>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!!
However, in discussing the problems with applying TA in real life you said
:-
>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.
Ironically, I believe you, better than most of the people who write books
about Buffett, have summarised (while discussing TA!) the reasons he has been so
successful, for so long. Iron will power. 100% focus. A
willingness to make it the central part of life. An ability to keep this
up year in year out.
I don't think Buffett style "buy and hold" is the antidote to an
unsuccessful foray into TA, just like TA wasn't the antidote to massive losses
from people who "bought and held" overvalued technology shares and refused to
sell them into what was quite obviously a massive bubble.
I suspect the key reasons Buffett has been successful, apart from obvious
intelligence, and no doubt some good luck along the way, are as you have stated
above - 100% focus, a willingness to make it a central part of life, and the
ability to keep it up year in and year out. To that I would add, a genuine
love for the process of making money, running businesses and observing the
successes and mistakes of others.
It isn't about choosing TA or "buy and hold", buying the t-shirt and
expecting the same results as those who excel at either pursuit. Let's say
I want to get better at golf. I watch videos of Tiger Woods, and work out
seven things that he does. I change my name to something exotic in worship
of my hero (Lion Tree?) and, every couple of months, practice the seven things I
have learnt from Tiger Woods. What would the result be?
I might get a little bit better, having learnt a couple basics (I really
suck at golf) but I'd never be the next Tiger Woods. Why? Because
while I'm hacking around, happy that i've learnt "the system", the *real* Tiger
Woods is probably at a driving range, practising the same things he has done ten
million times before. When I get bored after 20 minutes, he'll still be
there. Probably all day. Just like Buffett doesn't need any more
money, Woods doesn't need to get better at golf. But I bet he doesn't
think that.
Thinking that there is *any* sort of investment system that will give you
the long term results achieved by the very best is like thinking there is a
golf, or tennis, or rugby "system" that will give you the results achieved by
the very best. If you analyse very successful business people, or
sportspeople, you will always find a "system", something you can do in 20
minutes to feel better about yourself. But, in truth, are these people
successful because of a system, or is their unique system really just a product
of their 100% focus, persistence and dedication? The end result of how
they do things? Can you make their unique system work, for you, without
also adopting their 100% focus, persistence and dedication? I don't think
so.
I can fully understand why somebody wouldn't want to be 100% focussed on
investing, wouldn't want it to be a central part of their life, and wouldn't
want to maintain this intensity until the day they die. However, it isn't
realistic to expect the results achieved by those who *live* the above, even if
you follow their "system" for the 20 minutes a week you devote to the pursuit
that is their 24 hour a day obsession.
If you do not have a natural passion for investing, do not wish to have it
on your mind constantly, do not want to be dedicated, indefinitely, to educate
yourself futher and strive higher, just for the heck of it, is the answer really
to find your next system?(sounds like Buffett is back in vogue with you). If you
have other things you enjoy more than business and investments, why not simply
spend your time on them, and leave your money in, say, index funds or
something?
Cheers,
Phil
----- Original Message -----
Sent: Sunday, September 15, 2002 11:39
AM
Subject: [sharechat] My experience with
T.A
WHY I
WONT BE AROUND MUCH ON THE FORUMS FROM NOW ON
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!!
Nick
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