Author Topic: Transitioning from current DIY portfolio to SPA3 investor - new member  (Read 225 times)

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Offline Tyson

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Hello,  :wave: I am a new member of SPA3 Investor.  Before joining, I have been self managing a buy/hold portfolio that is currently over 20 stocks.  Panic sold in the COVID19 March crash and took large capital loss  :frown:.  Came to SPA3 to find a better way. 

A lot of the stocks I hold are not part of the SPA3 Investor stock universe.  I need help to manage a transition phase.
I have added all of my holdings into the SPA Trademaster (I had to Pyramid several parcels in single holdings as well).

I don't want to sell my shares just because they are not part of the SPA3 investor, as I have only learnt more about SPA3 ASX membership and what it does today!  And in the SPA3 ASX universe, my current holdings would quite possibly be open positions on my trades.   

So, I feel quite exposed with trades that have no current protection and I am no longer prepared to just let stocks fall and rise over time (GFC took me 10 years to recover losses). 

What to do?   :confused: :confused:
I am sure many members have been in the same position as me. 

Thank you. 
 

Offline Sharkie

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Hi Tyson

Welcome!

I can't offer financial advice, but have you prepared your trading plan yet?  If not, you will find help on how to do so in the education section of the members area at https://learn.sharewealthsystems.com/courses/331967/lectures/5098687.

Your trading plan should include details of how to start your portfolio.  Here's what mine says for my ASX equal weighted portfolio.

"5.4   Starting the Portfolio

There are two ways that a new SPA3 Investor ASX Equal Weighting portfolio can be started:

1.   Each position in the portfolio can be opened when a new SPA3 Investor buy signal occurs for each selected stock; or

2.   New positions will be taken in any currently open trade providing its current price is lower than the close price one trading day after the original signal (i.e. their Action Price). That is, the current price is below the Action Price as shown in Beyond Charts and the SWS  App.
         If there are multiple opportunities, they will be chosen as follows:
            Beyond Charts will be used to identify any stocks that are less than 2% above the ATR_TS value and vacant positions will be filled in ascending percentage difference order when the market opens on the following market day.
            If there are still positions that can be filled, then stocks will be bought in descending Relative Strength (i.e. Ranking) order when the market opens on the following market day.
            Stocks will not be bought above their Action Price.

There is no way of knowing for sure in advance which way will provide the best return.  This portfolio will use the second option."

It seems that you did not sell all of your pre SPA stocks, and you are concerned that you are quite exposed with no current protection.  I know the feeling, as I have been in that position, but that was a long time ago.  Once you have prepared your trading plan, if you have not already done so, you should be in a better position to decide what to do next.  As you can see from the excerpt from my trading plan above, I decided to buy all the stocks I could that were open trades currently trading below their Action Price.  I'd sold all my stocks and gone into cash when my system signaled that I should do so at the beginning of the recent sharp downtrend.  And now I am fully invested once again.  To see how this works in practice you can open Trademaster and download the SPA3 Investor - ASX Equal Weighted Stocks public portfolio.  Do this by starting Trademaster and then select File -> Portfolio Tools, and then under Select SWS Portfolio to Import select SPA3 Investor - ASX Equal Weighted Stocks and click on Download and Import Portfolio. After it has downloaded, click on OK.  To view the portfolio, select File -> Change portfolio and select it from the list and click OK.  You can look at the trades etc, to see what happened recently.

Offline Tyson

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Thanks Sharkie for the tips (understood - 'no financial advice').  I have viewed the portfolio and seen the performance as well as completing the modules.  I have made an investment plan and a goal to reach when the transition phase has been completed - Equal weight with one or two core ETFs. 

I am currently fully invested with pre-SPA3 investor stocks. 

I have 25 x positions open comprising of:

* 16 x positions are non SPA3 Investor stocks (ALU, AST, CHC, CKF, CLV, COL, JIN, NST, REA, RFF, RMD, SBM, SFR, SKI, SPK, WBCPG)
* 7 x positions, that are aligned to SPA3 investor stocks (ALL, BHP, CSL - all current open signals with SPA3 Investor & CBA, COH, MQG, WES - all previous sell signals by SPA3 Investor in late Feb)
* 1 x position is aligned to SPA3 ETF investor stock (IJH) and is currently still an open signal by SPA3 Investor.

So, I have 25 positions in total in my portfolio, with 16 positions non-SPA3 investor stocks as Satellite stocks & IJH in the core. 
Also, IJH is underweight (if I am to aim for a 50% weighting) and since IJH has also increased in value above the buy signal on the charts, then I would not be adding to it as according to Section 5.4 'Starting the Portfolio' subsection 2. 

I need to transition so the 16 x non SPA3 Investor stocks can be sold when the current timing for those positions warrant it. 
It seems SPA3 ASX trading charts would assist in that because they provide indicators to trade beyond SPA3 ASX choice of stocks, but I do not have SPA3 ASX!!
 
Rather than using guess work, I am trying to establish if there are other indicators that I could use to help me sell these (or keep holding) in a preferred orderly manner, until a time comes to swap them for SPA3 investor stocks and/or increase holding size of ETF/s.  I feel exposed to unmanaged risk as I am having to use my own judgement (or lack thereof) to decide. 

I am viewing the ATRVE21 extreme volatility indicator for the ASX200 as a general guide so if that hits 3.5 then I will sell all non SPA3 Investor stocks and wait for signals on the others. 

It's a tricky one I know. 

Offline Dave McCulloch

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Hi Tyson,

It can be challenging knowing when to sell if you're holding stocks outside of the SPA3 investor Universe, but one way that might help is by using  the ATR Trailing stop in the indicator panel in Beyond Charts.

This indicator varies significantly from the ATR_TS indictor in SPA3 Investor and is far less intelligent in the way that it works. Nonetheless it can still be used in a mechanical and non-discretionary way.

In its standard form, the ATR Trailing stop in the indicator panel uses a 21 period ATR (Average True Range) and then applies a multiplier of x5.  You can alter this multiplier in the parameter window both up and down.

It's important to note that whatever you change the multiplier to,  it remains constant for the entire charts data.  (This is very different to the ATR_TS in SPA3 Investor which is adaptive to changes in the stock/ETF volatility)

By applying the ATR Trailing stop to your stocks outside of the SPA3 Universe you'll be able to use it in a mechanical way, rules based way to determine when to sell you stocks. eg, once price closes below the trailing stop it signals a sell.

This is how a basic trailing stop loss works.

As an exercise, you can also pull up a chart of a SPA3 Investor stock with the SPA3 Investor ATR_TS applied, and then add the standard ATR Trailing stop from the indicator panel.

You can then "play" around with the up and down multipliers of the standard ATR Trailing stop to see if you can make it match the SPA3 Investor ATR_TS on the chart.

You won't be able to match it exactly because it doesn't adapt remember, but it will give you an idea of how changing the up and down multipliers effects the positioning of the trailing stop.

I've attached a chart as an example with the standard (x5) ATR Trailing Stop applied on top of the SPA3 Investor ATR_TS.

That's the first part of the lesson.... :)

From there, you can open up charts of your non SPA3 Investor stocks and apply the ATR Trailing stop from the indicator panel to see how the standard (x5) up and down multiplier works.

If it seems like an easy to use indicator on its own, without needing (or wanting) to change the multiplier, that's great. You might like to experiment a little but don't get too bogged down......keep it simple.

We're not wanting to try and re-create the wheel, but rather provide a tool that can assist with selling decisions.

Once you've settled on a setting for the ATR Trailing Stop (multiplier up & down) you can use it for those non SPA3 Investor stocks in your existing portfolio.


Hope this helps Tyson. If not please feel free to give me a call and we can discuss further.

Regards,

David.


« Last Edit: 25/05/2020, 12:08:00 PM by Dave McCulloch »

Offline Trevor Lock

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Hi Tyson
I have used the strategy as described by Dave with two different settings (ATR_TS 21:5.618:3.618 and ATR_TS 21:4.5:4.0).  I've found the first one tends to be more conservative (i.e. keeps the stock in portfolio for longer) whereas the second one tends to track closer the SPA3 Investor signals.  Both sets of parameters were suggested by Gary during previous C&G sessions.  Unfortunately, I can't remember when the sessions were held.  Hope that helps.

Offline Tyson

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Hi Tyson
I have used the strategy as described by Dave with two different settings (ATR_TS 21:5.618:3.618 and ATR_TS 21:4.5:4.0).  I've found the first one tends to be more conservative (i.e. keeps the stock in portfolio for longer) whereas the second one tends to track closer the SPA3 Investor signals.  Both sets of parameters were suggested by Gary during previous C&G sessions.  Unfortunately, I can't remember when the sessions were held.  Hope that helps.

Thanks Trevor, have entered those parameters in two ATR TS.  Appreciate it.