Investment Myths Busted

Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby kennynah » Sat May 15, 2010 9:00 pm

M glad u agree MM:)

so, in essence, if one had already initially planned to Long 3ooo shares, and set a max loss amt, it's quite alright to hit 3 different Long orders.

but not as a after the fact reaction following the 1st 1000 shares order is submitted..

it has to be premeditated.

It could well turn out that the subsequent 2nd n 3rd Long entries are at better prices..

Thus, in short, it has to be pre-planned
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Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby lithium » Sun May 16, 2010 5:57 pm

Kenny ko,
I have been thinking about your averaging down strategy. But i can't figure out how to apply it to my trading plan.
Because the first thing i look at to start a trade is the support price. I find a support price that i think people will stop selling and thinking that the stock will remain strong as long as it does not break this support.
So i don't raise this support up just because i want to bet more money in it. If i raise it, that's mean i will be more likely to get stop out and whipsaw isn't it.
Do you raise your support price from time to time? Based on what rationale you raise it? Or you don't use support price at all?
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Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby kennynah » Sun May 16, 2010 6:17 pm

lithium wrote: I find a support price that i think people will stop selling and thinking that the stock will remain strong as long as it does not break this support.


hi lithium,

great question :!:

firstly, i have a very different view of "buying and selling" transactions in the exchange vis-a-vis your above quote.

i think many have a misconception that at support, players will stop selling and at resistance, they stop buying. this cannot be further away from the truth. for a price to flash on the trading screen, a BUY and SELL transaction MUST occur; ie, a transaction occurs only when a buy and sell order matches. in this sense, at support levels, selling still happens, except that the buying interests outweighs selling interests and that causes prices to stay above support levels. at major resistance levels, the opposite occurs. but at no time does buying or selling stops. if this happens, price will not move, illiquidity sets in and bid/ask spreads widen.

in order words, it is absolute hogwash when news reporters say "there are no sellers/buyers"

now back to the issue of averaging down...

all that i mentioned was that averaging down increases risks and that risks must be controlled via resetting of stop loss exits. it doesn't suggest, in anyway, for traders to readjust technical readings.

hence, if for example, XYZ has a clear support at $9.80 and price has broken down to $9 in heavy volume continuously for a few sessions. no matter how much of an averaging down one undertakes, it will likely end up a losing proposition eventually.
some traders average down only because the initial entry order came slightly into question, perhaps becos of impatience or a technical error in deciphering an entry indicator AND becos the initial entry order size was only a fraction of the intended trade size.

finally, supports and resistances are guideposts... only one of many technical indicators we rely on. we can look at the same chart and spew out very different S/R levels...it is bcos it is subjective that no S/R levels can be trusted totally...and so, S/R breaks from time to time..

hope this clarifies 8-)
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Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby lithium » Sun May 16, 2010 6:51 pm

kennynah wrote:at support levels, selling still happens, except that the buying interests outweighs selling interests and that causes prices to stay above support levels. at major resistance levels, the opposite occurs. but at no time does buying or selling stops.


Sorry my england is not so good :oops: , I mean exactly what you think here.

kennynah wrote:now back to the issue of averaging down...

all that i mentioned was that averaging down increases risks and that risks must be controlled via resetting of stop loss exits. it doesn't suggest, in anyway, for traders to readjust technical readings.

hence, if for example, XYZ has a clear support at $9.80 and price has broken down to $9 in heavy volume continuously for a few sessions. no matter how much of an averaging down one undertakes, it will likely end up a losing proposition eventually.
some traders average down only because the initial entry order came slightly into question, perhaps becos of impatience or a technical error in deciphering an entry indicator AND becos the initial entry order size was only a fraction of the intended trade size.

finally, supports and resistances are guideposts... only one of many technical indicators we rely on. we can look at the same chart and spew out very different S/R levels...it is bcos it is subjective that no S/R levels can be trusted totally...and so, S/R breaks from time to time..

hope this clarifies 8-)


Sorry I'm still not clear :oops:

Since you emphasized that this averaging down should be planned. On the XYZ example, where does the trader see the support price at? $8, $8.9 or $9.13?
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Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby kennynah » Sun May 16, 2010 7:22 pm

clearly, my england lagi no good....hahaha... :?

to make this as crisp as i can...

adopting an acceptable averaging down approach, has nothing to do with technical readings... it has everything relating to controlling risks...

so, if i see a support level at $9.80 and I went Long at this price...and subsequently, if price drops to $9.60, it will be my judgment call if this support break is for real or a fake. that will determine if i want to cut loss earlier or proceed with the planned average down and reset my stop loss accordingly.
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Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby lithium » Sun May 16, 2010 7:38 pm

HAHA Kenny ko,

I think it's not our England, it's our trading concepts that are different, that's why we cannot understand each other. :lol:

If initially I see the support at $9.8, I will not pre-plan to average down below it. I will decide to cut if I think the support breaking is for real, and hold if it's a possible fake but most of the time I cut first then I see if I want to buy back when it's a fake.

Because I think it's very risky to buy when support is broken.
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Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby millionairemind » Fri Jun 25, 2010 1:24 pm

Debunking Five Popular Myths
Submitted by Tyler Durden on 06/24/2010 16:40 -0500

Global Economy Housing Market recovery Sovereign Debt

Here are the top five myths the bullish pundits would love you to swallow without question:

“European sovereign debt auctions are going well”
“The S&P 500 is trading at an 11.5x price/earnings multiple on 2011 earnings, which is extremely cheap”
“The Chinese RMB revaluation is a very important marker in the rebalancing of the global economy”
“The low return on cash will continue to drive money into risky assets”
“A return to more affordable housing will result in a housing market recovery”

http://www.zerohedge.com/sites/default/ ... ptions.pdf
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: Investment Myths Busted 01 (Jul 08 - Jul 11)

Postby winston » Sat Mar 19, 2011 1:50 pm

5 Investment Myths that Can Cost You

There are many investment myths that may be hurting your financial security. Among them are beliefs that active mutual fund managers have investing skill that permits them to beat the market and that stock picking and market timing are viable investment strategies.

They are viable, but only for those who make a living selling them. Here are five common investment myths. You can save a lot of money by being aware of them.


1. Market turmoil is a good reason to sell stock and wait until things settle down. Investors who stay in the market through tumultuous periods significantly outperform those who jump in and out.

Over time, the stock market has steadily increased in value. We have had many critical events that have roiled the market, including Pearl Harbor, the Cuban missile crisis, the assassination of President Kennedy, and the terrorist attacks on 9/11.

The DJIA closed at 112.52 the first trading session after Japan attacked Pearl Harbor. It closed at 12,044 on March 11, 2011. Investors who don't panic are the big winners.


2. Government intervention means lower market returns. Actually, the opposite is true. For the 39-year period from Jan. 1, 1970 to Dec. 31, 2008, Socialist or Socialist-leaning countries like the United Kingdom, Canada, Sweden, France, Norway, Belgium, and Denmark had higher stock market returns than the U.S.


3. Gold is always a good buy. There have been periods of time when gold was a great investment and as many times when it was a dud. For the 48-year period from 1945 to 1992, the annualized return on gold was 4.9 percent. The annualized return on U.S. Treasury Bills during the same period was 4.8 percent.

The problem is that gold investors took significantly more risk than Treasury Bill investors to achieve almost the same returns.


4. The S&P 500 has the best returns for long term stock investors. The S&P 500 may consist of the biggest and best stocks in the U.S., but don't confuse that with high returns.

U.S. large value stocks and U.S. small value stocks both outperformed the S&P 500 for the 83-year period from 1928 to 2010.


5. The real money is made in private equity deals. Many investors believe they are unfairly disadvantaged because they don't have access to the lucrative private equity deals offered to the big boys. These deals include venture capital and buyouts.

The data tells a much different story. For the 20-year period from January 1986 to December 2005, the real money was made by investors in emerging markets.

Their annualized return was a whopping 21 percent. Investors in all private equity deals had annualized returns of only 14.2 percent.

I don't understand why there is so much misinformation about investing. One theory is that the securities industry has an economic interest in encouraging trading, which can be fueled by instilling fear and uncertainty.

All investors would be far better served recognizing that what is currently passing for investing is simply part of the process of transferring your wealth to those who are helping you invest.

http://sg.finance.yahoo.com/news/5-Inve ... 8.html?x=0
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Investment Strategies 02 (Jun 10 - Jun 11)

Postby winston » Tue Apr 26, 2011 9:26 pm

10 Bad Investment Ideas You Need to Rethink

The following are 10 things singled out by some financial experts as among the worst advice they've heard clients take seriously:

1. Real estate is always a good investment.
2. Pay down your debt before you start saving
3. Use Home equity to pay down debt.
4. Index (or actively managed) funds are the only way to go.
5. You are doomed, doomed I tell ya.
6. You can do it yourself.
7. 'My accountant says to ...'
8. You can time the market.
9. Investing is always for the long term.
10. You are too young to worry about the future.

http://www.thestreet.com/story/11093196 ... L_btb_html
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Investment Myths Busted 01 (Jul 08 - Jun 12)

Postby winston » Tue Nov 01, 2011 7:18 am

10 Market Myths Debunked by Brett Arends

This market isn't just pounding your portfolio. It's also smashing some of the biggest myths that investors have lived on for a generation.

http://sg.finance.yahoo.com/news/10-Mar ... 7.html?x=0
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