All timeframes i use right now are daily and my trading is swing
I understand what you mean and i appreciate it, its all very helpful
Do I Need to Hire a Fundamental Analyst?
- Thread starter systematictrader
- Start date
All timeframes i use right now are daily and my trading is swing
I understand what you mean and i appreciate it, its all very helpful
Reminded me of the dogs of the DOW strategy. Typical dogs have high dividends. Fundamentals are only important if they are your long term holdings, otherwise this type of strategy typically rotates them in and out of your portfolio without regard to the fundamentals of the underlying.
One suggestion is only add fundamental analysis to your basic approach if you need to further narrow down the choices. For example, if there are >100 that fit your criteria, you may want to add fundamentals like payout ratio, debt to equity ratio, PE, PEG..... for further down select. Otherwise if it works why mess up a good thing?
hi and thanks for the input,,, ur last point is important i believe once there becomes many more that are making it into the list, as mentioned before there are only 12 right now out of 700 and thats assuming i captured every dividend stock there is with market cap 10b plus,,, i wanted to ask u what u think when the list becomes bigger say we are into a bear market whether to filter out some or simply tone down the size on ALL of them to make room for others, or even start using deep in the money call options where i can replicate the Delta, except here i would miss out on the dividend which would be detrimental if the move expected (18%) takes a long time to materialize,, ur thoughts???
also whay u define as long term holdings???
my biggest fear with this strategy remains two items
dividend getting cut, meaning i wont get as much and most importantly invalidates my pricing model for them, since my entry and exit revolves around that
the second is the company fully goes out of business and takes out my 10k allocated for it along with it
OK, so here goes (and as a disclaimer, this always works great on paper)
First, I threw out the concept of buying a stock for a dividend - how much capital do you want to risk to earn 4% over the course of a year?
Here's a chart of FTR - 2 days, 15 minutes:
How many trades do you see?
What are the percentage gains here?
Here's a chart of F - 10 days, 15 minutes:
How many trades do you see?
What are the percentage gains here?
Let's assume you see a minimum of 2 trades in each chart (4 if you like to short), you have a potential of 4 to 8 trades over a ten day period tracking two companies. We can see the 1-2% range, so that's 4% to 16% over two weeks or 104% - 416% over the course of the year if you are fully invested.
"it is impossible to catch every move" to paraphrase your comment. Yes, you are 100% absolutely correct, it is impossible. But I would ask how many trades do you need to make over the course of a year to make an acceptable return? What this demonstrates is that it's possible to make a pretty good living by having the discipline to wait for your price levels - and your trade potential increases exponentially if you add additional companies. My entries are based on price levels that I deem as "safe" based on historical support - you can chose an entry price OR an entry yield. Ask yourself "why will other people buy this stock?"
My exits are rule-based and I typically get out the same day if I realize 2%, and will bail the next day at 1% (this was the hardest part of my trading journey). If macro events are blowing in my favor, I may hold out for a little more. However, keep in mind that every position you have carries an opportunity cost in that your capital is tied up in the trade your in, so you may miss the next one. I've come to the conclusion that you'll never be able to catch every trade no matter how much capital you have. I may be wrong, but it keeps me sane. I typically scale into my positions and don't necessarily day-trade. Once the exit door opens, I walk through it - it may be two weeks, or may be 2 minutes.
The last variable in all this is capital allocation and I've found that if I'm willing to invest 5% of my account per trade, and I follow my rules, I can grow my trading account 50 basis points per week. If I risk 12.5%, I can grow my trading account 100 to 200 basis points per week. If I risk 25%, I can grow my trading account as much as 500 basis points. I max out at four positions, so at the 25% level, I'm fully invested. At that juncture you need to study the message threads on psychology, because seeing your account grow at that pace (or fearing you can lose at that pace) becomes very counterproductive.
Hope this helps - happy trading!
Today's news on OPEC is that production was cut by 1.5 million barrels - so tomorrow morning, the price of oil is likely (not definite) to rise, while wall street will make their crude oil forecast adjustments and release them afterwards. Stock prices will discount higher earnings estimates before the new numbers are forecast - so the numbers will be reflected in charts. We'll have new highs that will retrace to prior technical resistance, which will then be shorted by individuals and machines. Short-covering will drive the ride up... Traders will immediately get to work while analysts updated their models, send their research reports to compliance, and at some point publish their numbers.
U.S. production will increase to fill the void - so the party won't last forever, so prior resistance will become the new short....
U.S. production will increase to fill the void - so the party won't last forever, so prior resistance will become the new short....
1. I generally held stocks I liked for years if not decades.
2. Look at payout ratio. If low then chances of dividend cut is lower.
3. Look at other fundamentals of the company, of the industry and the economy.
I actually do both - My IRAs are comprised of stocks that I hold for 3 to 5 years. But I also trade these in a much more cost-effective account to catch the $0.25 and $0.50 moves that happen during the week.
If I'm holding a stock for 3 to 5 years, I look at the outlook for free cash generation, not necessarily the payout ratio since free cash is the mother of value creation.
Rufus, we have been in a bull market. You need to backtest your strategy through times like 2008 and 2002, or else figure out a workable filter to avoid being in the market at those times.
Buying dividend stocks on pullbacks is a good strategy in a bull market. Right now, those with 6% dividends are not the highest quality stocks. Choosing stocks with lower dividends that have proven dividend growth may be a strategy with slightly lower return but significantly less volatility, and may provide you (over times) with better compounded returns.
Buying dividend stocks on pullbacks is a good strategy in a bull market. Right now, those with 6% dividends are not the highest quality stocks. Choosing stocks with lower dividends that have proven dividend growth may be a strategy with slightly lower return but significantly less volatility, and may provide you (over times) with better compounded returns.
Thats a very good point to backtest those times, iam going to do so, as far as choosing stocks with lower dividend its a good idea but poses the question of what selection criteria??? Which in itself is a whole subject, anu opinion??
Also dont forget if i get 3 years worth of the dividend in the form capital gain iam out, at least for now thats the trend, what i can do in volotile drop times is increase that to 24% or 30% lets say for the added risk, your thoughts ? Iam trying to keep it as systmized as possible and as standrized as possible in its application, iam not afraid to introduce fa but fear that there are so many variables it becomes subjective how they r used
Some of these types of stocks were down 50% or more in 2008. Holding through a period like that only makes sense if you buy high quality names at a discount and hold them for a very long interval (much longer than 3 years). The stocks you are talking about are not high in quality. Healthy companies with long-term, modest, growing dividends usually recover from things like 2008, while other companies may not.
However, there is no way to know which industries will get hammered in a downturn. Even supposedly good companies (think FNM, BAC) have never recovered from 2008. IMO, it's best to be out of the market at those times. A dividend is just not a good enough hedge against bear markets.
Personally, I would choose more stable companies with lower dividends and excellent dividend growth over many years, and also consider exiting stocks during bear markets. Any simple method for identifying a bear market will do--since you are considering long holding periods, it does not have to be perfect (for example, the SPX falls below its 10-month moving average). Check out this piece about the dividend "sweet spot." http://seekingalpha.com/article/646801-the-dividend-sweet-spot
However, there is no way to know which industries will get hammered in a downturn. Even supposedly good companies (think FNM, BAC) have never recovered from 2008. IMO, it's best to be out of the market at those times. A dividend is just not a good enough hedge against bear markets.
Personally, I would choose more stable companies with lower dividends and excellent dividend growth over many years, and also consider exiting stocks during bear markets. Any simple method for identifying a bear market will do--since you are considering long holding periods, it does not have to be perfect (for example, the SPX falls below its 10-month moving average). Check out this piece about the dividend "sweet spot." http://seekingalpha.com/article/646801-the-dividend-sweet-spot