Author Archive

Three Fatal Trading Mistakes

Friday, February 3rd, 2012

There are a wide variety of mistakes you are likely to make while learning to trade, but there are three mistakes you had better learn to avoid very early in your trading career. Before you start trading you must verify your trading strategy works by testing it both historically and on real-time data. Controlling the size of your losses is essential and without sound risk management you’ll never trade successfully. But controlling losses is not enough; you must also resist the temptation to over trade. Any of these three mistakes can be fatal to your trading success.

Trading untested ideas

Poor analysis or research is common among new traders. You may hear a news report about a particular company and decide it would be a great idea to trade the company based on the report. Unfortunately by the time the news gets to you many other people already have the information and have made their trading decisions. There’s a saying in the stock market: ‘buy the rumour, sell the fact’, meaning that when the news is finally released it’s very often too late to enter a trade. Following tips or rumours is a sure sign that you haven’t adequately prepared to enter the market. By doing your own analysis you can determine what works and what doesn’t.

Back test or forward test your trading idea before ever entering a trade. Back testing involves testing your idea on historical data and allows you to test a large number of ideas very quickly. For example, you may scan a lot of charts and identify a particular pattern that appears before significant moves in a share. This is back testing.

Forward testing (often referred to as paper trading) involves testing your idea on current data as it becomes available. To verify that your idea works, look for opportunities as they unfold because your chosen pattern may occur without a strong move following it. This is using forward testing to confirm your idea. Forward testing is more reliable than back testing, but much slower to perform.

In its simplest form you can back test by looking at lots of charts so you can begin to recognise patterns that occur before a strong move unfolds. When I started trading I studied thousands of charts to find out what worked and what didn’t, then narrowed down a few ideas to follow through with forward testing to see if they continued to work. Ensure you complete a thorough analysis before entering a trade, or follow a more experienced trader’s strategy.

Allowing losers to get out of control

Failure to cut losses can quickly result in disaster for any trader because the market can move far more than you expect. This is probably the most common mistake we see new traders make. The trader hopes the trade will reverse direction and move back into profit. Refusing to take the loss, the trader continues to hold the trade while willing it to turn into profit. While this may happen occasionally, when the trade doesn’t turn around it can do severe damage to your trading account. Cut your loss and look to re-enter if another entry signal appears. Ensure you develop the discipline to enter a stop loss into the market every time you enter a trade. This ensures you never get hit with large losses.

Mental stops are stop-loss orders that you place in your head instead of the market. For example, you decide to exit a long trade at $3.10, but when the market approaches $3.10 you convince yourself the market will move higher soon so you don’t take the exit as planned. The loss can now get seriously out of control and you could lose a lot of money. The problem with mental stops is you have to act on them. This can be difficult because when you are required to execute the trade you’re often in a losing position and hoping things will turn out ok. Even if you have been able to develop the discipline to act on your stops, the market sometimes moves very rapidly and you may end up losing more than you expect.

Mental stops may be used by experienced traders, but must never be used by beginners. Until you master the discipline to take exits when they’re signalled, stay well away from mental stops. Focus on good stop placement to avoid getting stopped out.

Overtrading

Another common mistake traders make is overtrading. It’s possible to make very nice annual returns from just a few good trades a year. High frequency trading is not required to make a profit. If your strategy has a sound edge then the more opportunities you have to trade it the better, but don’t confuse trading a lot with trading successfully. A few good trades can make a good year. It’s not necessary to be in and out of trades 20 or 30 times a day to make a profit.

Some of the most valuable time you can spend is identifying the best opportunities. There are millions of trading possibilities. It becomes necessary to make some choices and narrow your selection of what you will trade. To do this it’s necessary to overcome the fear of missing out on an opportunity. Remember the opportunity of a lifetime comes along every week! Many great opportunities will appear, so stop wasting your time and money on half-rate opportunities. Accept nothing less than the best when selecting trades. This
more selective approach can dramatically improve your profitability.

Eliminating mistakes

Eliminate these three fatal mistakes we’ve just discussed and your trading will improve dramatically. However, to eliminate the mistakes, first you must identify when you’re making a mistake. Your trading diary where you record your trades, wins and losses allows you to identify areas where you’re failing to stick to your plan. In particular be honest about the reasons you entered a trade. This honesty may take some time to develop because it’s not nice to admit you took a trade because you wanted to make back the money you lost in the morning. It’s easy to justify that a setup was in place, but tell the truth. You’re only lying to yourself.

Identify why you fail to stick to your plan and what you must change to eliminate the mistake. If the reason you fail to execute the core skills is emotionally based then monitor how you’re feeling when you’re trading and notice when particular emotions appear. Address each bad habit, one at a time, to change your behaviour.

Refining your trading skills takes practice to improve on the areas in which you’re weak, but the rewards are worth the effort. Becoming a better trader requires you to become a better person. This is one of the reasons you can find trading challenging to learn. Fortunately once you’ve changed a few habits, successful trading becomes much easier.

Jeff Cartridge
Education Manager

Post to Twitter

ASX Company News: Living Cell Technologies Granted US Patent For Disease Free Pigs

Friday, February 3rd, 2012

Living Cell Technologies Limited (LCT) announced that it has been granted U.S. Patent No. 8,088,969 from the United States Patent and Trademark Office (USPTO). The patent provides exclusive rights to the use of cells and tissue derived from Auckland Island pigs for xenotransplantation therapies. It protects the holder’s ability to commercialise therapies based on its core cell encapsulation and xenotransplantation capabilities. The original Auckland Island pig herd has been developed by LCT over the last decade to produce a unique stock of pigs which are free from disease and, in particular, do not transmit pig viruses to human cells. The pigs are housed in bio-isolation facilities in New Zealand, and cells are harvested for the treatment of human diseases. Regulatory authorities in New Zealand, Argentina and Russia have judged the cells free of infectious organisms and safe for human recipients.

Professor Bob Elliott, LCT’s Medical Director said, “A disease-free source herd is an absolute requirement for transplantation of animal cells into humans. The discovery of the Auckland Island herd, its subsequent development and the characterisation of its disease-free properties is the foundation of LCT’s human xenotransplantation trials for diabetes and degenerative neurological conditions.”

Living Cell Technologies (LCT) is developing cell-based products to treat life threatening human diseases. The Company owns a biocertified pig herd that it uses as a source of cells for treating diabetes and neurological disorders. The Company’s lead product, DIABECELL®, consists of microencapsulated porcine islets which are implanted into a patient’s abdomen using a simple laparoscopic procedure. DIABECELL is designed to help normalise the lives of people with unstable Type 1 diabetes, especially those suffering from life-threatening episodes of unaware hypoglycaemia (low blood sugar), a dangerous and potentially fatal diabetes complication. The Company entered clinical trials for its diabetes product in 2007 and very encouraging results have been reported to date.

www.lctglobal.com

http://www.traderdealer.com.au/Fundamentals/lct

Post to Twitter

ASX Company News: Beacon Minerals Sells Mining Lease

Friday, February 3rd, 2012

Beacon Minerals Ltd (BCN) is pleased to announce it has signed the legal sale agreement with Ramelius Resources Ltd to sell Mining Lease ML 77/1254 (BCN ownership 80%) at the Barlee Gold Project. The sale of this asset will establish a strong financial base for the Company to grow, potentially through both the acquisition of new ground and further exploration of the remaining Barlee tenements. This recapitalisation will allow the Company to continue exploration of several prospective targets at Barlee as well as continue the current advanced negotiations on project opportunities which are located in geological regions where existing large scale gold resources occur. Further details of the Company’s planned activities will be released to shareholders in the coming weeks. The payment terms for sale of the Mining Lease are : Payment of $4 million cash representing reimbursement of exploration expenditure.

www.beaconminerals.com

http://www.traderdealer.com.au/Fundamentals/bcn

Post to Twitter

ASX Company News: Mariner Goes Shopping

Friday, February 3rd, 2012

Mariner (MCX) has explored a number of investment opportunities over the last 3 months, and is now pleased to announce to the market a number of acquisitions: 1,078,167 shares in Capilano Honey Limited, representing 12.65% of the issued equity of that company; 6,630,958 shares in Farm Pride Foods Limited (ACN 080 590 030), representing 12.02% of the issued equity of that company; 1,700,000 shares in Tasmanian Pure Foods Limited (ACN 124 272 108), representing 19.65% of the issued equity of that company; 1,441,039 shares in Peanut Company of Australia Limited (ACN 057 251 091), representing 19.83% of the issued equity of that company.

These four investment stakes will be acquired from a listed Australian investment company for a total consideration of $3,160,000. The acquisitions are in line with Mariner’s strategy, outlined by Mariner’s new management team in early 2011, to acquire strategic stakes in the small cap sector.

www.marinercorporation.com.au

http://www.traderdealer.com.au/Fundamentals/mcx

Post to Twitter

ASX Company News: Boral To Sell Indonesian Construction Materials Business

Thursday, February 2nd, 2012

In line with Boral’s (BLD) strategy to divest of non-core assets and focus on the core product portfolio, the Group announced  that it has reached agreement to sell the Indonesian construction materials business for an enterprise value of US$135 million to Siam Cement Group. The sale includes Boral’s concrete, quarry and precast operations, including limestone reserves in Indonesia. In FY2011, the collective businesses generated revenue of US$150 million and EBITDA of US$14 million. A once-off pretax profit of circa US$35 million against current book value is expected in the FY2012 results.

Commenting on the sale, Boral’s Chief Executive, Mark Selway, said: “The sale of the Indonesian construction materials business is in line with our strategy to realign the product portfolio to focus on core businesses where we hold leading market positions.” Boral will make its first half results announcement on 28 February 2012, with the record date for the FY2012 interim dividend now being 9 March 2012. As foreshadowed at the 2011 AGM, the Group expects first half results to be similar to the results for the second half of FY2011, after adjusting for property earnings which are all expected to arise in the second half of the year and the impact of the closure of the Galong lime plant in Cement. This produces an expected Group Profit After Tax range of $65 – $70 million, before significant items.

www.boral.com.au

http://www.traderdealer.com.au/fundamentals/bld

Post to Twitter

ASX Company News:Greencross Acquires Maitland and Rutherford Vets

Thursday, February 2nd, 2012

Australia’s largest veterinary group Greencross Limited (GXL) is pleased to announce that it has entered into agreements to acquire the Maitland Veterinary Hospital and the Rutherford Veterinary Clinic. Total cash consideration, including deferred payments, to be paid for this acquisition equals $2,823,069. The acquisition is expected to deliver annualised revenue and EBIT of $3.312m and $0.650m respectively. The acquisition is expected to be earnings per share accretive in the 2012 fiscal year. Both clinics are situated in Maitland, New South Wales and are well established businesses that have been in operation for over 38 years. Both vending veterinarians have entered into employment agreements with Greencross ranging from 1 to 3 years in duration. Greencross in pleased to also announce that it has entered into an agreement to purchase a further 16.31% of the shares in the Animal Emergency Centre Pty Ltd (‘AEC’). This will take the Company’s total ownership in the AEC from 59.00% to 75.31%. The total consideration for the AEC shares equals $856,165.  The consideration for the AEC shares is to be settled by the issue of 668,879 Greencross shares to the vendors.

Greencross was established in 2003 and has grown to become Australia’s leading veterinary services company through the acquisition and integration of 73 practices around Australia. Greencross’s strategy is to continue to consolidate the fragmented veterinary services industry in Australia and is focused on delivering exceptional veterinary medicine and levels of care to its patients. The company’s vision is to be the practice of choice for employees, clients, patients and shareholders.

www.greencrossvet.com.au

http://www.traderdealer.com.au/fundamentals/gxl

Post to Twitter

ASX Company News: Webfirm Secures Wotif Advertising Contract

Thursday, February 2nd, 2012

Webfirm Group Limited (WFM) announced Adslot has entered into a commercial agreement with Wotif Holdings Limited (WTF) to implement Adslot’s end-to-end self-serve display sales platform. The Wotif Group operates Australia and New Zealand’s leading accommodation site, represents more than 19,000 properties in 66 countries world-wide and transacts more than $1 billion AUD of accommodation bookings each year. The Adslot self-serve platform will enable advertisers to buy, build and serve display advertising campaigns on wotif.com. The platform provides wotif.com with an automated and highly scalable sales channel to capitalise on display ad revenue opportunities from advertisers in a secure private marketplace.

Andrew Barlow, CEO of Webfirm Group, said: “Wotif is a recognised world-leader and innovator in one of the fastest growing online sectors. We are excited to be working with yet another classifieds market leader and look forward to playing a key role in building wotif.com’s display advertising revenue.” Robbie Cooke, Managing Director of the Wotif Group stated, “The Adslot platform has a proven track record in the Australian market place and presents an ideal opportunity for us to tap into the display advertising market. We are looking forward to a strong partnership with Adslot.”

With the addition of Wotif.com, Adslot now provides display advertising automation solutions to market leading online classifieds publishers in property, automotive and accommodation across three countries.

www.webfirmgroup.com

http://www.traderdealer.com.au/fundamentals/wfm

Post to Twitter

ASX Company News: Southern Gold Enters Joint Venture With Integra Mining

Wednesday, February 1st, 2012

The Directors of Southern Gold Limited (SAU) are pleased to announce that Southern Gold and Integra Mining Limited (IGR) have executed a Share Subscription Agreement pursuant to which Integra has agreed to take a placement of Southern Gold shares equal to 10% of the expanded share capital at $0.05 per share to develop Southern Gold’s wholly owned Cannon Gold Resource.

Commenting on the transaction, Southern Gold Managing Director, Nanette Anderson said “this initial business relationship with Integra Mining is seen as a key step forward in realising value from our exploration success at the Bulong Gold project. The funding premium to the current share price highlights the value placed by our industry peer on the high quality and potential of the Cannon Gold Resource; These are near surface gold ounces which warrant economic evaluation”. Further, Nanette Anderson pointed out that, “Southern Gold acknowledges the commercial success of Integra as evidenced by their successful exploration and recent development of several nearby gold resources. We see a strong business synergy and added value in our relationship with Integra in the evaluation and possible development of the Cannon Gold Resource”.

Integra will be issued with a number of fully paid ordinary shares that is equal to 10% of Southern Gold’s expanded issued share capital at the time of completion of the placement, calculated (based on the current share capital structure of Southern Gold) as 26,976,644 ordinary shares at $0.05 cents per share, for consideration payment of approximately $1.35 million. The Southern Gold shares placed to Integra will be subject to a 12 month voluntary escrow period. Integra has agreed to a standstill period of 12 months following completion of the placement, subject to certain exceptions including Southern Gold Board approval and a 3% creep provision for on-market share purchases during any 6 month period up to a maximum shareholding of 15%.

www.southerngold.com.au

http://www.traderdealer.com.au/Fundamentals/sau

Post to Twitter

ASX Company News: Fletcher Building Acquires German Laminate Company

Wednesday, February 1st, 2012

Fletcher Building Limited (FBU) announces that its Formica business has reached agreement to acquire all of the shares in Homapal Plattenwerk, a manufacturer and distributor of metal and specialty laminates, for €30 million (NZ$48 million). Formica has been a 50-percent shareholder – and the largest customer – of the Germany-based company since 1983.

“Homapal is a successful company with an outstanding reputation as a niche leader in the high-end metal and specialty laminate business,” said Formica chief executive Mark Adamson. “We’ve been a part of the Homapal business for decades. We understand its capabilities and market differentiating qualities, and we’re eager to welcome Homapal to Formica while expanding our Laminates & Panels division.”

Homapal is a global leading specialist in the design, manufacture and distribution of high-quality metal and specialty laminates. Its product range is complementary to Formica’s, and will consolidate Formica’s position as a global brand leader in the surfacing industry. Full ownership of Homapal will increase Formica’s presence in Germany, one of the world’s largest laminate markets and where Homapal already has a strong market position. It will also allow Homapal to achieve greater access to growth opportunities for metallic laminates in Asia, due to Formica’s strong presence through its distribution network and customer base.

www.fletcherbuilding.com

http://www.traderdealer.com.au/Fundamentals/FBU

Post to Twitter

ASX Company News: Automotive Holdings Group Acquires Jeff Wignall Group

Wednesday, February 1st, 2012

Automotive Holdings Group Limited (AHE) announced it had acquired the business and assets of the Jeff Wignall Group (JWG) in Victoria, excluding the business of Southern Mitsubishi. The dealerships to be acquired from JWG comprise 9 dealership points – Ford (4), Mitsubishi (1), Kia (4) – at 5 locations throughout the Mornington Peninsula in Victoria which turnover approximately $100million p.a. The purchase price is approximately $14million inclusive of goodwill and trading assets but excluding vehicle inventories, which will be funded by AHG’s floor plan facilities. The purchase price is being funded from the proceeds of the capital raising completed in 2011.

AHG Managing Director Bronte Howson said the purchase of JWG’s dealerships was a significant addition to AHG’s automotive operations in Victoria. “AHG has an underweight presence in Victoria and we plan to continue to build our business in Melbourne where we can add value. We acquired Ferntree Gully Toyota in 2010 and the purchase of JWG gives us further scale with some leading brands in Ford, Mitsubishi and Kia. This builds on and strengthens our existing relationships with these key manufacturers” said Mr Howson. The principal of JWG, Andrew Cross, said the sale to AHG would provide a platform to continue to grow JWG’s dealership franchises as part of AHG. “The sale to Australia’s largest automotive group is a great opportunity for JWG’s dealerships.

Automotive Holdings Group Limited (AHE) is a diversified automotive retailing and logistics group with operations in every Australian mainland state and in New Zealand. The Company is Australia’s largest automotive retailer, with its major operations in Western Australia, New South Wales and Queensland. AHG also operates the Prestige Hino truck dealership in Dandenong, Victoria – one of the largest in the country, and a leading Toyota dealership in Melbourne. AHG operates logistics businesses throughout Australia through subsidiaries Rand Transport and Harris Refrigerated Transport (transport and cold storage), AMCAP and Coventry’s WA (motor parts and industrial supplies distribution), VSE, providing vehicle storage and engineering, Genuine Truck Bodies, which provides body building services to the truck industry, and KTM Sportmotorcycles (motorcycle importation and distribution in Australia and New Zealand).

www.ahg.com.au

http://www.traderdealer.com.au/fundamentals/ahe

Post to Twitter