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[sharechat] My experience with T.A

From: "nick" <>
Date: Sun, 15 Sep 2002 11:39:50 +1200

     I have been a fundamental investor for many years, and have been a regular contributor to this forum since its inception.  I moved to New Zealand from the U.K in 1990 and invested some money in corporate investments (montana) together with GPG and a few other stocks.  I have been fortunate with those and have seen my portfolio rise from around 10000 to over 100000. All from buy and hold.
   Around a year or two ago i noticed my investment patterns were starting to change, i was holding for shorter times, acting on tips, selling on talk. In short my investing was being adversly affected by spending to much time on the internet hanging around stock forums.
      At around that time the big T.A versus FA debate was raging and although highly sceptical i have to admit i was tempted. In the U.K  i was always fascinated with horse racing systems and did some serious study on the subject in a MENSA special interest group which led to a two year career as a professional gambler (another story).  So being attracted to gambling it was only natural i should have a go at T.A
     Having rather an obsessive personality i read everything i could find, spend hours backtesting, pouring over spreadsheets etc.
  I then decided to use 20% of my savings  20000 and open a trading account.   I opened an online account, managed to score a free copy of metastock and was ready for action.
    In the first six months i tried a number of methods , you name it i tried it, systems based on oversold, momentum, trends etc. The results were mixed but overall i was slightly up. I then settled on a fairly simple system  aimed at taking advantage of short to medium term trends.  It was at around this time (early this year) that the markets were tanking, still i did ok, managing to stay in the few stocks that were holding up and letting my stops take me out of the declining ones. 
   By May i had been using the approach for a year, the results were not too discouraging , my original 20000 had turned into 23000.    Now apparantly 90% of traders lose money in the first year so maybe it wasnt so bad , especially as it was such a bad year for stocks.
     However when i sat down and analysed the the years trading i started to see ominous signs which led me to abandon the experiment.
1. When i added up all the commisions, the price of books , data subscriptions etc it soon became clear to me why there are so many people touting technical analysis.  The allure of easy money atrtracts many who are tempted to trade and there is huge monetry gain to be had by supplying these people with the necessary equipment etc.
2. I could see many Technical "experts" who knew far more than i did who did not make money from trading, but made money telling other people how to trade.  I had a look at the stock and commodity magazine, the magazine for traders, it seemed to consist mainly of advertisments from firms wanting you to spend money on get rich quick software etc.   
   From my old horse racing days i knew to be wary of any field of endeavor where the main source of income is derived from telling other people how to be rich.   If anybody truly has a way to great wealth which  involves competing against others the last thing you would do would be to write a book telling everybody how to do it. Quite simply it removes any edge your system may of had.
3.   ALthough i did not lose any money from my trading it was very time consuming, worse than the time spent however was the difficulty in switching off.   I could not even go for a walk in the countryside without noticing double top formations on the hills. All this and it was only my "fun " money.   From my life as a horse race bettor i know that once you have to rely on profits for income the pressure is 100 times worse.
4. Having to watch a stock constantly also became rather boring, i found myself hanging around the forums all day, constantly  price movements and  having silly arguments with the likes of Gerry (Hi).  I found i was starting to make silly trading decisions due to hanging around these forums too much.   I even bought PTD just because i was spending so much time on the PTD board at ozstock.  I knew it was a dog but couldnt resist the cheap thrill of trading it.
          I knew i was starting to overtrade, i could of stopped that tendency by keeping away from the boards etc and just concentrating on the charts. But then what to do ?   It was all starting to become too much work.
 5. I realised life would be ,much simpler and better balanced if i simply took that 20000 and invested it in shares in the warehouse which is what i have done.  I probably will not even check the chart for a month or so and intend to have a good holiday from stocks, the boards and Gerry!
         On the side of TA i have to say that it is probably possible to make a living from it, however it would need iron will power, 100% focus an ability to be 100% focused and a willingness to make it the central part of life and an ability to keep this up year in year out.  From my experience with horse racing i know this is not how i would want to live my life.
     This probably explains why the beaches  in the west indies are not full of traders looking into their laptops. 
              Trading can be made to look very easy with hindsight, anybody can post a chart and point out how easy it would of been to buy here, sell there and make a profit.  Next time somebody tries to tout trading and tries to sell you something ask yourself why if it is so easy are they not sunning themselves on a tropical paradise somewhere.
                The only books i am likely to be reading on stocks from now on are the good old Buffet books, remind me of the philosophy i was briefly turned away from and am now returning to.    Now there is someone who really did get rich from stocks!!


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