ALTF4
Topic Author
Posts: 1154
Joined: Tue Jul 13, 2010 5:01 pm

Getting Into Trading

Mon May 21, 2012 8:48 pm

Ok, so I know the first thing any of you will say is "stop, don't do it". I'll ignore those warnings. Over the past few years I've followed the stock market and specifically a few companies that I delve into a bit more. Through this, done for fun in my spare time, I started 'virtually' buying / selling stocks and tracking how I would have done had I actually bought in or sold, and discovered I was doing fairly well. Well, virtually, at least.

Timeframe for these trades were anywhere from a few days to a few months - nothing long-term.

So far, all my 'real' investing has been in long-term mutual funds and similar. That said, I'd like to try my hand in stocks. The current company I use for mutual funds has $7 trades, which isn't horrible - but if I'm only keeping stocks for a few days, that adds up. Certainly nothing expensive, but it does add up. I keep seeing references to "ECM" and trades based on a percentage of the value traded. These percentage trades seem cheaper in some cases, although on larger quantity (ok, 100-200 stocks isn't large quantity for most, but could be about average for me) flat-rate is probably better. ECM seems to be even cheaper but I can't find out anything about it, or if I would even be able to use such a tool if I'm not trading even small amounts in the grand scheme of things.

For what its worth, I have a sum of money I have set aside for this, and fully expect to lose it all, so if I do, so be it.

Anybody else do this on the side / for fun? And no, I'm not taking all my advice from here - just thought I'd ask here as well and see what I get back.  
The above post is my opinion. Don't like it? Don't read it.
 
fr8mech
Posts: 6580
Joined: Mon Sep 26, 2005 9:00 am

RE: Getting Into Trading

Mon May 21, 2012 9:17 pm

Quoting ALTF4 (Thread starter):
For what its worth, I have a sum of money I have set aside for this, and fully expect to lose it all, so if I do, so be it.

Though, I understand what you're saying here...if you expect to lose it all, don't bother getting in. That mindset will skew your risk aversion strategy.

Otherwise, it looks like you have done your homework. Done a little practice trading to see if your research and assumptions hold up. You can jump in.

I'm not sure about day-trading though. I've never been a fan of it. I don't have the time nor the perseverance to sit in front of a computer and track a stock minute to minute. You indicate that you trade 100-200 shares (you wrote stock, but in context, I'm thinking shares). I don't think you can make a whole lot of money on such a small number of shares. But, if that's your bag...go for it.

I really don't know anything about any trading fees other than the flat per trade fee my brokerage firm offers. Sorry.
When seconds count...the police are minutes away.
 
planeguy727
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Joined: Fri Mar 30, 2007 2:58 am

RE: Getting Into Trading

Mon May 21, 2012 11:47 pm

I have a share builder account but I am looking at it from the long term perspective. I have my shares in a range of companies from different sectors (for balance). Not huge, but it helps me to continue learning.
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kiwiinoz
Posts: 1999
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RE: Getting Into Trading

Tue May 22, 2012 1:00 am

Definitely do it. I started for the first time 4 years back and am about $200K in my pocket better off for doing it.

However, I have no doubt that there is very little science involved. My stock picks, especialy in Asia are much more likely to shift with general market sentiment rather than with an individual company's potential or in-market conditions. Good fortune has played a big role in my profit

Like anything, there is risk. But being young, you should be taking some investment risks.
 
Pyrex
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RE: Getting Into Trading

Tue May 22, 2012 4:06 am

From someone who works in finance, don't do it. Unless you have basically all day to spend doing research or enough money to hire a broker you can trust (if such a thing even exists) you are much better off just buying some mutual funds and leaving it to the pros.
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nighthawk
Posts: 4763
Joined: Sun Sep 16, 2001 2:33 am

RE: Getting Into Trading

Tue May 22, 2012 7:42 am

Now may not be the best time to be starting in stock trading, with Greece looking more likely to leave the Euro each day, the stock markets are taking a hammering. If they do exit the euro and default on their debt, then we may be looking at a recession that makes the one of 2008 look like a mere blip.

Now, having said that - if you do decide to start trading, then here's some general advice.

Bear in mind that you need to pay a transaction fee per action - i.e one to buy, one to sell. I use iii.co.uk here in the UK for trading, and they charge £10 per transaction. So whenever you buy a stock. you are down £20 straight away. If you buy £100 worth of stock, then you need a 20% rise in share price just to cover your fees. As such, I always buy in blocks of £500, as such I only need a 4% rise to cover the fees.

You need to decide whether you want to do long term or short term investing, and whether you want to do high risk or low risk, as this will affect the type of company you buy. If you want to invest for the long term, then buy a low risk company such as BP, IBM, Microsoft etc. These types of companies should rise steadily over the years, but will pay dividends regularly which gives you your profit. On the other hand, you can buy up "penny shares" particularly oil companies. These could be worth 5p one month, with no assets other than a license to drill. If they strike oil in their area, they can be worth 50p within a month and £1+ within a year or two...

You mention you want to do day trading. this isnt going to be feasible with normal share trading, unless you have a few hundred thousand in the bank, as the rises are generally fairly small on a daily basis, so you would need a huge number of shares to make this worth while.

If you want to trade daily, then Forex trading may be worth looking at. Forex trading involves currencies rather than shares. Currency values change frequently, making it ideal for quick trading, but the changes are extremely small, at fractions of a penny/cent etc. As a result, the value you invest is typically weighted - if you invest £1000, they will give you 500x that, so you are buying £500,000 worth of the currency you select. With this, any small fluctuations will result in pretty large gains. However, this is EXTREMELY risky - the prices can go down as well as up. The price can easily go down as well, so a small fluctuation can easily leave you down £2000 or more in seconds. Be very careful if you decide to get involved in this kind of trading, you can very easily lose more than you invested in the first place!

I believe you can do a similar type of trading to forex with shares, but I cant remember what it is called. Again though, you can end up losing more than you invested. A friend of my sisters husband used to do this kind of trading - he was making thousands doing it, then one day called it wrong, and ended up half a million in debt. He was declared bankrupt and lost everything.

Trading can be a great way to make money, but make sure you fully understand the risks before you begin, and never invest more than you can afford to lose.
 
ALTF4
Topic Author
Posts: 1154
Joined: Tue Jul 13, 2010 5:01 pm

RE: Getting Into Trading

Tue May 22, 2012 2:05 pm

Quoting fr8mech (Reply 1):
if you expect to lose it all, don't bother getting in

Maybe I phrased that wrongly - it won't leave me with nothing if I lose it all. If I wanted to get rid of my money, I'd do something else.   Still, a fair point - my risk apetite is different right now than somebody who does this for their living.

Quoting fr8mech (Reply 1):
I don't think you can make a whole lot of money on such a small number of shares.

And, conversely, you can't lost a whole lot of money on such a small number of shares. I'm just testing the waters - I'm still "losing" money based on the time I'd spend doing this, but you have to start somewhere.

Quoting nighthawk (Reply 5):
Bear in mind that you need to pay a transaction fee per action

Yep. I feel like, based on what I'm seeing, there is some percentage-based fees, but I guess those may be only for the big-dogs. At $7 per trade, that is a large amount of shares I would have to purchase to spread that $7 out.

Quoting nighthawk (Reply 5):
You mention you want to do day trading. this isnt going to be feasible with normal share trading, unless you have a few hundred thousand in the bank, as the rises are generally fairly small on a daily basis, so you would need a huge number of shares to make this worth while.

Yeah, I'm seeing that now. I didn't realize transactions costed so much. I guess I'll have to look at other options inside the trading world.

Quoting nighthawk (Reply 5):
if you invest £1000, they will give you 500x that, so you are buying £500,000 worth of the currency you select.

Holy crap that sounds like a bad idea. No thanks! I only want to trade with what I actually own, and not on credit or any other scheme.
The above post is my opinion. Don't like it? Don't read it.
 
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nighthawk
Posts: 4763
Joined: Sun Sep 16, 2001 2:33 am

RE: Getting Into Trading

Wed May 23, 2012 7:17 am

Quoting ALTF4 (Reply 6):
Holy crap that sounds like a bad idea. No thanks! I only want to trade with what I actually own, and not on credit or any other scheme.

it can be. I did a little forex trading for a while, I was a little reluctant at first, but once you get into it, it's not too bad. You can set stop losses (and some trading platforms will force you to do so), so if you use these right you can stop yourself losing more than you invested, although even with the stop loss you can still lose all the money you invested.

With forex its easy to invest with small amounts of money - I was investing in blocks of £30. I quickly decided the markets were too unpredictable, and was more often than not losing that £30.
 
kiwiinoz
Posts: 1999
Joined: Mon Oct 10, 2005 3:07 pm

RE: Getting Into Trading

Wed May 23, 2012 7:32 am

Quoting kiwiinoz (Reply 3):
Definitely do it. I started for the first time 4 years back and am about $200K in my pocket better off for doing it.

Bugger.....make that $160K
 
Ozair
Posts: 1345
Joined: Mon Jan 31, 2005 8:38 am

RE: Getting Into Trading

Wed May 23, 2012 8:08 am

Quoting ALTF4 (Thread starter):
Anybody else do this on the side / for fun? And no, I'm not taking all my advice from here - just thought I'd ask here as well and see what I get back.

Trading is about discipline. Never trade because you think you should buy because everyone else is. Never trade because the paper or your mate has recommended the stock. Only trade when you have analysed the stock and understand the risk, having established what your exit number is (for both profit and loss) and put that into the trading system. If you lose a few don't think a big risk will get you back.

I am a technical trader, so I don't look at the market caps or read the newspapers. I trade off the indicators I get from my software. I look at day charts only and at usually the top 100 or so companies in Australia. When I am doing it right, it takes about an hour an evening to go through the market and investigate anything with potential. Happy to say I have found it to work for me as long as I keep the discipline and don't talk myself into buying a stock because I screw the indicators a certain way.

Good luck with it if you do decide to start, hopefully you will do well!

I will say though, given your housing market over there and the low price of real estate with your incredibly low interest rates, long term real estate might be a better option?

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