Umbhali Oqavile

 Trading opportunities, or should I say investing opportunities. I aspire to be a Trader and my definition of investing is "using resources to generate more resource", and for that reason I consider my trading activity to be a form of investing. But, periodically we disagree on "investing" and how it should be done. I also find myself questioning myself, is my approach the "correct" route to reach my destination, financial freedom. No doubt, trading is a good way to reach financial freedom, there's enough evidence, the question is can I do it? If I can't what other approaches can I use, and when to throw the towel. Is it possible to pick stocks that can return 10x or stock picking is a fool's game? This is one of the topics we tackled last week following Simon Brown's poll on Moneyweb, and a tweet by the Vector Equilibrium. Simon asked how "investors" performed in 2021, some didn't do well and VE asked how bad do you have to b...

 Is that even possible, yes. Can I do it, yes. The Stock Market. The Market of Stocks Beating the stock market is probably the main goal for every DIY investor. I mean if I was not obsessed with beating the market I would just delegate the investing task to the professionals and get whatever returns they can manage to get annually. By beating the stock market I mean generating alpha, have higher returns than the market. If the JSE All Share Index return 14% in the year, return more than 14%. Foundation of beating the market The first and major component is having a strategy that has a proven edge. Edge is described as the probability of one thing happening over another, in this case you need to have more profit than losses. However, your win rate does not mean much, it is the size of your wins/losses that matter, the trick is in asymmetric risk-to-reward. Your wins must dwarf your losses by a broad margin.  I use Trend Following, this approach is known to have a low win ...

At some point I nearly quit trading, or whatever that I was doing and thought it was trading. I had a strategy, by then I had already read  Trade Like a Stock Market Wizard  and  Trading in the Zone . In theory I was already in the path of consistent profitability but I was still not profitable. Not trusting the System This could be not understanding the System, but I will stick to not trusting the System despite proven results that it works. Systems, set of rules, work in certain markets, they are designed for certain markets and will not work in all markets. A Systematic Trend Following system will only work in a trending market, in a range bound market you will die by multiple cuts as you will be taking a series of stops. If you trade support and resistance levels you need a range bound market. So, the lack of trust often comes from not understanding the system and when it works. It is important to understand any system before you use it. I had a system, the JSE was i...

I am tempted to say this is a follow up Blog from the  Diworsification  Blog. Perhaps it is closely related. We are often tempted to do everything at once, whilst possible, it can yield below par results. I think I read from one of Nassim Taleb's books that the reason why Professors have average salaries is because they are generalist, they do not specialise. Conversely, neurosurgeons rake the dough, few can do what they do. I have an opinion on this argument; generalisation is good, it allows you to have a conversation with anyone about anything, the limitation of course is that you know little about anything. On the other hand, whilst specialisation is good, it can actually narrow your thinking. If I know more, a lot more about Chemistry, I may end up not knowing about Messi's departure from FC Barcelona to PSG; this is not necessarily a big deal but it does present me as an ignorant and oblivious  person. I digress.  Warren Buffett and Bitcoin Warren Buffett ...

Diversification is key This is the conventional wisdom, spread your investments to reduce risk. No doubt, it is a proven working formula. Few people are interested in placing all their eggs in one basket. But, Warren Buffett says those who diversify has no clue what they are doing. I am not in a position to argue with the Oracle of Omaha, he has made billions of dollars doing what he know. Diworsification Too much of something is a problem, just as too much diversification can defeat the purpose of diversification. Obviously, you are chasing the noble goal of minimising risk, while you are it, you are thinning out your investments! In the process, the risk and the returns just cancel each other out, making the whole process a pointless exercise. Not all is lost though, if you want to own too many stocks, just buy an ETF Bro . An exchange traded fund (ETF) is a diversified tradable security, some of the ETFs are even less volatile than individual stocks. Even there, be careful not ...

Is Aveng a good investment? I did something bad, I broke my rules and dived into Aveng's financial statements. It was for the Channel's viewers and subscribers, so it was done out of altruism. I do not do fundamental analysis, although what I did cannot be fully described as fundamental analysis. Note that I have already made a video of Aveng analysis using technical analysis. I did this to help the people who are supporting the YouTube Channel; most of those people are interested in Aveng, some of them know why whereas others do not, they bought the hype. What is in the financials? I used the company's 2021 interim results for the analysis. I then compared those with their most recent trading statement . Below is a summary of the interim results. As you can see, it is green everywhere. I love the growth in revenue, it means that there is money coming into the business bank accounts. Another great thing is the net cash, I do not know what it means but it good to see the ...

This was supposed to be a Facebook Post, but who does that when they have not published anything in days. Today I want to touch on some limitations of using technical analysis exclusively for trading or investing. I have been caught off guard many times, thanks to risk management, I manage to swim out of those situations. This list is by no means exhaustive, just what I can remember and what I have experienced. You can buy a company that is about to delist. I believe that insider trading is rife, and you cannot convince me otherwise. Typically a company can make an offer to buyout existing shareholders, more often than not at a higher price than the trading price. Some insiders may want to load up, the retail trader will start to see irregular trade volumes, and jump in if it fits their strategy. The price can go up, making really good profit. Until one day you wake up to a letter telling you that your days as the company shareholder are numbered. Well, if the offer is higher than my p...

  Few interesting charts to kick off the trading week.  Anglo American Platinum (AMS) The stock is back near R1500/share, an area of value. Although the stock is trading below its 200EMA, it may find support here, especially if there is still commodity appetite in the markets. BHP Group PLC (BHP) Another mining giant falling on its knees. The stock broke below the 200EMA, and the head-and-shoulder neckline, a not so attractive confluence. R365-ish is the next potential support. DRD Gold (DRD) In my defense, gold attempted a short-lived trend reversal, and I dived in to buy the dip. As you can see, it ended in tears. I am now bearing on gold, and most mining stocks after I exited my Sibanye position. Pan African Resources (PAN) Let us wrap up the horrible resources stocks with PAN. Another failed trade. You do not need any more convincing that at the moment gold stocks are a no go zone. Sure, most of these companies have loads of cash, they will afford to pay dividends. But, do...

I have been following cryptocurrencies for a while now, and I own a few coins through VALR . VALR is one of the South Africa's cryptocurrency brokers. Since Bitcoin broke down I have been generally bearish on crypto. However, I had a buy signal for Litecoin and XRP; I have since exited the Litecoin position, with a tiny loss. Let us look at what to expect from the cryptocurrency space. Bitcoin: $BTC moved up from the near $30 000 support level back to the near $40 000 resistance level. Note that the 200EMA is now facing downward and the 50EMA is approaching it. If we see a death-cross here we can then expect the price to go back to the support level. However, if there are enough buyers to push the price beyond the resistance level, then we might see Bitcoin go back to the previous high of $60 000. Dogecoin: DOGE just broke below the 50EMA. It is common that price can retest the 200EMA level once it breaks down the 50EMA, we saw it with Bitcoin. If that happens then we might see DOG...

Investors are always searching for investing opportunities, both in publicly listed and private companies. There are interesting private companies, except that it is a challenge to get a piece of them. So, you have to wait for the Initial Public Offering (IPO) .  Companies sell shares to the public to raise funds; they use these funds to grow the business, or to pay debt, it is a more complicated than this but you get the picture.  A handful of smart people work collectively to get the company listed in the securities exchange. This often include company founders , management, investment bankers , and other advisors. These people disagree on a number of things but the focal point of this Blog is the value of the business; from a trading perspective, the listing price. The founders want a fair price for their business. They will not settle for anything less that what they perceive to be the value of their brainchild. They will fight tooth and nail to get the highest p...

I have been keeping an eye on the gold price. As I mentioned before, patience is needed to have positive results in trading. Today gold reached the level I was waiting for, however the signal is not confirmed yet. I am waiting for the price to close above the 200EMA, then I will buy gold. I am targeting the previous high at $2100/ounce. At this level, the risk to reward is justified. Always practice risk management when trading derivatives; to minimise risk, it is better to buy a gold price tracking ETF or ETN.

  You buy a stock, for whatever reason. Then it starts to trade lower and lower, you're now not sure if you should exit or not. It doesn't matter whether the buy decision was good or bad , the assumption is that you had conviction on the buy. You have two option; exit or keep the position. I don't recommend changing from being a Trader to being a (value) Investor at this point. Exit You take a loss, hopefully a small loss (< 2% of your total portfolio, position sizing ) and move on with your life. You could be wrong and the market start to reverse, but heck you'll sleep better from now on. Your account will also recover quicker. Stay The market continue to fall, that initial -10% is now -35%. You don't want to exit now because the loss is bigger. You continue to stay, down another 10%. You can no longer handle the loss emotionally, and there's an amateur who keeps on saying "you only lose when you sell." One day your emotions will be too strong for ...

 It's been over a year since the stock market humbled me but I still get PTSD thinking about that incident. Once again, let me share my story. The emergence of Coronavirus disease (COVID-19) interrupted life as we know it. Equally, the securities markets were affected. In the beginning of 2020, South Africa was yet to feel the wrath of the virus, but on February 24 the dominoes started to fall in the Johannesburg Security Exchange (JSE). As a Systematic Trend Follower I have an obligation to adhere to the set parameters, particularly stop levels, and to bend with the market. Majority of my positions started to hit stop losses, I sold ALL my shares in order to either take a loss or lock in whatever small profit I had. In the end I was down -20%, phew. I stayed in cash position for 2 weeks before I started getting buy signals again. Despite the signals, the risk of ruin table paints a grim picture. In addition to working twice as much to break-even, trading costs also begin to be sig...

  Preparation is key if you want to have an ounce of success in the securities markets. More often than not people are drawn by the possible riches of the market, then they neglect the most important aspect of trading. A trading plan . In this Blog I want us to discuss "A Trading Plan". A trading plan consist of three components; the "strategy" and risk management. The third component of a trading plan is the Traders mindset. All these components contributes to the Trader's success, you can't leave one at the door. The Strategy There are various ways to trade the markets. Without going into more details; the two common ways are derived from fundamental analysis, where a large of pool of people uses  Value Investing , or technical analysis. Fundamental analysis, for the sake of simplicity we'll take as if value investing is the only way to do fundamental analysis, is the art of diving into company financial statements to diagnose the state of the company ...