Earn a second income trading the stock market

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    25-Jun-2015

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Nick Radge, The Chartist, was invited to present at the 2014 Trading Super Investing Future Wealth Forum in Sydney, Melbourne and Brisbane. These are the slides from Nick's presentation. Nick talks about the reality of trading for a living and that perhaps it is better to find a strategy to earn a second income instead.

Transcript

  • 1. This presentation has been prepared by Reef Capital Coaching ABN 24 092309 978 (RCC) trading as The Chartist and may contain general advice.It does not take account of your objectives, financial situation or needs.Before acting on any general advice you should consider the appropriatenessof the advice having regard to your own situation. We recommend you obtainfinancial, legal and taxation advice before making any financial investmentdecision.Past performance is not a reliable indication of future performance. Thismaterial has been prepared based on information believed to be accurate atthe time of publication. Subsequent changes in circumstances may occur atany time and may impact the accuracy of the information.AFSL 288200

2. Earn a 2nd IncomeNICK RADGE 3. Situational IronyWhen actions have an effect that isopposite to what was intended,specifically, the outcome is contraryto what was expected. 4. #1: Work Ethic 5. #2: Making $$$ 6. Trader 1Removes all profits 7. Trader 2Income $80,000 + reinvest excess 8. Trader 3Stays working + reinvests all profits 9. Facts Profits must not only cover expensesbut also grow the account Most people aspiring to trade for aliving do not have a self-sustainingcapital base Lake Wobegon Effect tendency toover-estimate our abilities. 10. Next... How a particular trader had 1 losing day in 1238 What James Packer knows about trading The strategy to make you a more consistent trader 11. Earn a 2nd IncomeNICK RADGE 12. Core ConceptsThe keys to consistency What casinos and HFT firms already know Strategy basics Selecting a universe & commissions Using technology 13. FACT:Most traders aspire to be consistent.Most prefer to take a small profit often.Most do so mainly for comfort. 14. Casinos & HFT FirmsVirtu Financial- 1 losing day in last 1238- 99.9% winning weeksTradeworx- 86% winning days- 99% winning weeksCasinos- 84% winning days- 83% of light gamblers lose- 94.3% of heavy gamblers lose 15. Frequency Simulation 16. Time Paradox + W/L Ratio 17. Data miningCurve fittingOptimisation 18. Casinos & HFT FirmsTradeworx- 86% winning days- 99% winning weeks- 50% - 60% winning tradesCasinos- 84% winning days- 83% of light gamblers lose- 94.3% of heavy gamblers lose- poker, blackjack, bingo, baccarat, all have anedge of less than 3%Opportunity = Frequency = Profits 19. Trading The Noise Find overbought/oversold points using technical oscillators, such asthe RSI or CCI Find overbought/oversold levels using Bollinger/Keltner Bands Find extended price moves using sequential up/down days, i.e. howlikely is it for price to reverse after 5 consecutive up/down closes Find extended price moves using daily percentage moves, i.e. if theclose is 2% higher than the day's open, how likely is it that price willreverse the following day Find extended price moves using volatility, specifically average trueranges Find extended price moves using gaps, specifically from high/low tothe next open 20. Trading The Noise If the close is higher on 5 consecutive days AND on day 5 it gapshigher, then what are the chances of it reversing? If the close is less than a Bollinger band AND the RSI is at anextremely oversold point, what are the chances of prices reversinghigher? If prices rise 2% from days open to close AND gap up the next day,what are the chances of prices reversing lower? If price makes its highest high point in 10 days AND the CCI is atextreme levels, what are the chances of it reversing? 21. Selecting A UniverseOpportunity = Frequency = Profits 22. Global EquitiesAustralia: 2952NYSE : 3198NASDAQ : 2732AMEX: 546ARCA: 1457 23. Drag ConsiderationsLiquidity / SlippageCommissions 24. Example Strategy 25. Long EntryClose > 100-day moving average [ensure long term up trend is in place]Close < 5-day moving average [ensure short term weakness is in place]3 consecutive lower lows [sequential weakness confirmed]Set a limit buy order for the next day if price falls another 0.5 x 10-day averagetrue range.Long ExitIf the close is greater than the prior close, then exit the position on the next day'sopen.Short EntryClose < 100-day moving average [ensure long term down trend is in place]Close > 5-day moving average [ensure short term strength is in place]3 consecutive higher highs [sequential strength confirmed]Short ExitSet a limit sell order for the next day if price rises another 0.5 x 10-day averagetrue range. 26. SimulationStart Balance: $100,000Start Date: January 1995Universe: Russell 1000 (inclusive of all historical anddelisted securities)Minimum Daily Volume: 500,000 shares# Positions: 20Allocation per position: Fixed $10,000 (no compounding)Leverage: 50% 27. CompoundedCAGR: 50.3%Trades: 20,576 (11,166 long trades / 9,410 short trades)Win%: 61.1%W/L: 0.83MaxDD: -30.8% 28. Long Only? 29. Long OnlyCompoundedCAGR: 42.4%Trades: 12,499Win%: 63.9%W/L: 0.83MaxDD: -34.2%Long/Short50.3%20,57661.1%0.83-30.8% 30. LeverageTechnology 31. The Chartist HFT Portfolio 32. This presentation has been prepared by Reef Capital Coaching ABN 24 092309 978 (RCC) trading as The Chartist and may contain general advice.It does not take account of your objectives, financial situation or needs.Before acting on any general advice you should consider the appropriatenessof the advice having regard to your own situation. We recommend you obtainfinancial, legal and taxation advice before making any financial investmentdecision.Past performance is not a reliable indication of future performance. Thismaterial has been prepared based on information believed to be accurate atthe time of publication. Subsequent changes in circumstances may occur atany time and may impact the accuracy of the information.AFSL 288200 33. WWW.THECHARTIST.COM.AU