Australian (ASX) Stock Market Forum

Dump it Here

Pondering the Share Market
At the core, people want to make a quick buck, believing that stock prices will increase over time. Buying with the anticipation of selling later at a higher price and generating a profit. This prospect of increased wealth is a major draw for many.

Making money from the markets is a difficult process. After some time in the markets, the process becomes an interesting endeavour, like any other worthwhile pursuit.

Beyond this, some seek to profit from short-term price movements through active trading. The thrill of trying to time the market and capitalise on volatility can be highly addictive, even though it also carries significant risks. The potential rewards, however, can be worth the applied effort.

Ultimately, the share market provides a platform for all to not only grow their wealth but also to experience a sense of participation. While the path is riddled with perils, the allure of the potential rewards continues to attract a wide range of people.

The excitement of what the future may hold
After reading @bettamania's comments, I believed it would be the ideal time to make a post about strategy development and expand on each step. Testing and evaluating a trading strategy is a crucial step in determining its potential profitability. However, a simple search would provide further explanation if needed.

Here are 6 key steps to take
1. Develop a trading strategy from an initial idea
2. Backtest the strategy
3. Analyse the results
4. Optimize the parameters
5. Paper trade the strategy
6. Monitor the strategy

By following these steps, you can test and evaluate any trading strategy to determine its potential for profitability while minimising the risk. Remember to always approach trading with caution and "only risk capital you can afford to lose".


The system that I play with is an old system. similar to an old song that is released on a new CD
I have a dream.jpg
I have a dream that my four little children will one day live in a nation where they will not be judged by the colour of their skin but by the content of their character.

A Journey of Discovery
I have an idea. An idea that one day, everyone who wants to learn about trading can do so without feeling overwhelmed or intimidated. Trading shouldn't be a secret club that only the experts can join. It's a skill that anyone can pick up with the right guidance.

So, I'm kicking off a new series to take you all on a journey of discovery into the world of trading. No prior knowledge is required - just an open mind. Over the next few posts, I'll lead with some basics to get started and work my way up, post-by-post.

So much to discover, so little time
As a lifelong admirer of Charles Darwin, I find myself endlessly fascinated by the natural world and all its wonders. While there is much we understand about the intricate workings of the human body, there remains a vast expanse of knowledge yet to be uncovered. And it is in exploring these obscure realms that the thrill of discovery lies.

Ear bump.jpg
A prime example of this is Darwin's tubercle
Darwin's tubercle is a small, congenital prominence found on the outer ear and most don't even know it's there. This minor feature appears as a thickening or bump on the edge of the ear and has lost its original function through the process of evolution. The name "Darwin's tubercle" pays homage to the renowned naturalist, who documented this vestigial trait in his seminal work "The Descent of Man."

This inconspicuous ear feature predates Darwin's writings
This small little bump was first described by the anatomist Thomas Woolner, whose work later caught the attention of the great naturalist himself, leading Darwin to incorporate the finding into his influential research.

As a 71-year-old admirer who bears a striking resemblance to my hero. While the physical similarities between us may be fleeting, the intellectual curiosity that fuelled his passion proves that there is always more to learn.

When you have one job
Don't mess it up.

you had one job.jpg

Simplifying Trading
Trading, like life, is all about the decisions you make. With a renewed sense of interest, I've decided to embark on creating a signal generator - an exercise that demonstrates an alternative way for new traders to get a foot in the door, even when they're not sure where to start.

A signal generator is designed specifically for those new to trading
Using a signal generator allows new traders to gain hands-on experience before investing any capital, providing the thrill of being directly involved in an exciting endeavour without the risk of losing money. By watching, new traders can familiarise themselves with the mechanics of the market and develop a better understanding of the factors that influence price movements.

A signal generator?
Yes, using a signal generator offers a low-stakes way for beginners to dip their toes into the world of trading. Rather than diving in headfirst, they can test whether a signals generator works for them. Having such an indicator will enable them to refine their decision-making, and build their confidence - all while avoiding the potential pitfalls that can come with live trading.

By starting with a signal generator, new traders can develop essential skills and gain valuable insights into the market without the pressure of managing a live trading account. This can be an empowering first step, allowing individuals to explore their interests and learn at their own pace before committing capital to the markets.

The key benefit of starting with a signal generator
Those new to trading have no reference point on where to start and that's the reason they join our community seeking information, as the task of getting underway can be daunting. By taking a gradual approach to following signals, they can build their confidence and familiarity with the mechanics of the market before committing any capital.

The key benefit of starting with a signal generator is that it provides a safe space for experimentation. A signal generator serves as a starting point, nothing more and nothing less. Beginners can test various trading ideas, tweak their approaches, and observe the results, all without having to worry about the potential pitfalls and pressure of managing a live trading account.

So, What's the Point?
There are some who want to understand more about trading and are currently seeking guidance on where to begin. While the need for direction is understandable, the ultimate goal should be starting on the right foot.

The purpose of using a signal generator can be broken down into four key points:
1. Spark ideas and inspiration among new traders.
2. Encourage thoughtful engagement with the markets.
3. Safeguard precious capital until you fully understand what drives market movements.
4. Provide a structured starting point for those interested in trading.

So, why a signal generator specifically?
Using a signal generator can help answer three fundamental questions that often perplex new traders:
1. What to buy?
2. When to buy?
3. When to sell?

With a sound footing and understanding of a simple concept, beginners can experiment with various ideas, refine their approaches, and build confidence - all without the pressure of managing a live trading account.

In essence, a signal generator serves as a bridge, allowing new traders to transition gradually from the theoretical to the practical, and ultimately, to successful live trading. It's a powerful tool for laying a solid foundation and positioning yourself for long-term success in the markets

So, What Does a Signal Generator Look Like?
Well, that's largely up to your imagination. The visual representation of a signal generator can take many forms - it could be a set of traffic lights, a simple bar that transitions from green to red to indicate buy and sell signals, or any other intuitive design that resonates with you.

The whole idea is to generate a clear, easy-to-interpret signal that makes sense within your trading approach. What generates those signals is limited only by the bounds of your creativity and ingenuity.

The key is to find a signal generation method that you can understand and align with. By tapping into your imagination and adapting established indicators, you can create a signal generator that serves as a reliable, confidence-building tool on your path to trading success.

Lets make a signal generator
A simple bar that transitions from green to red to indicate buy and sell signals may seem like a straightforward concept. However, this type of signal generator falls short of my expectations.

While the green-to-red bar approach is easy to explain, it could actually be confusing to follow in practice. The reliance on a single dual-coloured line may not provide the clarity needed to make well-informed trading decisions. A more robust design, even if slightly more complicated, can ultimately provide a stronger foundation for building your trading skills and confidence.

Signal Generator #1.jpg

Let's ditch the dual-coloured line
And use a more intuitive signal generator approach using four coloured dots. Instead of relying on a confusing dual-coloured line, using four distinct coloured dots can provide clearer, more actionable trading signals.

Here's how it could work
The rationale for the four dots is that it allows for both anticipatory and confirmatory signals. Using just two colours (green and red) for buy and sell signals might seem logical, but it lacks the necessary lead time for traders to prepare their positions.

Let me describe this concept even further
1. Lime Dot (Signal Dot)
This serves as the leading indicator, providing advance notice of the upcoming buy signal.

2. Green Dot (Buy Dot)
When the lime dot appears, traders know the green buy signal is coming the next trading day, allowing them to execute their purchase in the pre-auction.

3. Fuchsia Dot (Exit Signal Dot)
Similar to the lime and green dots, the fuchsia dot gives traders a heads-up when to exit a position in the pre-auction to ensure settlement at the opening price.

4. Red Dot (Sell Dot)
This is the final sell signal, confirming that traders should exit their positions on this bar.

The distinct colours and sequential appearances of these dots create a much more intuitive and actionable signal system. The layered approach of anticipatory and confirmatory signals helps eliminate the potential confusion of a single-coloured line.

A game changer
Implementing a signal generator with this level of visual clarity and advance notice can be a game-changer for developing traders. It allows them to enter the market with confidence, timing their trades to potentially capture favourable opening prices.

Dots Signal Generator.jpg

Why don't you add the words "buy and sell" to the coloured dots?
That's an interesting option, but I don't think it's entirely necessary. The key advantage of this four-dot approach is that it allows traders to anticipate and prepare for the upcoming action, without the need for explicit "buy" and "sell" labels or up and down arrows. The colour coding and sequential appearance of the dots create a clear, intuitive system that doesn't require additional text.

Additionally, I should mention, that the dots may appear, disappear, and even change colour throughout the trading day. The only time the coloured dots become truly significant is when they stabilise after the end of the trading day. At that point, the sequence of colours is the crucial information for traders to act upon.

Keeping the system focused on the visually distinct coloured dots, rather than adding explicit buy/sell labels, can help maintain a clean, streamlined interface that is easy to interpret at a glance. The colours themselves become the universal language that traders can quickly recognise and respond to.

Why is the back dotty line wavy?
The black dotted line provides an important function that allows you to follow along. Without this dotty line, the coloured dots would be floating independently and add confusion. Each dot represents a signal bar - whether that's a daily, weekly, or monthly signal depending on the strategy.

The power of this signal generator approach is that it's not constrained. It simply produces signals that reflect what the overall market participants are doing, enabling you to follow that herd mentality. The specifics of when to enter and exit trades may not be overly complex, but the key is having a signal generator that can consistently identify profitable trends, allowing you to generate positive returns more often than not.

Ultimately, the signal generator approach doesn't matter what the underlying asset classes, markets, or instruments are - whether it be a group of stocks, individual stocks, ETFs, crypto, futures, bonds, etc. A signal is a signal, and your job is to read and follow those signals, trimming around the edges as needed, but fundamentally a decent signal generator "tries" to go with the flow of the market

Dots Signal Generator.jpg

What if this signal generator proves to be effective
Once this signal generator approach has been proven effective, I'll make it available for anyone to evaluate. Releasing it before it has demonstrated its ability to generate consistently profitable trading signals would likely result in it being quickly discarded or lost among the myriads of other trading systems we tend to gather.

The beauty of a signal generator is that it removes the guesswork
I started paper trading this particular generator at the start of June 2024, but the great thing is you can start and stop it at any time. The signal generator has one simple job: "to produce clear, actionable trading signals". If this signal generator ultimately proves to be effective at consistently generating reliable, profitable trading signals, traders will be far more inclined to follow the system's guidance rather than relying solely on their own intuition or emotional decision-making.

The signal Generator progress
The signal generator is still in its early stages, but the initial results have been promising. After just 5 weeks of paper trading a $100,000 portfolio (allocated across 10 positions), the system is currently showing a profit. You can see the equity curve displayed below.

2. Weekly Results.jpg

Signal Generator Logo.jpg
Evaluation of a signal generator
To thoroughly test the effectiveness of executing trades based on this signal generator, I'll be evaluating its performance across 20 well-known ASX-listed companies. The list of companies being traded "are not" the ones you would typically look to for outperformance, that is not the primary objective of this exercise. Rather, the goal is to assess whether the signal generator can accurately identify trends and generate profitable trading signals in advance of major market moves.

The Signal Generator
There are only a few points when it comes to the portfolio construction

1. Start date: June 1, 2024
2. Portfolio: Diversified across 10 holdings
3. Excess signals: When more signals than allocated positions, add the lowest-priced holding
4. Allocation: $10,000 per position
5. Total portfolio value: $100,000

This ongoing live trading evaluation will provide a clear, data-driven assessment of the signal generator's merits. It will help determine whether this approach can consistently produce reliable, profitable trading signals.

Signal Generator Logo.jpg
The Signal Generator
The signal generator is designed to produce buy and sell signals for a basket of 20 prominent ASX-listed companies. The primary objective of this evaluation is to simplify the trading process for newcomers, while also providing valuable insights into the practical applications and performance of a signal generator system.

The timing of the buy and sell signals generated by this system is based on a proprietary methodology that aims to identify emerging market trends before they fully materialise. The goal is for the signal generator to give traders a leading edge, allowing them to potentially capture profits from market moves in a more systematic, disciplined manner.

The 20 ASX Positions for Trading
1. ALL.AX - Aristocrat Leisure Limited
2. ANZ.AX - ANZ Group Holdings Limited
3. BHP.AX - BHP Group Limited
4. CBA.AX - Commonwealth Bank of Australia
5. CSL.AX - CSL Limited
6. FMG.AX - Fortescue Ltd
7. GMG.AX - Goodman Group
8. MQG.AX - Macquarie Group Limited
9. NAB.AX - National Australia Bank Limited
10. QBE.AX - QBE Insurance Group Limited
11. REA.AX - REA Group Limited
12. RIO.AX - Rio Tinto Group
13. STO.AX - Santos Limited
14. TCL.AX - Transurban Group
15. TLS.AX - Telstra Group Limited
16. WBC.AX - Westpac Banking Corporation
17. WDS.AX - Woodside Energy Group Ltd
18. WES.AX - Wesfarmers Limited
19. WOW.AX - Woolworths Group Limited
20. WTC.AX - WiseTech Global Limited

#1. Signal Generator Logo.jpg
Signal Recording and Weekly Updates
Each generated signal will be posted immediately after the daily market close.

Weekly Report Schedule
Every Friday after 5pm, a comprehensive weekly summary will be posted

6. Buy Tomorrow.jpg
CSL - CSL Limited

Buy - CSL.jpg

7. Sell Tomorrow.jpg
MQG - Macquarie Group Limited

Sell - MQG.jpg

Last edited:
#1. Signal Generator Logo.jpg
The Signal Generator - Trading Rules
The signal generator is designed to produce buy and sell signals from a watchlist of 20 ASX-listed companies. When there are more signals than available positions, the strategy is to track the first 10 signals and add other signals when positions are sold. When confronted with excess signals, simply select the lowest-priced stocks first.

The key trading rules are:
1. Buy the first 10 signals.
2. Only buy signals when necessary to fill a 10-position portfolio.
3. Prioritise buying the lowest-priced stocks.
4. Execute buy and sell orders in the pre-auction the very next trading day, as this is a daily trading system.
5. Determine position size by dividing the closing share price by the dollar value of your next bet.
6. Add 5% to the last closing price to formulate your buy offer. (in the preauction)

By following these straightforward rules, you can establish a solid foundation for your trading activities. The simplicity of the approach allows you to focus on executing the generated signals, rather than getting bogged down in complex decision-making.

#1. Signal Generator Logo.jpg
When is the best time to plant a tree?
The classic Chinese proverb states that the best time to plant a tree was 20 years ago, and the second-best time is now. This proverb highlights the wisdom that the optimal time to take action is often in the past, but that doesn't mean it's too late to start today.

Even though I've been personally running this exercise for 5 weeks, the starting point, periodicity, watchlist, market, or index being traded doesn't ultimately matter. The signal generator's primary objective is to identify the early signs of pending price moves by measuring the common emotional drivers of market participants.

The question is whether a shift in sentiment will lead to a breakout
While this doesn't happen every time, if it does, you'll be positioned to capitalise on the move. Conversely, if the momentum fails to follow through, the system will signal you to quickly exit.

Jumping on and off these signals is a numbers game, a game of probabilities. The rewards may be slim when trading the top 20 companies, but the ability to move in and out of these positions rapidly, regardless of position size, is a key advantage.

Within the watchlist, fluctuating commodities make up a proportion that ebbs and flows. It's these fluctuations that the system is designed to capture, over and over. The simple premise is to ride them up and get off quickly before they fall too far.