3SOF

Hi

I appreciate your long/short term debate, and the pros and cons of having two portfolios, responding to the needs of both, long and short term traders (or should I say, well capitalized and under capitalized traders?)

I'm sure I'll do a pretty good job on both. No worries about my health, I'm just 30 and I work hard, what's wrong with that?

I have nothing to change to what I said previously about long and short term trading. Short term traders don't go anywhere. The money is made in the big swing and by being an investor in top quality companies, not by buying and selling many times.

I'll do my best to find those top quality companies to invest for the long term on the Main Portfolio. And I'll hold for as long as it is appropriate to do so, and I'll sell when I have to.

But, www.3stocksonfire.org is, as its name says, about 3 stocks on fire. People don't expect to come here and face a fundamentally based long term portfolio (at least not just that). They expect action and quick profits. I'll give them that (and probably, an overall long term loss too, if I play the short term long enough) - you keep that in mind!, because I'm not willing to deceive anybody on the 3 Stocks on Fire Portfolio. I also want to keep those expectations low.

People drink wine, smoke and do many other things that are bad for their health. Yet, companies that sell those items thrive. www.3stocksonfire.org is a socially responsible business for those who want to be responsible and have a cool head , but it also is a bad for health, rock and roll stock trading website

I was in no right to change the original spirit of the website.

I hope I'll be able to help satisfying both groups needs, but, overall, I'm just a man playing the stock game the best way I can, and the true lesson and service you get from all this is: you get to learn from my successes and mistakes and you learn very different techniques to approach the market, because I've done it all ! Pick what's best for you from my experience and hopefully earn good money in the process. 

Have a nice weekend, I love this job

I'm thinking, this debate isn't about short term vs long term strategies. This debate is about little capital vs big capital.

It is easy to think long term if your starting capital is, say, $100,000. If you make 30% a year profit, you'll have $19,004,963 in 20 years and $261,999,564 in 30 years.

But, what if your starting capital is just $15,000? With the same 30% a year, you'll have $2,850,744 in 20 years and $39,299,934 in 30 years. Still very respectable. The problem is, with just $15,000 as starting capital, one probably can't be diversified enough because trading costs do matter, so he'll take more risks than with a larger portfolio.

The best of both worlds would be to use short term techniques in a concentrated portfolio to go, from, say $15,000 to $150,000, and then use more long term oriented strategies from that point on. But this change is one of the hardest things to do in my opinion, because, if you're making 100% a year using short term techniques, why not keep it that way? There's plenty of liquidity for that in the market place.

Well, because nobody alive or dead was ever able to do 100% average annual profit for a long period, and if you try it, somewhere down the line you'll lose it all, because you're taking too much risk.

My take is:

- You need $100,000 to invest in a responsible way in the stock market;
- If you don't have $100,000 to start, the best way to achieve it is through hard work in whatever you do for a living;
- You can also try to make it in the stock market, keeping the risks in mind.

The 3 Stocks on Fire Portfolio is for me to show you how I would walk this 3rd way, that is, trying to turn $15,000 into a $100,000 or $150,000 stock trading account. I will probably "die" along the way - that is, I won't be able to do pull it out, but I'll show you how I would do it, if I wanted to do it.

I would buy momentum small cap stocks and sell them for a nice profit or a small loss. I wouldn't try to short term trade large caps for small and inconsistent profits.

I'm sure that, with your participation, it will at least be fun, and above all a new experience for many in the stock market.

Well put, David.  I think you've done a great job at identifying what the real debate here is about and I commend you on your honesty, frankness, and overall attitude toward what you are doing with this website. 

(I'd applaud you if I could, but I think I need a certain number of posts or something...speaking of that, is there a thread which discusses the details of 3stocks member status' - like what the newbie - trader - big trader - speculator progression is and how it's achieved?  Also...is 3SoF still doing T-shirts?!?!)

Derek

Quote from: dnickers on January 20, 2007, 02:39:33 PM
(I'd applaud you if I could, but I think I need a certain number of posts or something...speaking of that, is there a thread which discusses the details of 3stocks member status' - like what the newbie - trader - big trader - speculator progression is and how it's achieved?)

I don't know if these are correct but let me give you some numbers.


1 to 49 posts -------- Newbie
50 to 99 posts --- Trader
100 to 249 posts --- Big Trader
250 to 499 posts --- Heavy Trader
500 posts & above ---- Speculator

Quote from: David Randolph on January 20, 2007, 12:47:54 PM
I was in no right to change the original spirit of the website.

David, you should see it from that point of view.
Instead of saying that you changed the original spirit of the website, I think that what you have done was to complemented it with your expertise at fundamental, and by showing us the strategy at longterm, you have given the chance to all 3stockonfire subscribers to choose the best type of trading for each personal capacity of risk/cash ratio.

Like I said before, with David and Ransburg we have the chance to please Greeks and Trojans - fundamental long term and technical short term players.

I've been round the block a few times in the stock market game, and can tell you from my experiance that what David says about bigger stake, longer term and shorter term is right on the money.

I trade short and longer term, but for discretionary trading I know longer trem produces the better more consistant results. Sure I've ad some fantastic short term winners, but over time those wins get eroded by the losers.

The past 3 years my biggest portfolio contributors have been long term holds where I built up a big position, without these my short term holds would not have paid my bills:

2004 ALTR held on to a core for 2years 80+% gain big position size
2005 GIGM held on to a core for around 7 months 250%+ gain big position size
2006 XING held on to a core for around 6 months 60%+ gain big position size

Short term trading appeals to and satisfys the motivation in people to be 'in' the stock market, you just want to trade, it's exciting and can be emotionally rewarding, but over time you cannot make consistant profits (like over 15 to 20 years, if it is an income for you).

I have been real quite these past few weeks on the boards here because I have been focussing on replacing my short term discretionary trading with a backtested mechanical trading system. The aim being I have a trading system backtested over 10 years that shows me what type of results I am likely to get consistantly. This system is mechanical and I follow it 100% becuse I know its results, its win / loss, its exit cobnditions, its entry conditions are always the same (no human error/emotion deviates it). Also it is not a black box because I have designed it myself (I know the contents of the box).

I am combining this mechanical system with leverage (CFD's or contracts for differerence) using a relatively small account size.

I will share this approach in a lot more detail in the trading systems board in the next few days. I think it will be a very interesting and different approach to what most or any here are currently doing / had exposure to.

In summary then my aim is to be mechanical on short term trades and fundamental / technical but discretionary over the longer term trades.

This thread is interesting and has captured the age old debate that ALL traders face over time.

Quote from: AussieTrader on January 22, 2007, 06:01:59 PM
I've been round the block a few times in the stock market game, and can tell you from my experiance that what David says about bigger stake, longer term and shorter term is right on the money.

I trade short and longer term, but for discretionary trading I know longer trem produces the better more consistant results. Sure I've ad some fantastic short term winners, but over time those wins get eroded by the losers.

The past 3 years my biggest portfolio contributors have been long term holds where I built up a big position, without these my short term holds would not have paid my bills:

2004 ALTR held on to a core for 2years 80+% gain big position size
2005 GIGM held on to a core for around 7 months 250%+ gain big position size
2006 XING held on to a core for around 6 months 60%+ gain big position size

Short term trading appeals to and satisfys the motivation in people to be 'in' the stock market, you just want to trade, it's exciting and can be emotionally rewarding, but over time you cannot make consistant profits (like over 15 to 20 years, if it is an income for you).

I have been real quite these past few weeks on the boards here because I have been focussing on replacing my short term discretionary trading with a backtested mechanical trading system. The aim being I have a trading system backtested over 10 years that shows me what type of results I am likely to get consistantly. This system is mechanical and I follow it 100% becuse I know its results, its win / loss, its exit cobnditions, its entry conditions are always the same (no human error/emotion deviates it). Also it is not a black box because I have designed it myself (I know the contents of the box).

I am combining this mechanical system with leverage (CFD's or contracts for differerence) using a relatively small account size.

I will share this approach in a lot more detail in the trading systems board in the next few days. I think it will be a very interesting and different approach to what most or any here are currently doing / had exposure to.

In summary then my aim is to be mechanical on short term trades and fundamental / technical but discretionary over the longer term trades.

This thread is interesting and has captured the age old debate that ALL traders face over time.

Hi Aussie,

Nice to have the perspective of another experienced trader here on long term being the overall better way to go.  I am curious though how you view STEPS these days, will you still be pursuing those kinds of trades on the side with your mechanical system in place?  I really enjoyed STEPS, hope you keep talking about it.

I know this may be a question that will be difficult to pin down because I am sure it depends on certain varying factors. When seeing these "experts" on tv, they say long term is 5-7 years and short term is 3 years and I know that more than likely refers to mutual funds or annuitiesm due to their fees, etc. However, for the purpose of this discussion, is there a general 3SOF rule of what is considered long term versus short term? Is it going to revolve around changing factors in the technical or fundamental side of the coin from when the first recommendation was made? Overall market decline and the need to become a bearish trader?

I seem to be learning more from the posts on this site than I do reading the books on the same topic. Wonder if anyone of you guys thought of writing a book that shares your expertise and make your talents known? This seems more topical and real. IMHO

Finally, what are STEPS? Never heard of that term before.

Quote from: lancefur on January 24, 2007, 12:45:05 PM
Finally, what are STEPS? Never heard of that term before.

STEPS thread by Aussietrader
http://www.3stocksonfire.org/trading/index.php?topic=7595.0

Quote from: lancefur on January 24, 2007, 12:45:05 PM
I know this may be a question that will be difficult to pin down because I am sure it depends on certain varying factors.

lancefur,

Yes, you've essentially answered you own question.  "Rule Of Thumb" is:

Short-term: Minutes, Hours, Days Weeks

Intermediate-term: Days Weeks and Months

Long-Term: Weeks, Months, and Years

Within earch time-frame, there can be big variances.  For example, if you trade a stock and hold it for three hours, and I trade it and hold it for three weeks, those both would be considered short-term trades, but they're quite different.   So, as you said, it's difficult to pin down.

Quote
When seeing these "experts" on tv, they say long term is 5-7 years and short term is 3 years and I know that more than likely refers to mutual funds or annuitiesm due to their fees, etc.

The "experts" want a lot of time so that their clients aren't on their backs for losing them a ton of money, and even still, you'll never get them to say that they picked some lousy stocks for you, because they'll always say, "You have to hold it for the long term!"

If you say, "But, I've held the danged thing for seven years!"

They'll say, "NO!  Long-g-g-g-g-g-g-g-g-g-g-g-g-g-g-g-g-g-g-g-g-g term."

Merrill Lynch had a "Generation Portfolio" back in 2000.  If we bought it when they recommended it, we might have to hold it for a generation just to get our initial investment back because the stocks the 12-13 stocks that I was able to write down (they rattled off about 20) are down an average of 18%, almost 7 years later.

Lehman used to come out with "10 Uncommon Values" in June of the year.  They might still.  Here's their picks from 2000 (might have been 2001).  I think CD was Cendant, but I forget what happened to it.

The portfolio is down 58.99% (unless I missed a stock split), 7 years later.

The first number in bold is the current price.  The second number is the price that they thought it was an "uncommon value."

61,915.50 Gain/Loss: -116,822.00 (-58.99%)  Today: -915.00 (-1.46%) 

Symbol  Shares  Last/NAV  Net Change  Pur. Price  Gain/Loss  Value 
A 250 32.06 -0.55 75.4375 -10,844.38 8,015.00   
BEAS 500 12.37 -0.26 38.9375 -13,283.75 6,185.00   
CD 1,500 N/A N/A 12.875 N/A N/A  (I think this one was Cendant)   
GMST 400 3.83 -0.02 49.875 -18,418.00 1,532.00   
HPQ 400 41.71 -0.68 58.3125 -6,641.00 16,684.00   
JNPR 150 18.46 -0.53 126.4375 -16,196.62 2,769.00   
LLY 250 53.13 -0.20 84.75 -7,905.00 13,282.50   
MU 200 13.09 -0.14 90.00 -15,382.00 2,618.00   
NT 300 26.08 -0.51 67.25 -12,351.00 7,824.00   
TLAB 300 10.02 -0.19 62.6875 -15,800.25 3,006.00 

So, if we bought GMST at 49.876, we'll need to hold that one for the long-g-g-g term, because we'd need a rally of over 1,000%, just to get our original investment back.

Not to pick on MER or LEH.   MS came out with a "Super 7" back in 2000, that still is down 68%, unless I missed a split or two.

In fairness, those picks were at the height of the internet bubble.  But, still...a lot of them were horrible picks, designed for a long-term hold.

Buying a stock for a long-term hold usually is based on fundamentals, and the fundamentals on many of those stocks obviously changed a great deal.

Someone thought that JNPR was an "uncommon value" at $126.4375? (that was back when stocks traded in eighths and sixteenths)

Mercy! 

I think that if the fundamentals change, or if the stock puts in, say a six month H&S Top, one might want to re-evaluate the idea of continuing to hold it for the long-term.

Warren Buffet made billions with long-term investing, but he also is "one in a billion," in terms of his level of success, so that needs to be put into perspective.

But, I think that if one does some DD, and has a peep at a chart, one could do very well with long-term investing.

Let's take CAT (Caterpillar), which will report earnings in a few minutes.

Back at the height of the internet craze, you would have been laughed at for owning  a "stodgy, old economy" stock, like CAT, which was considered to be an old dinosaur, whose day had come and gone.

Shareholders suffered in CAT for a few years, because of that mentality in Wall Street at the time, but the fundamentals remained very good, and in early 2003, after everything internet-related had crashed and burned, CAT emerged from a very nice FOUR YEAR Symmetrical Triangle, a Bullish Continuation pattern.

It broke out at 29.13, and four years later, even after a pretty good correction, it's still up over 100% over the four years since the breakout, for an annualized gain of 25%.

That isn't the 30% that you guys have been discussing, but it's still quite nice, and could do better than that, if the long-term hold doesn't get stopped out.

For a stop, you might want to use the rising trendline, or the several horizontal stops, which keep getting raised to "the last low, prior to the stock making a new high."  That stop now would be below 48.25, the last low in October, 2005, if you used that one.

Personally, in this example, I'd argue for using the trendline, to lock you into a real nice gain for the four years, and still counting.

Wouldn't it be funny if CAT broke that trendline this morning, on earnings? 

Geez, I hope I didn't jinx it. 

Didn't mean to go on, but with all that you guys now have available to you, in terms of instant access to research and to technical analysis, I think it's well worth your time to come up with a plan for investing success, like this CAT example, or something similar.

You might not achieve the level of billionaire, like Warren, but millionaire isn't too shabby.

Quote from: David Randolph on January 18, 2007, 04:11:42 AM
I guess I was lucky in 2005. It wasn't the first time that I did that in my trading career, I had years where I've done much more than 200% profit.

For example, once I started with a $3,000 futures account and run it up to $80,000 in about 6 months (that's a 2,500% return in 6 months). I felt like a king, bought a Porsche Boxster and an old country house.

On another occasion, I wanted to buy a house for my family, and I started with about $10,000 ... the house price was about $250,000 ... I went to $100,000 plus in a few months, but in the end I couldn't buy the house.

Who did not believe this words? I think we all do now! 3SOF performance speaks for itself. Good job David!

Great day again for the 3 stocks on fire short term portfolio.

Well, I am really happy that David decided to do the short term portfolio again, so far it far exceeded my ideas of what was possible short term.  Still, the greatest investors of all time have all held long term, we dont hear about many billionaires who do day trading, lol. 

So despite being basically addicted to the short term portfolio at present, I am still mindful of David's advice and trying to learn the long term game little by little.  Toward that goal, I want to share another lesson with you from "The Tao of Warren Buffett". I felt it was particularly interesting and applicable to our discussion here because it mentions a 200% rate of return which 3SOF basically did do in its first year...



As an investor you don't have to get rich overnight to evenually get rich.  Warren is shooting for a 20% annual rate of return, not a 200% annual rate of return.  Invest $100,000 for twenty years at at 20% a year and you end up with $3.8 million.  Hold it for thirty years and yo uend up with $23.7 million.  You win with the running game - not the long bomb.  With a world trying to get and annual return of 100%, a lot of mistakes are being made regarding long-term business economics that make getting a 20% annual return pretty easy.

Perhaps the best way to go about this would be to have 2 different portfolios short term and long term... Once your short term reaches your goals you take X amount of money and invest in the long term. Rinse and repeat the cycle over again but never take money out of the long portfolio to put in the short term.

An example of this you have 100k in a long term portfolio and 15k in the short term. Your goal is to get 15k to 100k then take out 50% and put that in the long term portfolio. So you get 50k and add to the long term portfolio... then with remaining 50k you try again for 100k (rinse and repeat, take 50% out put in long term.) From the looks of it David and the 3OF team seems to be doing something like this strategy or at least a goal for the short term and long term 3OF portfolios.

Quote from: nullzero on February 05, 2007, 02:06:34 AM
rinse and repeat, take 50% out put in long term.

That's right! rinse and repeat...in that way you don't risk too much money for the short-term play.