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Titan Inv Partners -The REAL truth about how to win when investing… And it won’t be found in a seminar!
Market professionals are often asked one primary question by private investors, City outsiders and journalists which is -
“What is the magic formula for investing?”
The reality is that there is no philosopher’s stone for the stock market and that “trader coaches, soothsayers” etc will categorically NOT give you this secret. There are no magic formulas that will guarantee a winning trade every time and there are very few (if any) infallible investors that you can slavishly follow to make your fortune. Sorry to be the bearer of bad news!
The secret to succeeding at investing is not really a secret at all. We will give it you for free here and so save your money instead of attending these bullshit seminars (I went to one for the fun of it today run by a well known training company – my verdict? It is so shocking that it borders on the criminal).
In fact, the rules that create a framework for successful or profitable investing are those with which even novice investors will likely be familiar. Whether they choose to follow them of course is another matter entirely…
Here they are:
1. Firstly do your homework.
Before investing your hard earned money surely it makes perfect sense to understand the prospect that you are investing in and, perhaps more importantly, to understand what the drivers of a change in the price or valuation of that instrument are likely to be? The more research and background checking you do the better. Fact.
From a technical perspective, it might also be considered sensible to be aware of the historical price performance of the instrument in question, for example the 52 week high and low. If the investment in question is a share, then be aware of when the company is due to report and have an understanding of what they reported last time round. You’ll be amazed how few people actually do this.
2. You need to understand why you are invested and have a plan.
What is your expectation for the investment? Over what time horizons? What return are you looking for from the investment? Conversely, you should also consider what is the maximum drawdown or loss that you are willing or able to accept from the trade?
As the saying goes – “fail to prepare, then prepare to fail”.
3. You should consider your timing and, by default, where leverage is involved, the application of that leverage.
This is not always that straightforward, but you should give some consideration to where you are in the possible “life cycle” of a trade. By this we mean consider whether you are an early adopter i.e. one of the first investors into the trade, perhaps in the expectation of a catalyst causing a re-rating that “the market” is not really aware of.
You may in fact be entering the trade mid cycle (and so leverage levels will be different). Perhaps when a clear directional trend has emerged or when recent events have attracted broker or press comment, which is drawing more investors into a trade as an example (personally here at Titan we like to look for catalysts and are generally lightening our load at this stage).
Finally are you “tail end Charlie “? Are you entering a crowded trade which is approaching the end of its life? As you invest are the early adopters and mid cycle traders getting out?
However the golden rule to all investing is one which to some will sound like a cliché.
4. “Run your winners and cut your losses”
Too often investors do exactly the reverse of this golden rule and snatch at a quick profit whilst holding on to loss making positions in the hopes that they will turn around. We have all been there and we ALL do it.
There is a time to hold onto losing positions however and this is if the fundamental reason for being invested there has become more compelling with the price fall. For example, let’s say you are in a pharmaceuticals stock trading near the bottom of its historic valuation band and you expect some pipeline drugs news to be a positive catalyst. Absent the arrival of the catalyst let’s say the overall market endures a tumble on geopolitical news. To us, this is a renewed buying opportunity not a reason to sell at an arbitrary 10% loss level.
The decision to “hold or fold” should therefore be made within the context of your original plan for the investment. Ask yourself what if anything has changed? Do you still believe your original thesis?
If you can follow these rules in a disciplined fashion then you may be on the way to giving yourself a sustainable winning edge in the market. That is to make consistent profits that more than outweigh your losses. Over time even a small sustainable winning edge will mean that your portfolio could grow significantly.
Let’s look at the our flagship Titan Global Macro fund as an example of how this will work in your favour.
The table below details the performance of the Titan Global Macro Fund since July 19th 2013 to the close of business on Monday 21st July 2014. During this period the fund has executed a total of 353 trades of which 112 were closed with a profitable outcome, whilst 83 were closed at a loss, the rest are of course open trades.
The closed trade Win /Loss ratio is thus 1.35 times or, should you prefer, 135%. The incremental driver of returns however is the profit:loss ratio of 1.622. That is we made 1.622 times more profit than loss over the analysed period.
In fact, if you make a profit just 101 times and lose 99 then as long as your profit is a pound greater than your losses you will of course make money over time. Some of the best traders in the world only have a win/lose ratio a little over 1 times but yet they make money overall. Vice versa if you lose 101 times and make only 99, as long as your average profit exceeds you average loss by 25 you will also make money.
Over time that winning edge means the portfolio will experience growth in value and its one the main reasons that the Titan Global Macro fund is up substantially since its inception in July 2013 (see chart below)
Past performance is not necessarily a guide to the future.
So, the next time you receive a phone call from a CFD “advisory” firm or a trader training outfit, ask them to supply you their record with REAL money.
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Take a good look at below.
It is a measure of the S&P500’s equity returns over subsequent 10 year periods for a given CAPE Shiller PE band measure based on data from the last 100 years. At the current level of 25 times then good luck with your long only index funds for the next 10 years!
The man the Daily Mail dubbed “The King of the Short Sellers”, Evil Knievil (aka Simon Cawkwell) is Britain’s most feared bear-raider. A big man with a bigger reputation, Evil Knievil famously made £1 million by short selling shares in Northern Rock during its collapse. He also uses his knowledge and experience to buy shares, often resulting in the same devastating effect.
Three times a week Evil provides his thoughts and musings on the markets only at theevildiaries.com. Read an extract from Evil’s latest diaries below and click the banner at the bottom of the page for a free trial to the website…
As the lunatics firm up their faux posture towards Russia, there is the possibility that Russia will cut off gas to western Europe. If this were to happen, the insistence upon British home-produced gas, whether from shale or whatever, will become very shrill. At that point, gas from shale will happen at the end of a gun wielded by HMG which will negate all the environmental protesters’ blather. Probably best to hold on to Igas (IGAS), now 116p.
Audioboom (BOOM) declare that substantial investors are trying to get in on the act. Audioboom say no. This looks bullish to me: BOOM is now at 6.25p.
I have eased back from GCM Resources (GCM) since there are no further signs from Bangladesh that, finally, Phulbari can go ahead. I think it will go ahead but one would have to be nuts to expect to start, say, next week.
Mothercare (MTC) duly reported and now stands at 250p. There will not be a bid from Destination Maternity. So keep short.
Finally, for lunch I entertained a chum with a sustained Bolly ‘n’ Bordeaux session. After which it was horses all the way. I made £70,000 on the most remarkable flat race I have seen for many years. I was content with my £36,000. Since I had been engaged in hard pounding from 5.30 a.m. I slept very well.
The following day, I did it all over again. Delightfully, at the close, I had made £150,000 on the week just sports betting.
FOR A FREE ONE MONTH TRIAL TO THE EVIL DIARIES CLICK THE IMAGE BELOW
It can be safely said that, as far as UK equity indices are concerned, there is effectively only one that most investors are interested in following on a regular basis. However, while the FTSE 100 is king, there is merit in looking at various parts of the broader market in order to try and get a proper perspective.
This is particularly the case given the way that the market would appear to be equally divided between two camps - those who think that the FTSE 100, around 100 points off its record highs from the dotcom bubble era is worth shorting, and those who are anticipating a record 7,000 plus handle by the end of 2014.
This is a conundrum which appears difficult to answer. The irony is that what used to be one of the better ways of taking the temperature of leading UK companies, looking at the FTSE 250, does not appear to be the “objective” indicator” it once was. This may be due to a multitude of factors, including the even more heavy weighting of the FTSE 100 with resources stocks, a more international focus even for traditionally domestic focused mid caps, and the vagaries of the post financial crisis / QE.
The FTSE 100 has made a decent job of consolidation after the one touch rebound off the 200 day moving average last week at 6,698. This is even after the profits warning from GlaxoSmithkline (GSK). That said, while there may be more upside, it may be worth waiting on an end of day close above the 50 day moving average at 6,800 before assuming further gains. This is even though the RSI at 53 is now suggesting that bullish momentum is taking hold here for a return to the best levels of the year towards 6,900.
Looking at the FTSE 250 index it can be seen on the daily chart that this is actually a market which has come off the back of a massive rally over the past two years. Indeed, it is interesting to note that the run up to the last big rally from the summer of 2012 until March this year was a rough consolidation at and just below the 200 day moving average, a feature which currently runs at 15,809. The fact that it is still rising gives the bulls hope that we could see this market dragged higher in the wake of what has been a quite lengthy consolidation.
The preferred buy trigger here, perhaps even over and above buying this market on dips towards the 15,500 support zone, is to wait on an end of day close back above the 200 day line to act as a momentum trigger. Such a signal should lead towards a return to the March 16,700 plus highs over the next 1-2 months. This is especially the case given the way that we have seen the RSI - now at 51.9 - flip back over neutral 50.
Apart from the financial media bemoaning the IPO overload that has allegedly been ongoing throughout the year, there was also the idea at the beginning of the year that tech stocks, especially in the U.S., were overcooked. Somehow the implication was that we were in line for dotcom bubble crash II. So far though, this has not happened.
Looking at the daily chart of the TechMARK 100 and it can be seen that we are trading in the aftermath of an unfilled May gap to the upside in May through the 50 day moving average, which is now at 3,233. The suggestion now is that with the RSI still at a relatively modest 59 there should be enough technical gas in the tank to allow for a target towards the October price channel top through 3,400. The timeframe on such a move is seen as being as soon as the next 2-3 weeks. In fact, given the unfilled gap’s presence one would currently regard last year’s price channel top as the “minimum” upside on offer in the near term.
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