then when it drops another 20% they say 'well let me add here cause this has to be the bottom'. I have seen many blow out accounts with that mentality and how I blew out my first account. I look for reversals using The Strat. That's what it focuses on. There are continuation entries but I don't usually enter on those, only add to current positions on them. Someone asked me about VVOS the other day and that is why I gave the answer I did. I need to see a reversal first and on longer term trades the monthly is in control so I need to see a reversal on the monthly chart. Sure some may take a reversal on the weekly but I'm more conservative and like a little less risk but that's me. Not saying others are wrong for entering before that but for me I don't like getting in too early.

Oh well. Just trying to help and share with others but don't appreciate being called names for it. If anything I feel I was being 'attacked' on here and being told 'my way is the only way that works and everyone else is doing it wrong'. I have NEVER said that my way was the only way but have been told that by a few on here. Later all. I'm done here. Good luck

 

[Tarheelpilot]

Every time this thread pops up i read socks. Not stocks. :-/

 

[airdale]

@optionizerSS, your last post makes it clearer to me where you are in your investing career. Here are some things you can expect to learn in the future:

Trading schemes almost never work. Once in a great while one does, at least a little bit. "Dogs of the Dow" is sometimes cited as an example. But shortly after working, the schemes cease to work as traders discover them and arbitrage away any advantage. Your rumor that Merrill is investing $1B teaching this scheme is almost certainly apocryphal, but even if your scheme has some merit, this would kill it. (Merrill knows this; that’s why I think that story is apocryphal.) The feedback and sarcasm you have been getting here on your particular current favorite scheme indicates that none of us think it is one that will work long term. The biggest indicator of that is that its guru is still working for a living.

We were all young and aggressive once; at least most of us were. In my case, my scheme was to do Fourier transforms on stock price series, looking for trading schemes in the frequency domain that I could use to win in the time domain. That didn't work, of course, but it was a wonderful dream for a brief period.

You turn up your nose at 20% return. Eventually you will learn that is a wonderful number but somewhat worrisome. When you learn about reversion to the mean, you will understand why I say both those things.

You will learn that the size of the portfolio has very little to do with investing tactics or success. Tiny portfolios are more vulnerable to costs, though, so the small investor must pay careful attention. For example on that screen shot I posted there was a $49.95 fee for buying that particular fund. It had zero % impact on me, but that same number would be a much bigger hurt on a small trade. So be careful. Really big portfolios, like mutual funds and hedge funds prove every day that large size is a disadvantage.

Somewhere along the line you will also learn that stocks are not shiny toys or dice to be played with; they are actual ownership in actual companies; an investor's small stake in the profits created by thousands of employees working to enrichen their shareholder/owners. That's why buying and holding a diverse portfolio works and virtually nothing else does.​

Will Rogers' old wisdom applies to investing: "There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves."

For reading, I strongly encourage you to invest in a copy of "Winning the Loser's Game" by Charles Ellis. I promise that it will be one of the best investments you'll ever make.

Be well and commit yourself to learning. That is the key to investing success. There is no magic.

 

[SoonerAviator]

@optionizerSS . . .

Somewhere along the line you will also learn that stocks are not shiny toys or dice to be played with; they are actual ownership in actual companies; an investor's small stake in the profits created by thousands of employees working to enrichen their shareholder/owners. That's why buying and holding a diverse portfolio works and virtually nothing else does.​

Will Rogers' old wisdom applies to investing: "There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves."

For reading, I strongly encourage you to invest in a copy of "Winning the Loser's Game" by Charles Ellis. I promise that it will be one of the best investments you'll ever make.

Be well and commit yourself to learning. That is the key to investing success. There is no magic.

@airdale, I believe that response was perfectly appropriate as a counter to the posts by @optionizerSS . I think there were some poor comments by you and @FastEddieB early on which were unnecessary, as they didn't do anything to provide evidence to refute "the Strat" technique. Just a bunch of "nuh-uh that's all gibberish speak from a Wall Street con-man." It's fine if you don't want to look into the technique he was talking about to understand what the pitfalls are, but it seems a bit rash to dismiss it without any evidence to the contrary (outside of anecdotal "nothing else ever works" examples). Don't get me wrong, I'm in the camp that just buying low cost index/mutual funds and a handful of long-term stocks is a better investment strategy both due to simplicity and fighting against computer algorithms/transaction fees/gains taxes. However, since I don't day-trade and don't have enough depth of knowledge about the Strat to provide a specific rebuttal to the technique and when it won't work, I refrain from calling it rubbish. Just my .02. I don't think his posts were anything detrimental to the thread.

 

[FastEddieB]

@airdale, I believe that response was perfectly appropriate as a counter to the posts by @optionizerSS . I think there were some poor comments by you and @FastEddieB early on which were unnecessary, as they didn't do anything to provide evidence to refute "the Strat" technique…it seems a bit rash to dismiss it without any evidence to the contrary…

I think the error here is “shifting the burden of proof”. Plus, it’s hard to “prove a negative”. The burden of proof is firmly on the shoulders of he who makes the assertion, and it’s not up to me or anyone to provide “evidence to the contrary”.

How would one ever prove that “candles” and “gravestone dojo’s”are illusory and do not provide meaningful trading indicators? “Prove they don’t work” is, as I said, a shifting of the burden of proof. What I and others have tried to point out is logical reasons such schemes never work, at least not consistently, and if ever one is found that does work, it must by nature be transitory and self-defeating.

 

[airdale]

... I think there were some poor comments by you ...

I'll take the arrow on that one. I misunderstood what we were dealing with. Sorry for any offense, @optionizerSS

... it seems a bit rash to dismiss it without any evidence to the contrary (outside of anecdotal "nothing else ever works" examples). ...

Well, I would argue that the evidence is hardly anecdotal. It goes back at least a half century. In recent years we have seen about 10,000 mutual funds in the US market; over 50 years certainly the number is much larger since they fail at about a 7% annual rate. You can bet that a gargantuan number of stock picking schemes, including "candles" etc., have been tried and over that entire time the academics have been unable to find any evidence of skill; the results are basically random. No skill. No system that works.

Here is Michael Jensen, who later went on to win a Nobel prize, in 1967: " ... there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance. ..." (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=244153). Here is Nobel winner Eugene Fama's longtime research partner, Ken French, reporting their failure to find skill: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx

Note that French is careful to say that absence of evidence [for skill] is not evidence of absence. The wild card would be a stock picker with a system who is lounging by the pool on their private yacht or on their private island, not telling anyone anything. Really, no one who can actually win consistently is going to be giving away the recipe for free or for the pittance that newsletter subscriptions might bring in. Neither are they going to be stuffing themselves into a suit and going to work for an investment management company in a building where the windows don't even open.

 

[Crashnburn]

I'll take the arrow on that one. I misunderstood what we were dealing with. Sorry for any offense, @optionizerSS

Well, I would argue that the evidence is hardly anecdotal. It goes back at least a half century. In recent years we have seen about 10,000 mutual funds in the US market; over 50 years certainly the number is much larger since they fail at about a 7% annual rate. You can bet that a gargantuan number of stock picking schemes, including "candles" etc., have been tried and over that entire time the academics have been unable to find any evidence of skill; the results are basically random. No skill. No system that works.

Here is Michael Jensen, who later went on to win a Nobel prize, in 1967: " ... there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance. ..." (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=244153). Here is Nobel winner Eugene Fama's longtime research partner, Ken French, reporting their failure to find skill: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx

Note that French is careful to say that absence of evidence [for skill] is not evidence of absence. The wild card would be a stock picker with a system who is lounging by the pool on their private yacht or on their private island, not telling anyone anything. Really, no one who can actually win consistently is going to be giving away the recipe for free or for the pittance that newsletter subscriptions might bring in. Neither are they going to be stuffing themselves into a suit and going to work for an investment management company in a building where the windows don't even open.

Absolutely. A tune on Wall Street works until everyone learns the music. Then it doesn’t.If I had a great scheme for investing, I’d keep it to myself.

 

[SoonerAviator]

I think the error here is “shifting the burden of proof”. Plus, it’s hard to “prove a negative”. The burden of proof is firmly on the shoulders of he who makes the assertion, and it’s not up to me or anyone to provide “evidence to the contrary”.

How would one ever prove that “candles” and “gravestone dojo’s”are illusory and do not provide meaningful trading indicators? “Prove they don’t work” is, as I said, a shifting of the burden of proof. What I and others have tried to point out is logical reasons such schemes never work, at least not consistently, and if ever one is found that does work, it must by nature be transitory and self-defeating.

By illustrating that the method being used could be fooled by condition X, Y, or Z. By showing the underlying flaws in using price action to predict future prices, etc. This isn't like saying "prove God doesn't exist", this is a question that can have a definitive rebuttal, but it requires knowing enough about the subject to be able to refute it, versus just taking potshots and claiming a victory. I am aware of why these techniques typically fail from a human behavioral and statistical standpoint, but from a technical standpoint I don't have the knowledge to say why it won't work (nor apparently do you). It's one thing to tell them you feel it's a poor strategy given historical averages for boutique investing schemes, it's another to tell them it's outright gibberish without stating anything factual behind why it fails as a valid strategy. Of course, as you mentioned, if it really were so consistent at picking winners/losers the market would adjust and the advantage would be short-lived assuming markets are perfectly efficient.

 

[SoonerAviator]

I'll take the arrow on that one. I misunderstood what we were dealing with. Sorry for any offense, @optionizerSS

Well, I would argue that the evidence is hardly anecdotal. It goes back at least a half century. In recent years we have seen about 10,000 mutual funds in the US market; over 50 years certainly the number is much larger since they fail at about a 7% annual rate. You can bet that a gargantuan number of stock picking schemes, including "candles" etc., have been tried and over that entire time the academics have been unable to find any evidence of skill; the results are basically random. No skill. No system that works.

Here is Michael Jensen, who later went on to win a Nobel prize, in 1967: " ... there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance. ..." (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=244153). Here is Nobel winner Eugene Fama's longtime research partner, Ken French, reporting their failure to find skill: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx

Anecdotal in the sense that you aren't addressing "the Strat" directly for it's strengths/weaknesses. Merely saying everyone else who has tried has failed isn't really refuting his investing method, just that it's extremely unlikely to work in the long term. It's fine to have as an opinion (especially when supported with numerous citations for the statistics behind it), but I liken it more to telling Copernicus that he was wrong about the Sun being the center of the universe because everyone else who tried to claim that was "proven" wrong or killed by the Church, lol. I just want a bit more detail if we are going to outright say @optionizerSS is spouting off a strategy that holds no water (even if it is likely to be as-such).

Note that French is careful to say that absence of evidence [for skill] is not evidence of absence. The wild card would be a stock picker with a system who is lounging by the pool on their private yacht or on their private island, not telling anyone anything. Really, no one who can actually win consistently is going to be giving away the recipe for free or for the pittance that newsletter subscriptions might bring in. Neither are they going to be stuffing themselves into a suit and going to work for an investment management company in a building where the windows don't even open.

I agree, I seriously doubt the guy that has a surefire winning hand is going to be divulging that secret, and it surely wouldn't be to a bunch of seminar-enrollees at the local DoubleTree convention center for chump change. If they were that good, they'd make more money in a week with their trades than they would in a year of "sharing their secrets" for the average guy or in book deals.

 

[airdale]

... I seriously doubt the guy that has a surefire winning hand is going to be divulging that secret, and it surely wouldn't be to a bunch of seminar-enrollees at the local DoubleTree convention center for chump change. If they were that good, they'd make more money in a week with their trades than they would in a year of "sharing their secrets" for the average guy or in book deals.

@SoonerAviator, you have what you're asking for -- it's right under your nose. Your own analysis here is your proof that "The Strat" is just one more huckster scheme designed to sell newsletters and investment advice.

Actually that's the interesting sorta-paradox about all these pundits, advisors, schemes, and newsletters: Their very presence in the marketplace is proof that they believe their own advice to be worthless. If they didn't they would be using, it not selling it.

 

[FastEddieB]

This isn't like saying "prove God doesn't exist"…

I know better than to touch that one!

Better analogy might be how might one refute a forum member’s claim to have invented a perpetual motion machine?

Or a better, better analogy might be how might one refute a forum member’s claim to have discovered a system to beat the lottery?

How would one refute either of those beyond relying on very basic physics and math? That’s where we are with these schemes. We don’t have to show they don’t work, more that they can’t work.

“That which can be asserted without evidence, can be dismissed without evidence." - Christopher Hitchens.

 

[SoonerAviator]

I know better than to touch that one!

Better analogy might be how might one refute a forum member’s claim to have invented a perpetual motion machine?

Or a better, better analogy might be how might one refute a forum member’s claim to have discovered a system to beat the lottery?

How would one refute either of those beyond relying on very basic physics and math? That’s where we are with these schemes. We don’t have to show they don’t work, more that they can’t work.

“That which can be asserted without evidence, can be dismissed without evidence." - Christopher Hitchens.

The problem with that is, @optionizerSS provided some evidence for some trades he made using his Strat method that worked. He provided the before and after. I suppose he could have posted screenshots of every piece of supporting analysis he had prior to enacting the trade, a screenshot for his proof of trade, and then the subsequent sale with proof that the target he set was met. I mean he has given some bare bones, even though he didn't post any of the losses he may have had with that method. So, it's not as if there was no evidence, but it's obviously not iron-clad, either.

 

[SoonerAviator]

@SoonerAviator, you have what you're asking for -- it's right under your nose. Your own analysis here is your proof that "The Strat" is just one more huckster scheme designed to sell newsletters and investment advice.

Actually that's the interesting sorta-paradox about all these pundits, advisors, schemes, and newsletters: Their very presence in the marketplace is proof that they believe their own advice to be worthless. If they didn't they would be using, it not selling it.

My assertions are not PROOF, they are just my feelings (opinion given) based on the statistical likelihood that it is more effective than buying and holding long term. If I was going to provide PROOF, I'd show where using "candles" and such misses a meaningful component and why it fails to predict the majority of stock price movements. I don't have the time to invest in understanding the Strat method, and honestly don't have the statistical chops anymore to drop it into some tests to see if the results fall outside the noise level expected for random stock trades. Feelings aren't PROOF.

 

[FastEddieB]

We have no evidence. We have anecdotes. I asked him to post ALL his trades, winners and losers, over a set time frame in the future, including all transaction costs.That would avoid him “cherry picking” the data, unless he decides to just hide losses regardless. We could then see how successful his strategy is over time.

Of course, he’s under no obligation to do so.

As an aside, when I posted the Apple chart, I did so sort of facetiously. I think it’s movement over the day is indistinguishable from a random walk. Yet he did find all sorts of patterns therein. Are they really there? If so, are they predictive? Of that, no evidence has been provided.

 

[airdale]

The problem with that is, @optionizerSS provided some evidence for some trades he made using his Strat method that worked. ...

For any scheme, the randomness of the market guarantees that it will work sometimes. With mutual fund stock pickers, about a third beat their benchmarks in any given year. It is only when we look over a number of years that we see we have been "fooled by randomness."

Gedanken experiment: Hypothesize a stadium with 10,000 seats, approximating the number of mutual funds in the US. Instead of fund managers, fill the stadium with 10,000 monkeys (probably approximating the number of pundits and hucksters ). Give each monkey a fair coin and tell them to flip and sit down if they get tails. About 5,000 will still be standing after the first flip. Does that prove that those monkeys have heads-flipping system that should be taken seriously? Of course not. Now have them flip seven more times, again sitting if they flip tails. After those 8 flips, there will be about 40 monkeys left standing. At that point would you argue that those monkeys have a system that should be taken seriously? I still don't think so.

The concept that prices are random with a slight upward bias is a cornerstone of Modern Portfolio Theory, Harry Markowitz' "Portfolio Selection," published in 1952 (https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.1952.tb01525.x). This is a highly counterintuitive concept but once you make the heavy lift to really internalize it, a lot of investing questions become much easier to answer.

 

[SoonerAviator]

We have no evidence. We have anecdotes. I asked him to post ALL his trades, winners and losers, over a set time frame in the future, including all transaction costs.That would avoid him “cherry picking” the data, unless he decides to just hide losses regardless. We could then see how successful his strategy is over time.

Of course, he’s under no obligation to do so.

As an aside, when I posted the Apple chart, I did so sort of facetiously. I think it’s movement over the day is indistinguishable from a random walk. Yet he did find all sorts of patterns therein. Are they really there? If so, are they predictive? Of that, no evidence has been provided.

Agreed. And it's perfectly reasonable to be extremely skeptical of identifying patterns that may or may not be there, may or may not be repeatable/predictable.