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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (39555)	2/26/2005 2:09:17 PM
From: A Horse With No Name	Read Replies (1) \| Respond to of 206323

are you kidding? EN would not be around in 5 years!!

To: Tommaso who wrote (39555)	2/26/2005 5:21:31 PM
From: chowder	Read Replies (2) \| Respond to of 206323

>>> Quit trying to guess week-by-week, month-by-month, and maybe even year-by-year. <<< Just to add another perspective, I avoid longer term trades like 5 years because I would have to be correct in my analysis. There's no room for error. What if I'm wrong after 5 years? I don't have the time to make back the loss. With that in mind, I know others are more comfortable with playing the time element and if it works for them, I would say they are doing the right thing. What I have learned from my study of various trading systems is that only 20% of fund managers can outperform the market on a consistent basis. And they are professionals. They have research teams to help them out and they still can't beat the S&P 500 index on a consistent basis. If I look at the strategies used by these folks, they are long term buy and hold types. If I play the odds, the odds tell me only 20% of long term holding types can outperform the markets consistently. Studies have shown that only 5% of retail investors can outperform the market on a consistent basis. Just 5%! That means 95% of us would have been better off holding an index fund over time. Most retail investors are also long term types and fewer of them will outperform the markets over time because they don't have the researching assets that the professionals have. Only makes sense to me that they wouldn't have more retail investors outperforming professional investors. E.H. Harriman, a man who earned his wealth in the markets, studied the thousands and thousands of public trading accounts held by his firm and found that the number of accounts holding 5 and 10 point losses on various stocks outnumbered the amount of stocks holding a 5 or 10 point gain by 50-1. In my opinion, the days of holding a stock forever and creating wealth are gone. Companies like T, IBM and WMT don't have a monopoly on the market anymore. Too many upstarts come along and compete. You don't see the wealth being created anymore that used to be. Too many ENE, WCOM, NT or KKD companies that created wealth for people, took it away. Very few people locked their profits in. Short term trading won't work for everybody because you have to be able to admit mistakes freely and often. Ego must be left at the door. Short term trading works for me because I allow myself to make mistakes but I also correct them immediately. What has me outperforming the market is showing a profit every month, even if it's a small profit and I let compounding work for me. I shoot for 2% to 4% per month. The numbers sound small until you add them up. Compound 2% per month over a year and you have a very good return. Compound it over 5 years and the numbers are staggering. The reason the strategy is conceptually sound is because you are cutting losses short. If you don't have large losses or a large drawdown, you don't need large gains to get back to even. Therefore, your occasional home run stock has you well out ahead instead of getting back your losses. The reason why 95% of investors can't outperform the market is because they don't understand the negative power of the drawdown. You've heard people say, it isn't a loss if I don't take it. That's a failure to admit a mistake. That's ego getting in the way of making money. If a stock pulls back 20% and you don't take the loss, you now need a 25% profit to get back to even. If a stock pulls back 30% and you haven't taken a loss, you now need 42.8% to get back to even. Some here have taken a 40% drawdown without ever selling. They needed 66.6% return to get back to even. Take a 50% drawdown and you need a 100% return to get back to even. It's the drawdown that prevents success over the long run. I don't take double digit losses but if I did, a 10% loss only requires an 11.1% return to get back to even. There are a lot of stocks out there with the potential to provide an 11% gain. There aren't very many that will provide 42%, 66% or 100% gain. Some, but not many and again, you'd have to be correct again. Something that wasn't done on the first trade that suffered the drawback. And these numbers are required to get back to even. Where's the profit? The numbers required to show a profit after taking the drawbacks shown above are staggering. Trading or investing, like most things in life, will provide long term success if your results are consistent and the only way I know to show consistency is by achieving a series of short term objectives. To me, that means short term trading. Just providing another perspective, not saying what's right or wrong. Everyone has their own style. dabum