Trading based off Fundamentals

[DSchenk]

It's been 3 years folks. 3 years of trading and my equity curve looks less than stellar to put it mildly.

Imagine 3 years of market open trading, that's approximately 3 times 253 trading days per year times 1h of trading + 0.5h of trading preparation. Total: 1139h (or 47 days non-stop)

In short, a lot of time invested. If I learned to play piano in the same time, I would probably fill big concert halls by now.  

Anyway, what I'm thinking is, as trading purely based of technical analysis doesn't seem to work out exactly as I want it to, I'm thinking about looking at Fundamentals.

The problem with fundamentals in trading is: Only because a company is total **** and their balance sheet is total **** and their fundamental KPIs are total ****, that doesn't prevent the share price of this very company going to the moon first, before it comes crashing down to 0.

So where do you place your short order in that case? In trading being right is almost useless if you're not right at the right time. Read that again

That's why technical trading always made more sense to me. There in theory it doesn't matter if you're right or wrong, cause all you do is riding the momentum/sell-off until it reverses. In, out, profit  

So, anyone in here, trading fundamentals? If so, what's your approach?

I'm thinking essentially having my spread-bet account as a short only while my regular ISA/Share Dealing is my long only.

So when I'm analysing a ticker it either is a buy, gets on my watchlist for ISA/Share Dealing or it is a sell, then goes onto my watchlist for SB. Or it is neither nor, then just drop it.

What do you think?

[dmedin]

15 minutes ago, DSchenk said:

What do you think?

 

Have you worked out what your returns would be if you put e.g. £500 a month into an S&P 500 ETF over a three-year period?

I bet it would be a far better result than 99.9% of 'traders' activity over the same period

Edited October 15, 2020 by dmedin

[DSchenk]

Guess that depends when you start with your 3-year-period

I would expect something between roughly -30% and +30%.

Then the problem is, where you get those £500 a month from? Don't tell me I have to get a job first in order to do that  

The goal should still be to make roughly 50% per month. 100k account, 50k profits. That's the gold discipline we're all aiming for

[DSchenk]

In my trading career I've done Forex, UK Equities, Indices and at the moment on US Equities.

What's left is Crypto and Options (as far as I'm aware).

Not sure what to focus on next...

I'm thinking either keep doing the US Equities just with yet another strategy. (Just which one?)

Or going back to Indices, maybe I've learned something in US Equities which might help me there.

Or try the fundamental trading on UK Equities.

Not sure about Crypto and Options tbh. Anyone any good experience with that?

[dmedin]

I put money into an S&P 500 ETF in 2018, and took it back out again the next year.

According to https://dqydj.com/sp-500-return-calculator/

The annualized return on S&P 500 ETF from September 2018 to September 2020 is 7.700% (not including dividends)

Not only is 7.7% decent for a no-effort strategy (when the best savings account you can get is less than 2%) but it would represent a big return instead of a big loss from active trading.  

It also doesn't include the dividends, but those get eaten away by IG's fees anyway.

 

Edited October 15, 2020 by dmedin

[dmedin]

16 minutes ago, DSchenk said:

yet another strategy.

 

None of them work consistently.  You get occasional days when everything goes strongly up or strongly down so you make money, but the rest of the time it's just random up and down and losing money.

I've made several thousand pounds this year during strong trending moves and lost it all and then some.  If I'd restricted my trading to those strongly trading days only I would have made an awesome return this year.

 

[dmedin]

Here you go, simple strategy that makes money

 

[dmedin]

17 minutes ago, dmedin said:

he best savings account you can get is less than 2%)

That's so 2019.  1% is the best interest you get on a fixed-term bond nowadays. 🤮

[dmedin]

19 minutes ago, dmedin said:

The annualized return on S&P 500 ETF from September 2018 to September 2020 is 7.700% (not including dividends)

 

9.559% with dividends reinvested.

THAT IS INCREDIBLE FOR A NO-EFFORT INVESTMENT 'STRATEGY'.

[DSchenk]

Love how you comment on your own comments dmedin  True passion there

[jlz]

37 minutes ago, DSchenk said:

Love how you comment on your own comments dmedin  True passion there

The more I look at those comments the more they look like posts coming from a forum booster.

No one would spend that much on a site posting like that, not even a mad one.

[dmedin]

Why is this retard still here?

[jlz]

21 minutes ago, dmedin said:

Why is this retard still here?

I just came to change my avatar, so you don't put yourself in evidence calling me Swedish again. 

Come on Detective, I am ruling a country out of your list, which one are you going to insult next?  

[Bopperz]

Back on topic.... 

Have you completely given up on technicals? The problem with fundamentals is the very long timescales. You spot a company in trouble, how long before the trade pays out? A long time, so that's a lot of capital tied up in a trade.

I have tried fundamentals, based on some guidelines from the "Naked Trader". I think in a long slow bull market, this will make you some £$£, but I remember he was bullish cineworld. Covid really killed that trade!

On a side note: What return do people aim for? I am thinking a steady 25-30% a year would be great. People seem to earn a lot more, but can they do it day in, day out, without blowing up an account?

J

[jlz]

https://www.investopedia.com/modern-monetary-theory-mmt-4588060

Maybe fundamentals worked before 2009 but since some countries are allowed to print money and bypass inflation there is cash flow that is no longer tracked. If that country decides to help a certain company for a very random reason your reports will not make any sense. Pretty much like the US Federal Reserve is doing with the Credit market right now. You would expect that in a global pandemic everything should fall apart but, on the contrary, you are seeing an unprecedented cash flow raising all indices.

Now try to use any fundamental reports to explain current market behaviours if you can. 

[dmedin]

20 minutes ago, Bopperz said:

I am thinking a steady 25-30% a year would be great.

 

lol!

If managers of the world's largest portfolios and the world's best mathematicians can't beat the market indices, what makes the retail punter think they can do it consistently, year after year?

🤣

[dmedin]

If you grew your wealth at a compounding rate of 30% a year, within 25 years you'd own all the money in the world.

Just f*king ridiculous what greedy punters will fall for.  You know, the same ones who LOSE MONEY year after year because a 10% ROR on an S&P 500 tracker isn't enough for them 🤣

Edited October 16, 2020 by dmedin

[DSchenk]

5 hours ago, Bopperz said:

Have you completely given up on technicals?

Nope, not quite yet.

5 hours ago, Bopperz said:

The problem with fundamentals is the very long timescales

That's the thing which is putting me off from even looking at it.

Surely I could research now 10 companies, which in theory are massively overvalued.
But only because they go bankrupt eventually, doesn't mean I can contain a short position over an extended period of time, esp. not when the price spikes up for literally no fundamental reason at all  

 

Currently, thinking of going back to indices. Did a bit of trading indices last year in Jun-Sep or so, until @nit2wynitconvinced me to go back to equities  

[DSchenk]

6 hours ago, jlz said:

The more I look at those comments the more they look like posts coming from a forum booster.

No one would spend that much on a site posting like that, not even a mad one.

Makes a lot of sense. That's how he funds his trading account which he constantly blows up

We got you dmedin, we finally got you 😎

[THT]

6 hours ago, dmedin said:

If managers of the world's largest portfolios and the world's best mathematicians can't beat the market indices, what makes the retail punter think they can do it consistently, year after year?

That's not necessarily true, for 1 many of them have to be invested x% at ALL times, which means holding during plunges and bear markets and 2) If they all sold out at tops and invested at lows (assuming the could do it) then they'd end up wrecking the the fund management industry - just imagine them all cashing in at once hold cash for say 12 months then reinvesting it-  they'd have no income to pay salaries etc and their businesses would implode

The realities of business and regulations to be part of a particular sector prevent them from being able to do it even if they could hence why you're always told to buy and hold, always stay in the market.........those fund management fees need collecting!

Fund Managers get paid a % of the fund, the bigger the fund, the bigger their commission in £'s so it would be logical to think that they would do everything possible to avoid the fund from losing value especially during bear markets, but they don't because of the restrictions mentioned above

 

[jlz]

1 hour ago, DSchenk said:

Makes a lot of sense. That's how he funds his trading account which he constantly blows up

We got you dmedin, we finally got you 😎

 Nothing makes sense. 

[dmedin]

Nobody has come on here and shown that they are consistently profitable using technicals or fundamentals, not even Tom. 

I'm close to coming to the conclusion that it's impossible for all but a tiny handful of professional traders to make money.

Edited October 16, 2020 by dmedin

[jlz]

These guys claim to have a method that is strongly based on fundamentals.

https://www.youtube.com/watch?v=t_jCCnr85pc

If you watch their videos their don't trade any time-frame smaller than the daily ticker. They go through company reports, forex driving macros, macro economics news and so on.

Many people call them a fraud but they seem to be running the business for a long time. Who knows, maybe they are an example of how to do it. They are all pros with a long trading career, maybe what it takes to make fundamentals to work is to get hit and fail during years to understand them. 

[dmedin]

6 minutes ago, jlz said:

These guys claim to have a method that is strongly based on fundamentals.

https://www.youtube.com/watch?v=t_jCCnr85pc

If you watch their videos their don't trade any time-frame smaller than the daily ticker. They go through company reports, forex driving macros, macro economics news and so on.

Many people call them a fraud but they seem to be running the business for a long time. Who knows, maybe they are an example of how to do it. They are all pros with a long trading career, maybe what it takes to make fundamentals to work is to get hit and fail during years to understand them. 

 

Why would they risk money trading if they can get paid 'training' other people instead?  That's a certain (and lucrative) income and the supply of gullible punters is endless.

Anton Tw4t himself abandoned trading as soon as he made some money and now gets his income from selling sh!t to desperate punters.

It's the time-honoured way.  Livermore and Gann did the same thing themselves

 

Edited October 16, 2020 by dmedin

[jlz]

1 minute ago, dmedin said:

 

Why would they risk money trading if they can get paid 'training' other people instead?  That's a certain (and lucrative) income and the supply of gullible punters is endless.

Anton Tw4t himself abandoned trading as soon as he made some money and now gets his income from selling sh!t to desperate punters.

It's the time-honoured way.  Livermore and Gann did the same thing themselves

 

That is what I thought until I saw that the best students join the company and trade with their funds, that made me think something else. Still can't support them because I have no idea of what they do.

It is easy to think that if they had a method that is working , why would they teach it to people instead of using it themselves? Yeah, your point is valid.

[dmedin]

Look at IG's 'Trade of the week' to see how often IG's two 'technical analyst' experts get it right

That's what you want.  You want to be a technical analyst because you can do amazing charts and with the power of hindsight make yourself appear very credible, and TA is very seductive to technical- and visually-orientated people.

You can make a good living pitching your 'analysis' to high net-worth clients, who will be risking their own money.  Which you would never risk yourself on your own trades because you know that TA is next to useless  

[dmedin]

I can survive losing the money but I don't think I will ever recover emotionally from the two years (and counting) I sunk into this garbage.  That's pure wasted time.

[TFFX_]

Interesting post….

Apologies for my long post below, but I hope some readers appreciate its content.

 

From a funds management point of view, these guys (non-gender specific when I say this), need to manage according to their mandate. Now, if this means they need to be invested in all sectors or only allowed to hold a certain amount of cash (for a lot of them, this is < 5% of the fund), which means they pretty much have to be fully invested at ALL times. Depending on the mandate, this might also mean they are only allowed to hold a certain weighting in a particular stock, sector or company (amongst other stipulations). This inherently makes it complex to perform in all types of markets, which is why you don’t see the ~30%+ performance in all types of funds, which we all wish we could have if it was as simple as buying a certain fund. This is not to mention the other factors of portfolio management, which relate to redemptions or capital inflow (i.e. selling stock to raise funds or investing new capital for a balanced portfolio – daily, weekly, monthly etc.).

 

A private investor has much more flexibility when deciding what they want to trade and when, which in turn means more flexibility in what they want / can trade. The above comments in this thread about wishing to achieve 30% are entirely possible, provided you are in the right trade at the right time.

 

Remember as a retail investor, one good trade of 30% (if that’s how we want to measure it), can make a year. But Investment managers have to take thousands of trades (in stocks they HAVE to own, but not necessarily WANT to…) to make a year…..our stock and asset allocation is very different….  

 

Getting back to the primary point of the post – fundamentals.

Let’s look at some very recent examples (some which I have either been invested in, or watching). All reporting or giving trading updates this week:

 

ASOS: profits quadrupled from their announcement on Wednesday

Stock is down 13% since then – hammered on the announcement

Technically – this stock has had a great runs since the crash in April – +278%

 

Dominos: 19% increase in sale for the third quarter announced on 15^th Oct

Stock is down 9% since then - hammered on the announcement

Technically – up since July peak prior to sales figures– +24%

 

AO World (on another thread on this community)

Sales up 57% in first half

Stock up 34% since the close on Wednesday – to the moon on announcement

Technically – this stock has had a lovely trend following run since the crash in May – 332%

 

Whilst I have been selective with the stocks above (in terms of performance), I’m trying to point out that pure fundamentals may not reap the rewards which certain investors are trying to gain purely on their fundamentals. Two of the stocks mentioned above have had has big increases in sales and revenue (i.e. things are looking good…), but have had quite large falls in share price since announcing.

This could have been because “all the good new was priced in”….but as retail investors, how do we know this…?

What I’m learning is that we have to trade with the market and THEIR view of the market, not of ours….

 

TFFX_

[TFFX_]

@DSchenk

You mention earlier that TA doesn’t work, how you do you want it to? – what exactly are you looking for?

I think defining this will help with your ultimate approach….remember, there is no silver bullet to investing or trading (or anything in life for that matter…), which will make things easier….figure out what will work for you and concentrate on that.

RE: Markets: Why is the US market more appealing than the UK market? Volatility, volume, liquidity….more opportunity…?

Out of all the markets you have tried, what makes you think a fundamental approach is better? All markets trade on fundamental news, but this can be varied – one thing is for sure, price governs all markets….viewing this visually can be very helpful.

Look at Glaxo – they supply products most of us user every day, without evening knowing…defo buy right? Look at their chart and tell me your thoughts….total downtrend and would mean losing capital fast…..but hey, they pay a dividend…(I’m a buyer when they hit £13.00 btw..)

Crypto (I’m not a massive believer in this) – how does this work in the real world? When is the last time you paid for something in a crypto ccy? – conceptually great, but will your gran (dad/mom) buy a can of coke for $1.00 one day, and $1.40 BTC the next because of the volatility in BTC?

The key premise of TA is (according to Investopedia) – “Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.”

https://www.investopedia.com/terms/t/technicalanalysis.asp (not a fan of Investopedia, but im trying to make a point)

I do use fundamentals, but only to the extent of looking for value in stocks which I want to hold for a certain period of time – I’m either looking for capital growth or dividend yield (sometimes both). These stocks are ones I have in my ISA portfolio.

Depending on the above, it will depend on what account I trade in. ISA’s are great for when you are making profits (and earning dividends), but not so great when you are not. This is where having losses in your trading account may benefit you (speak to your tax advisor if you are unsure of what I’m referring to..).

None of the above is trading or tax advice - please speak to a professional to get this information which is specific t your situation. 

 

TFFX

 

Edited October 16, 2020 by TFFX_

[DSchenk]

11 hours ago, jlz said:

These guys claim to have a method that is strongly based on fundamentals.

https://www.youtube.com/watch?v=t_jCCnr85pc

If you watch their videos their don't trade any time-frame smaller than the daily ticker. They go through company reports, forex driving macros, macro economics news and so on.

Many people call them a fraud but they seem to be running the business for a long time. Who knows, maybe they are an example of how to do it. They are all pros with a long trading career, maybe what it takes to make fundamentals to work is to get hit and fail during years to understand them. 

Yes, those guys Anton Kreil and his gang are great. All ex-pro trades at Goldman's etc

They are doing 80% fundamentals, 20% technical trading style if I'm not mistaken.

Everyone who says they are a scam just doesn't understand anything about the industry. Period.

They are indeed one of main the reason, I'm thinking of trying the fundamental based trading system rather than looking 100% at technicals.