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I Had to Develop an iPhone App to Understand Swing Trading

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Re: I Had to Develop an iPhone App to Understand Swing Trading

#21

Post by emcnicho »

The chances of the stock moving from {$25 - $24 = 4.00%decrease} is much more likely than a move from {$25 - $27.5 = 10% increase}-plain intuition. To be brutally honest, it will most likely hit both of those price targets assuming the stock has been trading between that range and they are within one standard deviation of the historical price records.

The most important part of being a trader is TIMING and the second most important part is being able to make decisions based off of analysis of technical parameters and NOT based off of your emotions.

This type of analysis tells me that you are not comfortable emotionally with losing more than $50 on one trade which I see as a sign that you should be looking into more traditional investment practices.

I would suggest you analyze the opportunity cost for the amount of research, training, and actual trading it will take before you become profitable. Don't forget about taxes!

As a seasoned trader, I can assure you this is the type of analysis that will result in lost money and unimaginable negative emotions. It is too simplistic and lacks both fundamental theory and actual technical analysis.

Re: I Had to Develop an iPhone App to Understand Swing Trading

#22

Post by jeffreyrogers »

Hermel wrote: post #14
jeffreyrogers wrote: post #7

Earlier quoted context omitted.

> People literally spend all their time doing this, if there was free money to be made someone would be making it:) I agree with everything you said above, including this. I want to add though, that there is effectively free money in the stock market. For example, just by buying a low-fee index fund (e.g. something from Vanguard), you're almost guaranteed to do better than most investors and probably better than near…

Note that you are somehow arguing in favor and against the efficient market hypothesis at the same time. By arguing for ETFs, you are implicitely assuming that there is not much to gain by doing your own research because markets are efficient and have already priced in everything. By arguing that most people underperform the market, you are implicitely assuming that it is easy to underperform the market - something t…

No, I'm arguing that the market is efficient most of the time and that most people don't have the time and inclination to find underpriced securities.

Also, most people underperform the market because of fees. If you invest in a mutual fund with a 2% management fee, then the fund needs to outperform the index by 2% to breakeven. It needs to do significantly better than that if you're invested in a hedge fund with a typical 2-and-20 fee.

Edit: in particular, small-cap stocks tend to be inefficiently priced because it doesn't make sense for institutional investors to research them heavily since they cannot allocate a large percentage of funds to them without: 1) significantly disturbing the market price 2) in some cases owning a significant percentage of shares (5% or 10% I think) that requires filing with the SEC.

Re: I Had to Develop an iPhone App to Understand Swing Trading

#23

Post by JTon »

dirtyaura wrote: post #12

A tangential question: It seems that a lot of smart people believe in technical analysis, but to me it sounds like telling the future from tea leaves. Does it really work or are successes just part of the standard randomness of stock investing?

The most compelling argument I've heard is that technical analysis is a self-fulfilling prophecy. I.e. If a large enough segment of players believe the accuracy of a certain indicator, and they all take positions reflecting this belief, and the sum of actions can move the market. Personally I've grown fond of behavioral analysis (I suppose that's a subsection of technical analysis), in the form of the candle stick technique. I think it works more often than not

Re: I Had to Develop an iPhone App to Understand Swing Trading

#24

Post by phkahler »

>> I have the potential to make a higher 2R profit, with the same amount of risk as before, because I’m simply buying more shares.

What he's really doing here is demanding a much larger percentage gain in the stock price to get that higher return. It has nothing to do with the number of shares.

Re: I Had to Develop an iPhone App to Understand Swing Trading

#25

Post by at-fates-hands »

jeffreyrogers wrote: post #7
chollida1 wrote: post #2

Good for this guy for making this app. However, this makes me worried for him... > There’s a 50% chance that I can lose $50.00 in a few days, but there’s also a 50% chance that I can make $100.00 or more in a few days. Why 50% chance? This number will be different for every person depending on his profit & loss history. Ummm..... This doesn't seem true to me. What if the stock just stays flat? That's more often than…

> People literally spend all their time doing this, if there was free money to be made someone would be making it:) I agree with everything you said above, including this. I want to add though, that there is effectively free money in the stock market. For example, just by buying a low-fee index fund (e.g. something from Vanguard), you're almost guaranteed to do better than most investors and probably better than near…

>>> The idea of rapidly creating an enormous amount of money for very little effort in a very short amount of time is much more appealing than making 12+% per year indefinitely, even though this strategy is much more likely to net you a higher return in the long-run.

Just as a side note, I was watching the excellent ESPN series "30 for 30" and they were describing why so many athletes have gone bankrupt so quickly after retiring, even though they supposedly made millions when they were playing.

Your quote is the key. They had several financial planners and they said the same thing, "It's not cool for these guys to their money in an index fund and watch it grow over 20 years. They want bars, dance clubs, music studios, and other frivolous stuff. THAT'S why they broke."

The stories the athletes tell are pretty jaw dropping by the way: http://www.youtube.com/watch?v=TSOAwNSv8EM

Re: I Had to Develop an iPhone App to Understand Swing Trading

#27

Post by smrtinsert »

jeffreyrogers wrote: post #7
chollida1 wrote: post #2

Good for this guy for making this app. However, this makes me worried for him... > There’s a 50% chance that I can lose $50.00 in a few days, but there’s also a 50% chance that I can make $100.00 or more in a few days. Why 50% chance? This number will be different for every person depending on his profit & loss history. Ummm..... This doesn't seem true to me. What if the stock just stays flat? That's more often than…

> People literally spend all their time doing this, if there was free money to be made someone would be making it:) I agree with everything you said above, including this. I want to add though, that there is effectively free money in the stock market. For example, just by buying a low-fee index fund (e.g. something from Vanguard), you're almost guaranteed to do better than most investors and probably better than near…

12%! I would love to join this fantasy world of yours :)

Re: I Had to Develop an iPhone App to Understand Swing Trading

#29

Post by wcgortel »

dirtyaura wrote: post #12

A tangential question: It seems that a lot of smart people believe in technical analysis, but to me it sounds like telling the future from tea leaves. Does it really work or are successes just part of the standard randomness of stock investing?

It really depends how you use it. "Technical analysis" refers to techniques that are as disparate as "cooking". There is evidence of some technical stuff being quite valid--the relevance of momentum to returns, for example--but there are also plenty of people who misuse it.

My own view is that it's a window into the pricing process and adds depth to the practice of reading the market that many analysts go through. Ignoring technical analysis when looking through charts is kind of like watching TV in standard definition instead of HD. Even though it's kind of still the same thing, I enjoy it.

Re: I Had to Develop an iPhone App to Understand Swing Trading

#30

Post by joshu »

chollida1 wrote: post #16
dirtyaura wrote: post #12

A tangential question: It seems that a lot of smart people believe in technical analysis, but to me it sounds like telling the future from tea leaves. Does it really work or are successes just part of the standard randomness of stock investing?

This is a good question, and I don't think you'll get a definitive answer. If by technical analysis do you mean watch for patterns to appear, then yes it works. There are patterns all over the place. Renaissance Technologies is famous for its pattern matching AI. They hired 2 key employees out of IBM many years ago that layed the base for their technology and the rest has been money making history. See: http://www.bu…

Pov would be an execution strategy. And exploiting it seems almost by definition not technical analysis.

The rest seems accurate.

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