Trading with Focus – Have a nice Apocalypse!
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“Scientists are saying the future is going to be far more futuristic than they originally predicted.”
Up until the Olsen non-twin came along as Wanda (in Marvel’s Avengers), Mandy Moore was my favourite movie-star-make-believe girlfriend. And around the same time as Mandy Moore was playing Mandy Moore in Entourage she was also in the follow-up movie to Donnie Darko, called Southland Tales.
I loved Donnie Darko, and I loved Southland Tales.
It had it all. The cast was immaculate; in addition to Mandy was The Rock, Stiffler, Buffy, Avon Barksdale, Jon Lovitz, Timbersnake, Kathy Griffin, Leslie Knope and a whole lot more.
It was a commentary on the military-industrial news-tainment complex and the decline of society brought about by social media and corrupt government agencies in the near future, with a combination of time travel and renewable wave energy combining to bring about the end of the world.
It had an amazing cast and characters, some fantastic dialogue, a writer/director with a cult-following, creative cinematography and no doubt the studio had high hopes for its profitability.
But it bombed.
I think I may have been the only person in the world that thought it was amazing. My mates won’t even consider watching it and I’ll admit, it requires some effort. I don’t know why, or what they could have done differently, but if, in 2006, you’d invested in Southland Tales and not The Departed or Borat, you would be very disappointed.
Alright, this is a chart of GME. We don’t have US data in our platform yet so this image is thanks to our good friends at TradingView, who have a very high-quality technical charting package for the purists (but don’t have $5/0.02% brokerage and charge a similar amount per month to get live pricing).
This should have ‘gone to the moon and beyond’ and they were all expecting it to at least double again, and there was every reason for it (every reason except fundamentals). But instead, it went up and then back down again.
Well, probably because the facts changed and it was cooked as people raced to get out. Maybe brokerage houses had to limit buying on it because it breached their internal risk controls, or maybe the evil hedge funds and SEC got together to screw small investors or whatever.
It doesn’t change the fact that a lot of unsavvy people entered this stock expecting there would be a big payoff, even at $482 a share, and they lost money. Lots of it. And reading reddit even now, it would appear that those people still have the faith and they’re still going on about “excess short-positions” and “squeezes” and “diamond hands”. Amongst the serious depression, that is…
Maybe I’m wrong, but I thought the whole point of trading was to make money, not to join some sort of political movement that ends up funding the thing you are fighting against.
I go on a lot about technical indicators and fundamentals in this column (mainly because we have technical indicators and fundamentals all built into our live-pricing platform for traders). But sometimes you have to just accept that no matter what you thought the future was going to look like, no matter how many times your old Aunt Irena read the tea leaves correctly in the past, at some point you are going to find out that the stock you invested in is just not going to play out the way you expected it would.
If you’re not already a client of ours you are probably trading on a click-to-refresh platform, where you get a snapshot of the market, then you have to refresh your webpage for the latest data. You may even be trading on something that is a bit cheaper by offering you delayed ‘click to refresh’ price data (maybe it offers the live price when you open a trading ticket, or maybe it even just shows you the Chi-X price, which is correct about 80% of the time on the Top 200 ASX shares).
But you’re reading Stockhead right now for the fresh content, and you probably have the latest articles sent to your inbox. So why would you accept delayed prices, or to have to click to refresh every time and wait for the webpage to load?
And why would you accept ‘correct about 80% of the time on 10% of the market’ if you are trading the sort of stocks that are talked about on Stockhead? The market is tough enough already!
It is widely believed that IRESSPro is the best trading platform in Australia, which is why the brokers all use it. But it’s almost $1000 a month. The other problem is that it needs a significantly better computer than the one you have, and almost certainly your laptop would fry. Forget mobile!
Marketech Focus is $45 a month, and does all the work in the cloud. So we can even put everything you have on your PC version onto your mobile phone, even sharing your settings between your different devices. So you set up a chart on a particular stock you are watching on your PC, then duck out for a coffee, and when you open up the app there is the stock you are watching all loaded up and ready to go!
Getting back to that GME trade, if you have a look at the volatility there was a day when the stock traded as high as $482 and as low as $113. One of the most traded and most talked about stocks and you could have been down 76% in one day just because your timing was bad.
I haven’t got the intra-day chart on that day but I’ll bet a lot of money would have been lost just waiting for a website to load, or worse, waiting for the current price to come through to you 20 minutes later.
Now we don’t have international trading yet, and we’re not really in a rush. Personally I’ve never felt short of an opportunity to trade something with the 3000-odd shares on the ASX, so feeling compelled to buy something I know nothing about like GME or crypto feels more like gambling than trading or investing. If you can’t find something worth investing in on the ASX we have big problems as a country!
There are very few traders that don’t have a sneaky look at chatrooms. But if you really want to know if smart money or dumb money is holding a share you are interested in, then have a look at the number and quality of posts on the Facebook tip sheets, or the biggest chatroom for ASX stocks (whose name I refuse to say here).
There’s an almost zero chance that the ‘most talked about’ company is an opportunity to make a good safe earn – it’s probably run hard already. Worse, a retail trader or group of retail traders can not possibly support a share price for anything more than a short period, as eventually its value will be determined by large or institutional money.
And if it starts to fall, the retail trader is likely to panic more than a major shareholder, so the volatility can be brutal. Like GME, or that 96c to 30c sell-off in Brainchip in September. Will GME rise again, a little bit, somewhere down the track, like BRN has, sort of? Who knows… flip that coin!
Most fundamental information, by definition, is backwards looking. For example, you can only work out a price-to-earnings ratio by calculating the profit that they have already previously made. Not what they are going to make, in the future… if they even make profit that is!
Technical patterns are also backward looking, with a twist of assumptions and a large swag of hope thrown in. Breakouts can fail, stocks can sail through support. When using technicals, you’re hoping that the past performance is some sort of indication of the future. Sometimes it is, but ‘sometimes’ can be costly.
And you’re assuming that the investors of the past are still acting the same in this market, where at least a third of retail investors have only started trading in the last 12 months.
So then we try to get a better read on the future through ‘independent research’, and hope that some guy working for a large firm is somehow a better ‘reader of tea-leaves’, and hope that they are not just trying to pump up the price of a company that pays them. Or media articles… ahem.
Well, let’s assume you’ve already become a client of Marketech and have access to live streaming pricing, not ‘pricing from the past’. And you’ve read all the chatrooms and realised that they are often a great reverse-indicator.
You’ve done your fundamental comparisons between companies and sectors, you’ve learned about technical patterns, you’ve read the research; hell, maybe you’ve even done a site visit, met with management… and your trade still goes south.
What could you have done differently?
No really, I want to know! (For a friend.)
At Marketech our platform is about technology, providing you the tools and technology to trade. We encourage our high-function trading platform to get you live pricing, live charts, live market depth to ensure you have the tools and trading capability at your fingertips, and on your mobile phone or PC.
You trade your own stock on your individual HIN. It is your cash in your own Macquarie account where you keep the competitive interest you earn.
Our subscribers get access to brokerage starting at $5, and then 0.02 per cent for trades over $25k. If you want to trade the market you need immediate access wherever you are and the seamless Marketech mobile app means you are live anywhere anytime.
Go to www.marketech.com.au to set up a free trial – you will be astounded by the simplicity and tools that this technology gives you. No spin, just low-cost trading and the tools that give you advantage over hype.
This article was developed in collaboration with Marketech Stockbroking Pty Ltd (AFSL 486148), a Stockhead advertiser at the time of publishing. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.