ASX Investor Hour – Oliver Ward Takes The Stage

By Dave McLachlan

This week I had the pleasure of attending an ASX seminar in Brisbane where the key speaker was Oliver Ward – a portfolio manager at RBS Morgans.  As many of you know, I will take any excuse to chat about or get involved in the markets – and at $5 the ASX Investor Hour is a great way to spend a lunch time.  Sometimes it is nice to be reminded that we have many high performing traders and investors right here in Australia.

Apart from being a great speaker, Oliver Ward was able to make a lot of key trading concepts sound simple.  It was refreshing to see the tools he used to make his trading decisions - tools that many regular degree qualified analysts would be hesitant to use (which is probably one of the reasons for his greater success), and yet tools that are also available to private and professional traders alike.

An Effective Way To Look At The Markets

If you missed the opportunity to see him, here is a quick run down on some of the best parts of Oliver’s approach (from memory):

  • Oliver found that a 12 month moving average on the index can help keep you out of bear markets – if it is trading above it: invest, if it is below it: lighten your positions or move to cash.
  • The reason behind this is Oliver believes around 40% of stocks will follow the overall market, and a further 35% (approx) will follow their particular sector.  This leaves only around 25% for the individual stock performance – so if you get the first two right you are streets ahead.
  • If you understand this so far - it makes sense to analyse the relative strength of the different sectors and invest in the strongest ones.  This technique has also been used by great trader William O’Neil, and to do this Oliver gets some of his relative strengh research from www.dorseywright.com – a site available to everyone with a free trial.  Note – this is not to be mistaken for the RSI, a technical chart indicator.
  • Oliver also believes that the overall market will revert back to its average P.E. ratio over time – the market average being 14 to 15.  This means if the overall market P.E. ratio is 7 to 8, it could be a good time to look for opportunities to enter.  Likewise if it is around 20, keep a close eye out for a market reversal.  He made sure to clarify this is nothing to do with the P.E.s of individual stocks, but of the overall market itself.  More research on this can also be found at www.crestmontresearch.com.

Like any great trader, Oliver went into position sizing - preferring to risk 1% per trade and getting his stop to break even / cutting his risk as soon as possible.  Average True Range was mentioned as a way to determine stop losses in the market – because Average True Range increases or decreases with the volatility of the stock or market you are trading, it can give you a more “dynamic” stop loss point.  This has also been used by such traders as the Turtles (for entries), and Bruce Babcock (for stops).

As mentioned before, the ASX investor hours are a great way to spend a lunch time – for $5 you usually get the insights of experienced traders, and I can’t recommend Oliver Ward’s expertise enough.  He was a great speaker, obviously an experienced trader, and highly recommended if you see him around your city again.

Happy trending!

Oliver Ward is a portfolio manager with RBS Morgans in Sydney, taking an Absolute Return approach to money management.

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March 6, 2010  Tags: , , ,   Posted in: Articles On Building Wealth

4 Responses

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    [...] Price Strength of the stock.  The top and bottom relative strengths are found on this site under Oliver Ward’s research, but there are other sites that have Relative Price Strength available for the ASX.  [...]

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    [...] guys, here is an update direct from the offices of Oliver Ward.  While the list of stocks are not a recommendation in or of themselves – it might be a good [...]

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