Official Investment Thread

Fair enough. I try to understand the large trends and use paid research to make decisions about positions. I am generally trying to find asymmetric bets, that is where my risk is substantially less than the profit potential. So, after November elections, I decided to bet against the dollar. Among other things, increased my holdings in silver miners. I bought a half position in AG (First Majestic Silver) 11/24/20 and another half on 11/30/20. It was doing well, today it's enjoying the attention of the Reddit crowd, and if it was long-term I'd probably sell half (up 116%). The core of my account is biotech, 5G, and precious metal miners.

I use Stansberry Research and Legacy Research Group. Expensive, but long since paid for themselves.
 
FastEddieB said:
Don’t take this personally, but there is an informal logical fallacy called “Special Pleading”.

This is not my first rodeo going back and forth with a day trader or someone defending technical analysis as a reliable way to profit long term from small market moves. Invariably I’ve been regaled with arguments like those above. “If only I had followed my own rules, I would have made $xxx.” Or “I would have turned a profit in February if I just had stuck to my guns”. Or “Except for that one big losing trade in AAPL, which I should have seen coming, I would have been WAY ahead following my system”.

I think that mindset is covered by Taleb in “Fooled By Randomness”. Regardless, it’s well known in skeptic circles as a commonly used fallacy.

A few others to always have in mind are “cherry picking data”, “confirmation bias” and “moving the goalposts”. I have in mind a thread on another forum where a forum member confidently forecast $40 silver in the near future. Years ago. I’ll see if I can find it.

edited to add: Found it! The original prediction was made in 2011. Lots of back and forth (27 pages!) but covers similar ground to what I’m discussing here.

http://www.internationalskeptics.com/forums/showthread.php?t=205790&highlight=silver&page=26
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Not necessarily disagreeing with you as a general rule but there are exceptions. Remember, 90% of day traders fail. What about the other 10%? Those results I showed aren't 'what-ifs', those are my actual results, including fees. That is my net profit or loss each day. For transparency I will tell you that that particular account only has about $28,000 in it. I'd say pretty good returns.

Sure not every trade is a winner and if you aren't prepared for losers then you will fail. We have a guy that trades with us that trades a 1 minute chart and usually makes about $500-$1000 every day in under 1 minute. Sure he goes in for about $1,000,000 on each trade and only takes about a .1% profit but it is working for him. He only had 4 red days last year. There were days where his 1 minute trade failed but he would make another and get back to green so it wasn't like he only had 4 losing trades for the year.

Believe me when I say I know the pitfalls of day trading. I see people asking questions that I used to ask and instantly know they are going to blow out their account soon if they don't change their approach. Questions like asking if it was a good time to get in GME when it was up 100%. I didn't touch that trade and had no plans to.

But as a whole, would I ever try to persuade anyone to become a day trader? Nope. Most people don't have the determination I do and will likely blow out their account, quit, and walk away broke. I did blow out my first account but I kept at it, saved up and started again. I had been doing traditional technical analysis using MACD and other oscillators and had just started being profitable then started learning the strat and did away with all indicator and using only price action and timeframe continuity. It took me about 6 months to start being profitable with the strat and for about the past 4 or 5 months I have been consistently profitable. Long term investing is much easier, especially trading common stock. I definitely agree with that. The shorter the term you trade the harder it gets and trading options makes it exponentially harder. If I had a $300,000 account then I might be trading common stock and holding a little longer. With a $28,000 account I'd be lucky to make $5000/year with that approach. That is still a good ROI but I can do much better day trading options. I'm almost up to that in 6 weeks.

But I absolutely agree with you that day trading is a bad career idea and much harder than longer term investing but there are exceptions and I'm in that group. My short term swing trades are more consistent with my winning because you have time. Like your article about silver hitting $40. I can say that AAPL will eventually hit $500/share. I'm sure it will, eventually. Not hard to buy 1000 shares and wait 5 years.
 
optionizerSS said:
Remember, 90% of day traders fail. What about the other 10%?
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So, what you're saying is that only 10% of the unwashed masses have what you allege to have - some special and rare combination of determination and discipline and insight or whatever "special sauce" is required to consistently profit were most ultimately fail. That seems odd on the surface - even if markets do, in fact, move randomly or unpredictably, before transaction costs it seems like roughly 50% of day trades should result in gains and 50% in losses.

It took me about 6 months to start being profitable with the strat and for about the past 4 or 5 months I have been consistently profitable.
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Or, like you, to lose money for 6 months, and then only to start measuring your "consistency" by cherry picking the next 4 or 5 months as your proof that your method works. “I’ve made money 4 or 5 months out of the last 10 or 11” is hardly a glowing confirmation of your prowess.

Which will lead me into my next post concerning another possible explanation.
 
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FastEddieB said:
I really hope this doesn’t come across as bragging, but I think it’s a perfect setup for comparing different market philosophies.

I own AMZN with a basis of about $235/share. Will hold it as long as I like the company.

I own AAPL with a basis of under $1/share. Ditto on how long I’ll hold it. Nice benefit is regardless of price moves, it pays a nice little dividend as well.

From my perspective, day or option trading is chasing after nickels and dimes in all the little wiggles on charts, while ignoring the dollars to be made by just buying and holding good companies. Not to mention the work involved. But more power to you if you can make it work - keep it up.
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So, FastEddie, are you sure you're not cherry-picking there yourself? For a more fair defense of your position, we'd have to look at any other stock you acquired at similar times (not that I'm trying to be nosy).

The discussion of individual stock-picking reminds me of something I head on either Barry Ritholtz's Masters in Business podcast or Meb Faber's podcast (both highly recommended). It was mentioned that total returns for "the stock market" have largely been driven by a small percentage of stocks. The odds are not good. A few discussions on the topic, which include links to original presentations and a paper:

https://awealthofcommonsense.com/2016/05/the-sp-500-is-the-worlds-largest-momentum-strategy/
https://alphaarchitect.com/2019/08/13/do-most-individual-stocks-outperform-cash-no/
https://alphaarchitect.com/2017/01/26/treasury-bills-outperform-stocks-say/
https://thebamalliance.com/blog/the-perils-of-owning-individual-stocks/

Spoiler alert: you did well with Apple and Amazon. Now how much of that was luck? :D
 
rpadula said:
So, FastEddie, are you sure you're not cherry-picking there yourself? For a more fair defense of your position, we'd have to look at any other stock you acquired at similar times (not that I'm trying to be nosy)...

Spoiler alert: you did well with Apple and Amazon. Now how much of that was luck? :D
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OUCH! Hoist by my own petard!

I’ve had losers. How about Enron? Though I inherited my shares from my dad, I watched them all the way down the tube. Or Pan Am? They can’t let an American icon just fade away, can they? Or Excelsior Henderson*, Harley Davidson needs some competition, don’t they?

Plus lots of others that just kind of hovered near their purchase price and were sold for a slight profit or loss.

One of the points of “One Up On Wall Street” was that you only need a few “10 baggers” and above to come out ahead overall. The most you can lose on a stock is what you invested, while the upside is virtually unlimited. It also helps that most of my investment history began in the 1980’s - and I’m still in a few of those positions. Bear in mind the Dow was around 1,300 back then. You almost have to be trying NOT to make money on a gradual rise to 30,000 Dow, especially with dividends reinvested along the way.

But, yes, I may just have been lucky. Like a great general - I will expound on that shortly. But it sure feels like my intuition helped along the way.

*When I bought the Excelsior Henderson shares, on the basis of Harley Davidson needing competition, I also bought some Polaris, on the basis of their Victory line, now Indian. The gain on Polaris made up for the loss on Excelsior Henderson several times over, showing the benefit of diversification.
 
Re: my reference to being a “great general”.

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…?”

The point of this is that even if stocks moved randomly, you would still expect big winners, stringing together lots of successful trades, maybe even over years. Not because of any particular skill, but just luck and large numbers doing their thing.

Maybe, just maybe, there’s something in charts - candles? - that allow someone to accurately forecast future moves of a stock or commodity and to profit from it reliably. But if you think about it, once that pattern becomes clear and used by enough folks, it must become self defeating - unless you imagine a universe where everybody can use the same obvious patterns and everyone can get rich doing so.

Not likely.
 
Stocks don't move 'randomly'. The majority of trading is done with charts, this includes the large firms. Algorithms are built to try to maximize these 'alerts'. Different firms use different algorithms depending on the system of whoever is running the firm. The system I use is based on truth and facts. There are only 3 ways a stock can move, and only 3 types of candles. There is an inside candle that failed to break the high or low of the previous candle, an outside candle that broke both the high and low of the previous candle, and everything else only broke one side of the previous candle. That's it. Can't be any other candle type. Now let's number these candles. An inside candle is a 1, and outside is a 3, everything else is a 2 (either up or down). There are many scenarios that can be played knowing this information and yes there is more to it than this. Merrill Lynch just budgeted $1,000,000,000 for it's traders to learn this system. I know the guy that created it.

And trust me, you don't get 'lucky' and have 5 straight winning months in a row day trading. Cannot happen. Long term trading sure you can. Very easy. Heck, with the bull run we had you could have bought and held a handful of stocks and had about 10 years of winning months. That does not happen day trading. In fact, I don't think I had 5 green months total before this. What makes day trading so hard is that even if you have a winning position many turn that into a losing position due to greed. They want more so they hold longer. Eventually it will pull back to a point that you are down and then you panic and sell. That is the psychological part that I talked about that is so hard to overcome. The flip side is the guy that is in a losing trade and is down $100 but is sure it will turn around. Soon he is down $500.

Even if everyone traded the same 'patterns' there will still be losers because of the psychology involved. You also have traders looking at different timeframes. If I'm trading off of a 5 minute chart and sell for 20% profit and the guy that buys my shares is trading off of a 60 minute chart both can make money. That guy trading a 5 minute chart may have got in at a perfect time but it was too early for the guy on the 60 minute chart but it was a perfect setup on the 60 when the 5 minute guy is selling. Both can be perfect setups but on different timeframes.

It's obvious you don't believe in day trading but I have been around it for awhile and I see people making more money in a week than I make in a year. I have personally seen probably 10 people that have got good enough at it to quit their jobs. Whether you agree or not it does happen.

Today I made 13.2% on DIS calls in my small account and 20.6% on DIS calls in my bigger account. I also traded a few other ones for smaller wins and sold a few losers too but in the end both accounts were green again today.
 
We keep some of our stuff in stocks with fairly steady prices and good dividends and then dividend re-invest them all. The tax hit isn't to harsh since its just on the quarterly dividend earnings vs selling the stock. Being able to purchase partial shares is great. And seeing how many shares there are after 10 or more years is pretty cool. Its definitely the slow and steady thing though.

Been looking into REIT's lately, some paying some pretty nice dividends.

Favorite Covid stock was Cintas (CTAS). Not that it made us 50x our money. But one day about 3wks after everything shut down I was sick of eating at home and made a run to the Jimmy John's. There was only like 8 cars out there. One them was the Cintas truck. I was like duh...they own their own fleet. They clean uniforms and some side stuff doing fire extinguishers, etc. Looked at their numbers and said what the heck. Might sell in a few months but seem to be holding on pretty good this far into Covid.
 
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