Some Common aspects between the Types in the Spectrum:
Key Differences across the Spectrum Types:
This is the Last in my series of 7 blogs on Spreadbetting but at the bottom it includes links to all 6 other parts.
An unusual Approach that may or may not fit in one of the Styles in the Spectrum.
There is one Approach that doesn’t necessarily fit neatly within the Spectrum of Trader / Investors types - arguably it does have a slot, but I leave it to Readers to take their own view of where it should go (in other words, I have no idea where to shove it !!).
The particular Approach is that used by Ed Croft on his Stockopedia Website which uses a Data-driven numerical approach to select Stocks and run a Portfolio - its results have been extremely strong. I am not all that expert in understanding it, but in essence the System lists the Stocks that you should Buy and hold in a Portfolio and I think it will also tell you when to Sell them as the Numbers change. I think it is based on the ‘Stockranks’ which are derived from all sorts of aspects of a particular Stock like Debt, P/E Ratio, Dividend yield, Momentum, ROCE (Return on Capital Employed), PEG Ratio (Price Earnings Ratio divided by Profit Growth Rate), Sharpe Ratio, etc. etc.
The strange thing about this approach is that it seems to be very Passive as you don’t really need to do much except do what the System tells you - but the Paradox here is that many people like myself would probably not classify it as ‘Investing’ - in many ways it has more in common with ‘Trading’ approaches which are more Quantitative and less Qualitative in nature. For me personally, it is not something that appeals as it seems a bit like ‘Painting by Numbers’ - it lacks the ‘Art’ which I enjoy - it is more like ‘Science‘. Of course a big risk is if Stockopedia ever stopped providing the Stockranks.
I admit I know very little about this so probably most of the last few paragraphs is utter tosh - however, to get more of an understanding, @GrindertraderUK is running a low effort Portfolio which he calls his ’Stockranks Farming Approach’ here:
There are loads of articles on it which are well worth a look.
When you make your tentative (or ‘Gung Ho’ in some cases unfortunately !!) first steps into the Markets, it makes best sense in my view to approach it from the Active Investor end of things. I see many, many people who start off by paying some or other ‘Guru’ for a Trading Training Course where they have been sold on the idea that you can make £000’s every week just by learning the principles of the Course. Needless to say, this is complete bollox and it is a total waste of money to pay these people £3000 or something when you will come away pretty much clueless and now you have even depleted your Valuable Capital.
It makes far more sense to start slowly and learn from all the other experienced Investors that are around (especially on Twitter - please see my ‘Beginners’ Page to get some ideas of people to Follow and Websites that are worth looking at), and after perhaps a couple of years you will be more steeped in what is going on and maybe you can then make a sensible well thought through decision that you want to move to more of a Trader type approach, from a position of real understanding.
If you do it this way you have hugely more chance of being successful and if you start off by wanting to be a ‘Trader’ then you will most likely lose huge amounts of money and end up disillusioned and leave the Markets altogether - this would be the biggest and most expensive mistake you will ever make in Life - don’t ever give up - the markets are the best and easiest way of making money there is once you know what you are doing.
A Word of Warning
My own personal experiences and observations of other People make me think that mixing Investor Styles with Trader Styles does not work very well for the vast majority of people. To a large extent, I find they are incompatible.
What I mean by this is that it is far better to stick to one particular Style and to become truly an expert at this, than to chop around from one Style to another. Over the years I have tried to do Daytrading and Position Trading but I am quite frankly useless at it - for me I think the biggest problem is inability to use Stoplosses and the conflict of Timeframes.
When I think about it, I have put a lot of effort into learning the Skills of Short Term Trading but it is only by applying my Long Term Active Investing Principles (as laid out on the ‘M3 Manifesto’ Page of my Website) that I have really brung home the Bacon. Sadly, the time I spent on Short Term Trading (and a fair few Quid LOL) was mostly wasted - although it has taught me a few tricks to help refine my Investing activities.
I suspect a lot of ‘Short Term Traders’ that I see on Twitter are fooling themselves - they all make out that they are in the Money but I am not convinced and there are clearly a lot of People who only tell the World about their Winners. The simple fact is, if you are a Trader and you are not making many multiples of your capital every year, then you are wasting your time and the chances are that any success you are having is purely down to Luck and Probability.
It is important to know where you are on the Spectrum - it may be worth spending some time on this and thinking about how it affects what you are doing. Are you working too hard on your Market Activities? Are you making the right sort of Returns? Are you enjoying it? Should you change to a Style that may fit your lifestyle better? Are you anxious and worried all the time? Is Wheelie talking a load of shite here?
One of my reasons for writing this Blog, or at least why the idea was in my mind in the first place, is because I have been very attracted to the methods that @stealthsurf and @YaiLondon use. I don’t see approaches very often that are sufficiently different to my own so they would actually be worthwhile changing to, but the System these guys use looks like it could consistently work very well - and clearly does for these guys. It has the beauty that it is very Rules Based from what I can tell and the subjectivity which most approaches suffer from is largely removed.
My thinking here is that if ever my own approach stopped working (unlikely, but I never want to have to Work again so it is important I have a Contingency Plan !!), then I could totally change my Style to follow their methods - it wouldn’t be a perfect match (I like doing Company Analysis and their approach is more Technicals based and mechanical) but it would be a compromise worth taking as it would mean not having to get back in the Rat Race !!
Even if I do not adopt their approach precisely, it is very good at highlighting Stocks in strong Uptrends and it is these kind of Stocks where further Fundamental Investigation might prove very worthwhile.
@stealthsurf does Tutorial Articles on his Website with lots of information about how the approach works:
There is masses of Educational stuff available about all of the Styles across the Spectrum, one place that should have various books on each of them is Wheelie’s Bookshop on WD2 at:
Ok, that’s it, thanks for sticking with it, wd.
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