Any room on this forum for a thread on charts and technical analysis

[Vae Victis]

Love this thread, strong work Vae Victis. Do you use screeners to identify stocks that are consolidating? You also seem to trade large caps only. Most people that I know use this strategy will trade any stock that fits the pattern, was wondering if you had a rule for a certain market cap

I won't trade micro caps because they are just too volatile, but no, I don't target only mega caps. A few on my watchlist right now are mid and small caps.

My biggest risk is an overnight gap down, and by sticking with "respectable" names I am somewhat mitigating that risk - hence the no microcap rule. Also why I will rarely hold into earnings overnight unless I am well in profit.

I do use screeners with filters for rising 50 DMA, price > 50 DMA and relative strength >80 (relative strength against S&P500, not RSI relative strength indicator). Then I quickly flip through the returned charts to look for horizontal consolidations. As I get more experience, they pop out very quickly so I can probably spend a few seconds or less on each chart before I can dismiss it.

[Nysoz]

Second, long term capital gains are not 0%, they are 20%. People seem to lose sight of this. So it isn't the difference between 38% taxes and 0%, its 38% v 20% when you eventually sell.

Out of curiosity, what is your method of trading?

Ltcg only comes into play if you sell in the future. I don’t ever plan on selling unless something drastically changes. Otherwise I generate cash flow by selling options or borrowing on margin if I need to.

Essentially my goal is to make my portfolio 50% TSLA, 50% qqq/tqqq and sell covered strangles at varying deltas using margin/buying power. I use similar TA to choose my strikes and deltas but also underlying news/macro as well.

[Vae Victis]

Ltcg only comes into play if you sell in the future. I don’t ever plan on selling unless something drastically changes. Otherwise I generate cash flow by selling options or borrowing on margin if I need to.

Essentially my goal is to make my portfolio 50% TSLA, 50% qqq/tqqq and sell covered strangles at varying deltas using margin/buying power. I use similar TA to choose my strikes and deltas but also underlying news/macro as well.

Interesting. It seems like you've developed a very specific strategy that is working for you.

Do you mean to say that it is your intent to donate your portfolio to kids at death? Is that what you mean by never selling?

[nephron]

Anybody can post past performance successes. I would need to want to see real time successes before I believed anything and even then I would probably attribute it to luck. I agree with the wci/bogleheads philosophy. If there was some strategy for beating the market/stock picking, you would think the investment managers working on it 80 hrs per week with their large staff of research analysts, fancy computer programs, and research on the ground would be onto it before a physician doing it part time figured it out. They spend billions of dollars in finance industry trying to pick winning investments and most can't even beat what the indices do. Pointing out previous stock picks that did well is akin to looking to an individual physician touting some new treatment for covid. If it were that great, someone else probably would have noticed it as well.

[Vae Victis]

Anybody can post past performance successes. I would need to want to see real time successes before I believed anything and even then I would probably attribute it to luck. I agree with the wci/bogleheads philosophy. If there was some strategy for beating the market/stock picking, you would think the investment managers working on it 80 hrs per week with their large staff of research analysts, fancy computer programs, and research on the ground would be onto it before a physician doing it part time figured it out. They spend billions of dollars in finance industry trying to pick winning investments and most can't even beat what the indices do. Pointing out previous stock picks that did well is akin to looking to an individual physician touting some new treatment for covid. If it were that great, someone else probably would have noticed it as well.

Yes, it does seem like the odds would be stacked against the individual, doesn't it. One thing I would point out, and I don't think this point should be taken lightly, is that fund managers at big firms are handcuffed in some pretty important ways compared to the individual. First, they are very limited in WHAT they can invest in. Second, they are very constrained in terms of HOW they should invest; fund managers can't be sitting in cash, they must always be majority invested, irrespective of market conditions. Third, they generally have to limit their trades in order to minimize churn, or at least that is my understanding.

So, as an individual, you have latitudes and freedoms that a fund manager does not, such as being able to completely sit out a market correction on the sidelines.

Anyway, it wasn't my purpose to "convince" anybody of anything, simply wanting to connect with people who have similar thoughts and possibly learn as we share charts. If buy and hold works for you and you are comfortable with it, then you've already struck gold and congrats!

[Nysoz]

Interesting. It seems like you've developed a very specific strategy that is working for you.

Do you mean to say that it is your intent to donate your portfolio to kids at death? Is that what you mean by never selling?

I don’t have any kids yet, but yes my family will get everything at my death at a step up basis unless something changes. And also DAF once appropriate.

[Tim]

You are correct that I underperformed in 2021, but again this was my first year of active trading; I give myself some leeway for a learning curve. If you read on some of the greatest traders who have consistent success, most lost or completely blew up their accounts early on. So, while I agree that the underperformance was annoying, I personally don't label a 10% return a "minor catastrophe". Particularly since my previous allocation would have been something like 65/35 stocks/bonds and so my performance would have been less than the 25% returned by the S&P.

As for the checking too much, etc, I really didn't do that at all for many years. I would occasional check how the market was doing on CNBC or something, but would just shrug and go on with my life. I was very content.... and then the COVID crash happened. I don't know how it is for others, but some of my most profound life lessons and change catalyzing events have arisen from painful experiences. Watching my account that I had built up for years plummet by 30% or whatever it was certainly qualifies as that. The concept of holding through huge crashes just didn't make sense to me; it didn't hold water in my mind. It's not that I sold the bottom or anything like that. I held on, even put more capital in on the way down, and held on the way back up until I was back above where I was before the crash... but then I got out. It was at that point that I started trading, much as many people have done, to initially mixed results (to put it kindly). Put bluntly, I had no idea what I was doing. But I started reading, filtering out the noise, and trading. I got better. Now, I am learning, reading, watching charts and continuing to refine my technique, and my returns continue to improve.

I pride myself on being something of a pragmatist... if I am unable to generate returns that I am comfortable with, then I will re-assess my strategy or abandon it all together. Right now the trajectory of my returns is up and so I am not going to stop pursuing it. Many times in my life I have been told that I can't do something for this reason or that. A few times, the naysayers were right... most of the time, I was better off believing in myself. One thing I know for certain about myself is that I won't be content to take someone else's word for it.

You have a misunderstanding of risk tolerance as it relates to investing.
Consider the risk before you even think about returns.
Your risk capacity and how much you can tolerate. Read up on how to determine your personal risk tolerance. You are overly optimistic.
Proof: Your asset allocation was over your head during a correction. Behavior finance reaction. Close to panic and one extremely short drop you jumped ship.
Proof: Your trading plan is much higher risk and again you are overly optimistic. Considering the market performance after the drop, you would be hard pressed to find a trader that LOST money. The market has been through the roof! Is it skill or luck? You tell me. Would your trades worked out better if you held them?

You need a 30 year strategy. Feel free to use a piece of your portfolio. Once you get a sizable portfolio you will run out of room for sufficient size trades.

[Vae Victis]

You have a misunderstanding of risk tolerance as it relates to investing.
Consider the risk before you even think about returns.
Your risk capacity and how much you can tolerate. Read up on how to determine your personal risk tolerance. You are overly optimistic.
Proof: Your asset allocation was over your head during a correction. Behavior finance reaction. Close to panic and one extremely short drop you jumped ship.
Proof: Your trading plan is much higher risk and again you are overly optimistic. Considering the market performance after the drop, you would be hard pressed to find a trader that LOST money. The market has been through the roof! Is it skill or luck? You tell me. Would your trades worked out better if you held them?

You need a 30 year strategy. Feel free to use a piece of your portfolio. Once you get a sizable portfolio you will run out of room for sufficient size trades.

There is a whole lot of conjecture here presented as fact. Suffice to say, I don't agree with most any of it.

A few points I will address. I did not "panic" during the COVID crash, I held and increased my allocation to stocks. When I was back in profit again, at my pre-COVID level, I reassessed my investment strategy.

I have to take exception to the idea that I don't understand risk or know what my risk tolerance is. I am intolerant to the market risk associated with holding and thus I know exactly how much of my portfolio is at risk in the market at any given time, down to the dollar. I would say that I have tailored my market exposure to exactly the amount of risk I am comfortable with. It may not match at all what your strategy or risk tolerance is, but does that automatically make it wrong?

Finally, you would be surprised how many people lost money trading this past 18 months or so. Think of the people who got heavy into tech names, GME/AMC reddit'ers, gold/silver miners, etc after they ran up and subsequently corrected.

[Brains428]

I don't think anyone who went heavy into legacy tech lost money- GOOG, AMZN, FB, NVDA, AAPL, etc etc (I don't include TSLA, because pre-pandemic it was sort of a coin flip). If you went risky pandemic style tech- ZM, DASH, China- you probably lost money.

FWIW- I think learning how to trade options is a decent thing to learn to hedge a portfolio. It may also be necessary if we end up in a Japan style market for the next 30 years.

Probably want to look into trader tax status and mark to market accounting if you're doing it enough.

[Tim]

There is a whole lot of conjecture here presented as fact. Suffice to say, I don't agree with most any of it.

A few points I will address. I did not "panic" during the COVID crash, I held and increased my allocation to stocks. When I was back in profit again, at my pre-COVID level, I reassessed my investment strategy.

I have to take exception to the idea that I don't understand risk or know what my risk tolerance is. I am intolerant to the market risk associated with holding and thus I know exactly how much of my portfolio is at risk in the market at any given time, down to the dollar. I would say that I have tailored my market exposure to exactly the amount of risk I am comfortable with. It may not match at all what your strategy or risk tolerance is, but does that automatically make it wrong?

Finally, you would be surprised how many people lost money trading this past 18 months or so. Think of the people who got heavy into tech names, GME/AMC reddit'ers, gold/silver miners, etc after they ran up and subsequently corrected.

Technical Analysis is a discipline: get educated.

https://www.wallstreetmojo.com/cft-vs-cmt/

Train yourself:

http://traderfeed.blogspot.com/?m=1

Charts are visual presentation of data.. Prop trading don’t rely on a visual presentation. They program the math. Servers located at the exchanges are programmed. Scan the data and place trades according to whatever the criteria is.
Understand Value at Risk:

https://www.investopedia.com/articles/04/092904.asp

This is different than your personal risk.

https://www.investopedia.com/articles/04/092904.asp

It is math.

The goal is to make money on pricing based on market movements and probability.

Ray Dalit (Bridgewater Capital) was one of the first. Premise: Decide the trading strategy and program it. Exploiting whatever market inefficiency is found or factors. Ray is a “weird” guy, but the theory was sound. Banks were making tons, until there prop trading desks were shut down.

The point is, technical trading is really a rules based mathematical system process. Much competition and some extremely brilliant people work at it full time. As a retail investor, what is your edge? It all depends on the rules you use, access to data and of course your results.
The ticker symbol means absolutely zero.
Rate of positive results in number of trades and the gains (losses) in a time period. Judge the process. Not sure if % gain is the sole criteria.
A nickel per share is great if the volume is consistently positive.

I just don’t see a part time effort consistently sustaining this approach based on a rules based approach reacting to price movements (and whatever indicators).

“Finally, you would be surprised how many people lost money trading this past 18 months or so. Think of the people who got heavy into tech names, GME/AMC reddit'ers, gold/silver miners, etc after they ran up and subsequently corrected.”
Amateurs. But some big guys played the game too.

[CordMcNally]

Maybe I missed it (feel free to refer me back if you’ve already said it) but how much of your portfolio are you doing this with? What’s the rest of your portfolio in if it’s not 100%? What makes you decide how much of your available cash to use?

[Hatton]

If I had bought BRK.B and had a profit I would hold for at least a LTCG and likely forever. IMHO really big gains are achieved by holding good stuff for the long haul. I have owned Apple since 2008 and QQQ even longer for example.

[The White Coat Investor]

"The dumbest reason in the world to buy a stock is because it is going up." -- Warren Buffett

Burton Malkiel did an experiment in which he flipped a coin to determine whether a fictitious stock price went up or down. One of his charts showed a classic technical analysis pattern indicating that the stock was due to surge. When he showed that chart to a stock analyst, the analyst said, "What stock is this? We should buy it immediately."

https://www.theonion.com/blue-line-j...ent-1819565647

https://www.followingthetrend.com/20...professionals/

and my favorite quote:

"Technical Analysis is just astrology for men in their 30s" -wsbmod

If you want to do market timing or technical analysis, I would suggest a very simple trend following strategy (in a tax-protected account).

https://www.whitecoatinvestor.com/be...me-the-market/

[xraygoggles]

There have been other posters in the past who have made claims of being a savvy investor/trader, without any proof. If you post your trades/charts in real-time, then it would be an interesting experiment.

[CordMcNally]

There have been other posters in the past who have made claims of being a savvy investor/trader, without any proof.

It was more than that. One such person basically put themselves in the same class as Warren Buffett.