May I suggest a way to approach the Prefs/Adviss?

You will probably not like all the Prefs identified. Every Platonist has his/her favourites. The Prefs/Advis are designed neither to displace your particular brand of common sense, nor your own research. So if you think a Pref is nonsense, ignore it. You may even let off steam by firing off an e-mail to yours truly.

Let's assume a Pref appears that you like, for one reason or another. But after you have bought, preferably having applied P.8., it may still ease off. You may then average out together with the Advisories or Hits - remembering of course never ever to allocate 100% of the cash that you have earmarked for that share at the first purchase.

Now let's assume you like the share but do not trust it as a Pref, just yet. Now you have the great advantage of following the Advis and HIts about when others may average out. THAT's when you can buy.


Here is a way using the Points - esp P.6 and P.8 - to time your purchases and sales on the JSE, especially if you have a short term strategy. Employ common sense in using the Points when following a long term strategy. Thus, e.g., buy using Point 8, but do not place a GTC order to sell, as Point 3 advises!

There are many handbooks on trading strategies and they often, correctly, remind investors to "find a strategy and stick to, or with it". Do not chop and change strategies. Keep to your plan! But, to find the appropriate strategy is often more difficult than to find the securities to invest in. Recommendations to buy, sell, or hold are also easy to find. But online investors are always on their own when it comes to making the big decision: WHEN to buy, or sell. PlatoPrefs, read with Plato's proprietary 13 Points, and in this subscription the Daily Advisories try to assist Platonists in deciding WHEN to sell and WHEN to buy. This is how the 13 Points approach the art of investing: It approaches the art as a horse race with various (cycles of) distances and which has already begun. And on which bets are placed as it is run. Horses represent shares. The length of the race represent both a trough and the apex of a cycle wherein many other shorter cycles eventually appear, as well as itself being within a trough and apex. So that there are many races within races, all representing cycles of performance. The starting stalls represent the initial infusion and reallocation of money and the number of bets placed on the race, and is a measure of how much the horses (shares) are liked or are rerated at any one particular moment in time (- a completely arbitrary moment, say when an investor starts looking at a selection of shares e.g. on Sunday when he/she makes some preliminary selections as to what is, prima facie, considered good bets during a period selected, say over the next week). The Platonist makes a note of this and watches which bets gradually turn out right, i.e. which horses perform in relation to the other horses. The bets represent the volume of shares bought and sold. During the race the Platonist makes a decision: To stay out, or participate in the betting. There are a number of factors the investor has to take into account. For a start: The race is over a finite period. But because some horses are steeple-chasers, and others one milers, to the former the race will go on after the mile race is complete and a winner for that race is identified. Its cycle is complete, and may commence another race (cycle) later. He/she has to consider the possibility that the number of bets that a horse has attracted was as a result of a betting syndicate being aware that the race for that horse was longer than the race the others are running so that if the investor is interested in short cycle (races) those horses have to be ignored, even if many bets were placed on them. So although a large parcel of money has reached horse A, that was not necessarily because the syndicate wanted a return after the shortest race was run. Before money is placed on a horse the investor has to decide how long that race is. The cycle has to be identified. Then all the horses in that race have to be grouped together. Then a comparison has to be made of the varying chances each has in beating the others in that group. When the first horse in a race is fast approaching the tape, the investor has to make a decision: The race is about to finish and the horse is not going to win. Switch allegiances. Cut losses. Platonists have 17 Statistical Codes to identify the results of their strategy. They are presented below. If the decision is made to switch, a Statistical Code 12 is allocated to that decision. Some money is made. If one nevertheless believed that circumstances will change and the selection come in second or third, and in fact nearly wins a Stat.Code 6 is allocated. When we do not make any money but we also do not lose any, e.g. we looked at the horse but rejected it ultimately we have not lost any money other than time - we are a Stat.Code 13. If we lose we could be Stat.Codes 14-15. Often the prospects of a horse depends on the going. Whether it is wet, or hard. Whether the jockey is competent or on a winning streak. And these days, whether it is doped! So a company, as represented by the weighting a share has together with its status in the investing community, does to a significant extent affect the number of bets placed on its performance. These bets are the primary movers of the stock price because of the extremely simple notion that if there are many buyers of a good it is, relationally price-wise to its former state dear, and if there are few the opposite obtains. Platonists therefore watch the watchers. Once it is clear that a significant interest is being placed on a share such that the low does not go lower, and in fact changes direction, they buy. And once a share refuses to go higher, they sell. No fancy footwork. No Nobel laureate risk-at-value or Black-Scholes models of risk. However, all investors are at some time or other caught out. Provided the jockey is reputable, and the horse is not doped, if the race in which a horse is running is a steeplechase, tripping on one or two hurdles is not the end of the world. Although the horse may take a breather, the race is not run. Race tracks are not known for closing-down for lack of funds while a race is run. Statistical Codes: 1. Hit target on first day of trade; 2. Hit target on target day; 3. Hit target by target date; 4. Hit target after target date; 5. Near Hit of target on target day; 6. Near Hit of target by target date; 7. Near Hit of target after target date; 8. Hit revised target by target date; 9. Hit revised target by revised target date; 10. Hit revised target after revised target date; 11. Near hit of revised target. 12. Position closed with a profit; 13. Wrong Pref - position not opened - no loss & application of Points 8 & 10; 14. Wrong Pref - small to no loss & application of Point 6; 15. Wrong Pref - loss of 5-10%; 16. Not yet matured - ante/post target date; 17. Investor's decision - target date uncertain. POINT 1 The last close and low prices are a guide only: The selection process of a Pref is necessarily at a space/time point (over a week-end). The cycle is guessed according to the probable high within separate speed and acceleration criteria. That may be within a 10 - 25 trading day cycle. Thus to use Friday's low or Monday's low is a misnomer and may often turn out to be too soon. Friday's close and low simply date the Prefs. You have to make the decision to buy by application of Point 8, or to short a stock by application of Point 10. You have to establish the true low before buying or the true high before shorting. Both of these essential functions the Prefs do not do. You do. POINT 2 Only a small difference: If there is only a small difference between the d/target, and that at which the counter has already (independently of the 13 Points) been bought by the investor - accept the d/target as the price at which it is suggested the counter will run out of steam. POINT 3 Place a GTC order to sell once you have bought: Place a GTC order to sell at the d/target, preferably slightly less to sell into the high. 3.1 Often an investor is reluctant to sell "cheaply". This is an example of suffering the condition known as "greed". We all suffer from it at one stage or another. One way of ameliorating the condition is to sell 50% of the open position when the Advisory has or after applying Point 6. That way the best of both worlds is achieved. At least 50% profits, even if lower than expected, are locked in, and a further 50% chance is courted that more may be forthcoming. POINT 4 Place a GTC order to buy once you have shorted: Place a GTC order to buy at the d/target, preferably slightly higher to buy into the low. The same sentiments as in 3.1 apply here, except that here we refer to shorting a counter. POINT 5 ...............(eliminated May 2005). POINT 6 Plato's "Stop Loss": If the share, opened as a long, does not hit the d/target after a few days of trade, AND is about to, OR is unsuccessfully trying to close at the same high, OR has reached the same high intraday for two continuous days, sell. It is not going to reach the d/target. Or worse, it is going lower. 6.1 This POINT also applies if the counter is bought as soon as the Monday of the Prefs - when its low on Monday turns out to be is higher than Friday's (Point 8) but closes on that Monday, the first day, lower than its Friday's close; OR If it was shorted and it closes higher than its Friday's close the position should be closed that day, at a small loss. 6.2 This POINT also applies when the price falls or surges past the Friday close in cases where at first it had acted as expected and suggested by Points 8 or 10. Instead of waiting for negative sentiment to really knock the share price, sell when it crosses the purchase price on the way down or buy when it surges past the shorted price. What has happened in the case of long positions, is that negative (usually exogenous) events have overtaken the share or entire sectors, are subjected to negativity. The price, for whatever reason has lost steam. 6.3 When closing a long position (i.e. when thinking of selling having bought i.t.o. P.8), one looks at, takes in and compares the highs of the days since opening, but one especially compares that particular day's high with the previous day's high. However, don't lose the big picture. You may even look at the lows for guidance. You do exactly the same when looking at closing short positions, but instead of comparing highs, do so with the lows, also not forgetting the bigger picture. And show some balance. Don't be unnecessarily spooked by slight variations. 6.4 A trick to apply when you are in the money (with a long), is to close at yesterday's high, if it appears that it is tiring, and appears that it might close lower than the previous day's close. This way you lock in profits. That it in actual fact did not close lower than the previous day is immaterial. You grossed a decent return and you lost not a cent. 6.5 Also consult Points 8 & 8.1 in the case of longs misbehaving on the first Monday after the Prefs, and Points 10 & 10.1 in the case of shorts similarly misbehaving.Your economic cost on the rare occasions that you sell only to see it reaching the d/taregt after trading near the high for two days, will, on the probabilities, be less in the long run than if you hold on for dear life in the "irrationally exuberant" expectation that it will perform, notwithstanding all the indications to the contrary. Remember: That little number owes you nothing. It has a mind of its own. And consider Prof. Modigliani's words: "Sell too early". 6.6 An indication of a high after a aggressive run north, as during the gold rush of May 2002, when a share price just seems to have no end in sight, a lone trade at yet a new high, is an indication that Prefs Platonists by application of P.6, can take profits. 6.7 It requires heavy emphasis that this POINT does NOT apply as the Law of the Medes and Persians did. THERE IS ABSOLUTELY NO ABSOLUTE REQUIREMENT THAT INVESTORS HAVE TO SELL IN THE CIRCUMSTANCES SET OUT ABOVE. Often, a sharp 10-20% correction will fairly soon be followed by a recovery. All that Plato suggests is that were the investor to be particularly sensitive to short term (unrealised) losses, he/she follow this POINT. Otherwise, there is nothing wrong in having lost the opportunity to bale out in time. It happens in the best of financial families. Be assured, you are in good company. If you can wait, rather than sell at the bottom, once the correction has taken root, sit it out. 6.8 In many instances, Point 6 is a too-early-Prof -Modigliani indicator. Often, although the Hits mention how we exited, we could, on the basis of our own calculations, have decided to ignore P.6 with good results. Again: P.6 is to be treated as a safety-first continuous stop loss mechanism. Since you decide when to buy and when to sell you have to decide if your view of the immediate future demands application of P.6. The Prefs and Hits are not panaceas for certitude (neither are the daily Advisories) and they are not designed to remove your application of your unique brand of common sense. Use it.!! POINT 7 When movement of the share is negligible counter will feature in Hits: If, at the end of the period movement of the share is negligible, either the Adviss or the Hits will comment on possible action. POINT 8 When about to go long: Do not open a position as the first trade of the day. Wait a while to test the lie of the land. But be wary of opening a position close to the original target date. [Read Point 10 for shorts.] Do not open a position on the Monday, (or the first trading day after Monday if it is tradeless), if the opening trade opens lower than the last close, and for as long as it keeps lower than the last close unless it reverts (any time that week other than that Monday) to type and goes north as suggested AND is confirmed on the day after the new low, just as Point 6 requires. TO LESS RISK AVERSE PLATONISTS: How much risk you are prepared to accept may move you to accept the previous Friday's low as first day and Monday as second day for purposes of P.8. To less risk averse Platonists here is a way of establishing a true low without having to wait for the next day's low: When a Pref has reached a new low (day X+1) AND closes above the previous day's high (day X), that day's (day X+1) low is the true low. Your gut may even say that that day's (day X+1's) low is the true low if that day's (day X+1) close is decisively higher than day X's. 8.1 If a Pref, that is suggested to go up, opens the first day slightly higher, than the close of the previous trading day, on which the Pref is based, the probabilities are that it is on track. Take that as confirmation of the direction of the Pref. Buy asap, giving a quick glance to bids and offers volumes. Then place a GTC order to sell at the target. With the acceleration of the up movement which the higher open suggests, chances are that the target is to be reached earlier than expected. The target date may be too long. So do not forget to place that GTC order to sell at target, or slightly shy of target. 8.2 However, if the open is grossly higher than the previous close, it is your call. It may be too high to sustain the rest of the target within the cycle. The decision to open a position at a particular price must always be seen in relation to the relational target. This is not an academic exercise - we are aiming for a profit after all - that is the ONLY point of the exercise, apart from having fun. If it opens too close to the target to make a decent profit, skip it and go to another Pref. 8.3 Take your time to find the true low. Traders are NEVER impatient to get into a stock, only to get out to lock in profits which are guaranteed. But when the true low is near the end of the cycle that is a warning that the Prefs may indeed be a wrong'un. So if it is a five or ten day cycle I would shy away from opening the position on the fourth day. [ However, if a nice precipitous fall occurs as a result of a dramatic event, such as a highly respected MD resigning for bona fide reasons (e.g. health, and not one in a cloud of acrimony suggesting the company really has a problem - one need only cast one's mind back to early 2000 and recall the departures of MDs in the IT sector) then a countervailing precipitous uptick is probably on the cards fairly immediately. But if it is a longish +-4 week cycle, taking a week to establish a true low, still leaves enough time for the cycle to compete itself.] POINT 9 Having gone long: If you have opened a long position on Monday at Friday's close or as suggested by Point 8, and it closes south slightly, hold, do not close your open position. The Pref could have been out by a day or two. Wait for next day. If the price then goes lower than the low of the previous day, that confirms it is a wrong Pref: Sell! BUT: 9.1 If it does not exceed the unexpected low of the previous day, or does so only very slightly, continue holding as an ordinary Pref using Point 6 to close position in case of unexpected price movements. POINT 10 When about to go short: Do not suggest opening a position as the first trade of the day. Wait a while to test the lie of the land. But be wary of opening a position close to the original target date. [Read Point 8 for longs.] Do not suggest opening a position on the Monday (or the first trading day after Monday if it is tradeless), if the opening trade higher than the last close unless it reverts (any time that week other than that Monday) to type and goes south as suggested AND is confirmed on the day after the new high, just as as Point 6 requires. 10.1 If a Pref, that is suggested to go down, opens the first day slightly lower,, than the close of the previous trading day, on which the Pref is based, the probabilities are that it is on track. Take that as confirmation of the direction of the Pref. Sell asap, giving a quick glance to bids and offers volumes. Then place a GTC order to buy at the target. With the acceleration of the down movement which the lower open suggests, chances are that the target is to be reached earlier than expected. The target date may be too long. So do not forget to place that GTC order to buy at target, or slightly shy of target. 10.2 However, if the open is grossly lower than the previous close, it is your call. It may be too low to sustain the rest of the target within the cycle. The decision to open a position at a particular price must always be seen in relation to the relational target. This is not an academic exercise - we are aiming for a profit after all - that is the ONLY point of the exercise, apart from having fun. If it opens too close to the target to make a decent profit, skip Pref and go to another - like skipping the difficult questions in an exam and answering the easy ones first. 10.3 Take your time to find the true low. Traders are NEVER impatient to get into a stock, only to get out to lock in profits which are guaranteed. But when the true low is near the end of the cycle that is a warning that the Prefs may indeed be a wrong'un. So if it is a five or ten day cycle I would shy away from opening the position on the fourth day POINT 11 Having gone short: If you have opened a short position at Friday's close price and it closes north slightly, hold, do not close your open position. It could have been out by a day or two. Wait for next day. If the price then exceeds the high of the previous day, that confirms it is a wrong Pref: Close Position! BUT: 11.1 If it does not, the following day, exceed the unexpected high of the previous day, or does so only very slightly, continue holding as an ordinary Pref using Point 6 to close position in case of unexpected price movements. POINT 12 When closing a position: When closing a position: If HITS, suggest taking profits at a certain price (or at the last close) and the opening price is higher (or lower if a short) than his suggestion, you have the discretion to ignore the suggestion and close the position at a price which you have determined, but try not to be too greedy! Remember: Fear is around the corner. POINT 13. PLATO'S DISCLAIMER: Not all of Plato's Prefs are correct. In fact fully a quarter of them have been wrong in the past. His suggestions are mere probabilities based on inductive logic in the form of selected computer generated charts supplied by Indexia Research, and using past data. The level of accuracy attained by him is to a large extent derived from his experience in the use of these techniques on a daily basis over the last twelve years. Data by their very nature change and fluctuate unceasingly and hence these suggestions are subject to the vagaries and uncertainties of these data fluctuations. Accordingly neither Plato nor any publisher of the Prefs or Hits guarantees the correctness of any of his or any other view expressed or the movement of any counter nor does Plato or any publisher of the Prefs or Hits hold out that anyone must or should act on these suggestions. The Prefs and those reported on in the Hits, are not invitations to trade or deal in those securities. They merely represent securities which, if Plato had traded as suggested in the Prefs or Hits, then the results as presented in the Hits would have occurred. There is no suggestion either that such trades actually did occur. Plato is neither a financial nor a portfolio adviser. He devoutly wishes to be neither. He specifically draws the attention of every potential Platonist to the fact that he does not make out to be either. In providing the Prefs and Hits he is neither advising nor recommending either trading at specific prices (which the Platonist has to decide on) nor the fundamental soundness or otherwise of any of the companies referred to. By acting on his suggestions the investor expresses his/her unequivocal acceptance of the aforegoing and particularly the fact that if he/she does follow the suggestions, then it is solely at his/her own risk. By acting on any of his suggestions the particular investor unequivocally accepts, understands and hereby unreservedly acknowledges that his/her success or failure were he/she to trade in the abovementioned securities is entirely his/her own, and he/she takes sole responsibility for any profit or loss sustained in so acting in a market that is inherently subject to a very high degree of risk. Disclaimer Last updated: July 16, 2003.   WARREN BUFFET'S (who is not averse to trading STOCKS, except TMT's, as opposed to companies, and whose Berkshire Hathaway makes a very nice tidy profit trading stocks every year, thank you) Thirteenth Principle in his "Owner's Manual" "Despite our policy of candor, we will discuss our activities in marketable securities only to the extent legally required. Good investment ideas are rare, valuable and subject to competitive appropriation just as good product or business acquisition ideas are. Therefore we normally will not talk about our investment ideas. This ban extends even to securities we have sold (because we may purchase them again) and to stocks we are incorrectly rumored to be buying. If we deny those reports but say "no comment" on other occasions, the no-comments become confirmation. "Though we continue to be unwilling to talk about specific stocks, we freely discuss our business and investment philosophy. I benefited enormously from the intellectual generosity of Ben Graham, the greatest teacher in the history of finance, and I believe it appropriate to pass along what I learned from him, even if that creates new and able investment competitors for Berkshire just as Ben's teachings did for him."   13 Points Last updated: June 16, 2006