This Blog Series covers some pretty complicated stuff and I recommend that you read Parts 1 and 2 before you attack this one - you can find them here:
http://wheeliedealer.weebly.com/educational-blogs/the-mechanics-of-a-trade-part-1-of-3 http://wheeliedealer.weebly.com/educational-blogs/the-mechanics-of-a-trade-part-2-of-3 Example 3 - You want to buy 3 Shares in Company XYZ - a ‘Tree-Shake’ This next situation only tends to happen on Small Stocks which are illiquid and where the actions of one Market Maker can affect the Price - on a large and liquid Stock, this kind of thing simply cannot happen as in effect it can throw up an arbitrage opportunity where another Market Maker can take advantage of the artificial Price move and in addition such big Stocks are watched by Traders in general for every tiny move and any mis-pricings would be quickly bought or sold away.
0 Comments
It’s funny the things in life than can really get under our skin and something that really grates with me is when I see people on Twitter sending out a Tweet to the effect of “A big Buy for 200,000 Shares just went through on XYZ……” (heck, even just typing this is getting my Blood Pressure up !!).
Apart from the fact that the vast majority of people who Tweet sh*te like this are probably Rampers (or perhaps they are just not very clued up on what is really going on), the big issue with this is that if there is a Buy for any Shares then it is a simple truth that there is always one or more Sells on the other side. So if you are taking notice of a Buy Trade and thinking that this is a good thing, then you must be making the cognitive leap that whoever was on the Buy side knows more than whoever is on the Sell side. Without knowing who the individuals are, that is obviously impossible to know and even if you did know who was Buying, you are making an assumption that they are correct (no one is 100% right - even Warren Buffett gets things wrong).
This is the last part of this Blog Series and you can read the earlier bits at these Links:
http://wheeliedealer.weebly.com/educational-blogs/the-spectrum-of-how-to-organise-a-nations-economy-part-1-of-3 http://wheeliedealer.weebly.com/educational-blogs/the-spectrum-of-how-to-organise-a-nations-economy-part-2-of-4 http://wheeliedealer.weebly.com/educational-blogs/the-spectrum-of-how-to-organise-a-nations-economy-part-3-of-4 The Counterpart to High State Spending - High Borrowing Invariably whenever a Socialist Government embarks on a high level of State Spending, it has to fund that Spending and it is usually too difficult within the Political constraints of Western Economies to tax People and Businesses within the Economy at a level that would cover all the Spending (and to be fair that would make little sense anyway because a CONTROLLED amount of State Borrowing can be worth doing and affordable provided that the Economy is growing at a sufficient rate), and as a result the Government has to borrow money by issuing Bonds.
This probably won’t be a particularly long Blog but I just wanted to scribble something about how my ‘Style’ or ‘Approach’ so far in 2018 (and with barely 2 Months left it ain’t gonna change much - although of course I might stick with the Current Style for a while yet as we go into 2019), has been markedly different from how I usually do things.
In most ‘Normal’ times I tend to focus on picking Stocks and I sort of relax in the fairly certain belief that more often than not the Stockmarkets are going to rise (after all, this is by far their usual way of doing things with Bull Markets vastly outnumbering Bear Markets) and perhaps I switch to more of an Index or Market focus when we get towards Autumn or if other one-off Events like a General Election or something mean that there is likely to be a Short Period of pain ahead which will need me to Hedge by focusing on the Indexes and using Spreadbet Shorts to try to offset some of the damage that my Long Portfolio is likely to suffer and soon after the ‘Problem’ I normally find that Markets and my Portfolio recover quite promptly.
I often get asked how I managed to accumulate enough Capital so that I could retire at the ripe old age of 44. OK, it is time to come clean about one of my Dirty Little Secrets - I am one of the UK’s most prolific National Lottery Winners !!
Obviously I am far too modest to talk about this much and it is no big deal because I have never won the Top Prize or anything but I have a ‘system’ by which I regularly make small Wins which of course add up to a large amount over time.
This is something I often seem to discuss with People and to Tweet about but I am not sure if I have ever written much about it in my Blogs. Anyway, the point I am making here is that when calculating the Performance of your Portfolio or of the Stocks within it, it is always a good idea to think in terms of Percentages - not in terms of the Pound Notes.
There are many reasons for this but the main one is that once your Portfolio gets to a particular Size (and this will vary depending on each and everyone of us and our attitudes/personalities especially with regard to Risk and of course how ‘Rich‘ we are in total), if you start to think in Pound Note terms then you can easily frighten yourself and this will lead to Fear, Panic, and other Cognitive Errors that the amount your Portfolio moves about is instilling in you.
This Blog has absolutely nothing to do with Stocks and with the Market in its current ungenerous mood it seems a good time now for ‘Something completely different’.
A few Weeks back I did my usual Weekend Blog and included a Link to a YouTube Video of BBC Top Gear which came from the Last Episode of Season 2. Sadly since then the Video is no longer available on YouTube due to ‘Third party Copyright Infringement’ but my mate @InvestingMartin did some poking around and managed to find it here - thanks chap !! You need to scroll to 33 mins ish: https://www.dailymotion.com/video/x3jro9c Following on from that, I have had countless questions about what it was like to appear on Top Gear and I think the best way to respond is for me to produce a Blog about it, so here it is. I am remarkably lucky that despite all my fears that in a fairly short period of time I would run out of ideas for Blogs and get chronic Writer’s block, by some weird quirk I manage to continually trip over new ideas that I think would make interesting subjects to write about (so that keeps me enthused to actually write them !!) and enable me to get some valuable educational points across to Readers. These ideas just seem to emerge from nowhere for much of the time but in this case the subject came about from an idea thrown up by a question from Snailspup via Twitter (@Winterfell4x) - I was going on about what to do when bad times hit (I had been reading ‘Trade Like a Shark’ by Robbie Burns which is strong on this) and saying if you have a proven system that works over time then you should stick to your knitting etc. and not panic.
Snailspup has been trading for about 5 years I recall but never been through a Bear Market so how can they know if their system works? I can’t recall the exact turn of the conversation but in essence this bit was asking if there was a way of measuring how reliable an Approach for engaging with the Stockmarkets was, and then there was a secondary part about how can you prepare for a Bear Market in advance?
This is the Final Part of a Series of Blogs - if this is the first time you have been unlucky enough to find this Series then Links to the earlier Parts are at the bottom of this one if you scroll down.
Conclusion I am hoping that I have done these Blogs in a way which Readers can makes sense of and will enable them to think about how to go about such Index Trading themselves if the urge takes hold. You can use ETFs like XUKS (a way of Shorting the FTSE100 that you buy and sell like a Share. To go Long on the FTSE100 you could use something like ISF I think - you will need to check this) instead of Spreadbets and of course things like CFDs will give a similar result (but these come with Tax disadvantages when compared to Spreadbets). But it goes without saying (but I will say it anyway !!) if you do fancy having a go you must be extremely careful and start with a Practice Account perhaps or at least start with very low Position Sizes - don’t go betting £1000 a Point on the FTSE100 on your first Trade !! (that would be equivalent to about £7.2m of Exposure by the way !!!). Before I finish the Blog Series off, I just want to stress the following Key Points:
Stage 5 - 2015 to 2018 - Well into the Bull Run
Here comes The WheelieDealer. More sophisticated Trading Tricks and focus on Psychology. Enforced Discipline.
|
'Educational' WheelieBlogsWelcome to my Educational Blog Page - I have another 'Stocks & Markets' Blog Page which you can access via a Button on the top of the Homepage. Archives
January 2021
Categories
All
Please see the Full Range of Book Ideas in Wheelie's Bookshop.
|