Online Trading
- Thread starter RoJoHen
- Start date
A
Amaris
Guest
^ Firstly, don't do it unless you're willing to lose double what you put into it. If you invest $2000, be willing to lose $4000. Secondly, fast trades may make you some money, but they're very risky. Don't dig into this lightly.
This link generally has some good advice: http://daytrading.about.com/
J.
This link generally has some good advice: http://daytrading.about.com/
J.
R
Rocketman
Guest
This is because they're
- Much less likely to boast about their losses.
- Incorrectly calculate their gains by ignoring trading costs.
- Have been lucky, so far.
- Are among the small set of gifted, educated individuals who can do this consistently.
Or a combination of the above things.
This is only true for derivatives or shadier, off-market 'trading products'. If you're an unexperienced trader, and someone tries to sell you one of these products with 'leverage' or 'margin', run for your life. The potential losses are often far higher than merely 'double' of what you put in.
RoJoHen said:
The main problem with that is that there's a shitload of disinformation out there about the stock market. The Disinformation to real information ratio is something like 10:1. The stock market is a place where money is made, not particularly by investors but off investors.
If you read an article about 'hot stocks' to pick, it's very likely to be bullshit.
If you read an article with pretty graphs and lines in it, it's very likely to be bullshit.
If you read an article predicting general economic trends, the odds are about even that it's bullshit.
RoJoHen said:
Which you won't. You're up against quantitative analysts with PhDs in economics and mathematics, white ravens like Warren Buffett, industry specialists, small-time insider traders, automated trading systems with fiber-optic links to the stock market, adrenaline-junky day and floor traders, and pension fund managers with decades of experience.
And you're also up against people like you and me, and against people with less common sense and knowledge about the stock market. But frankly, I don't think the last category is all that large.
The best time would have been back in March when the Dow was way down and you could have bought stuff up cheap.
I can't really offer any advice, just tips I use.
Stick with companies and types of stocks that you're familiar with.
Techs, Industrials, Textiles, Livestocks, that kinda jazz.
I know tech stuff, I follow the all the techie stuff as a general interest cause hey, I'm a geek! So I tend to mostly only fool around with Tech stocks.
It all depends if you want to be a big hotshot day trader gambler or if you want to invest for the long term in stable stuff that you can almost count on to grow say your retirement fund over the course of 30 years.
I guess an interesting gamble right now would be to by some General Motors stock.
Sure, the government just bailed it out big time and took it over, but it's almost a safe bet that in the next 10 years GM will rebound bigtime, completely restructure, build good cars again and pay back their government loans and turn a profit again. But it's still a gamble. I doubt you would ever see them spike, but hopefully a gradual incline over 20 years.
I used to do a bit of online trading. Made a bit, lost a bit, probably broke about even overall or a slim profit, I guess.
Bottom line is, it takes TIME to do it well. You need to research stocks and sectors, sit in front of the computer so you can act promptly when the need arises, etc, etc, etc. Frankly, while it was fun for a while, I got bored and now let fund managers and especially wealth managers deal with this sort of issue. They've also got access to faster systems (really, really, really important) and the benefit of lower charges too, as well as the ability to use a wider range of financial instruments.
If you really want to get into day trading, sure, go for it. Otherwise, I'd suggest finding a good professional team you can trust and work with and leaving it up to them.
Bottom line is, it takes TIME to do it well. You need to research stocks and sectors, sit in front of the computer so you can act promptly when the need arises, etc, etc, etc. Frankly, while it was fun for a while, I got bored and now let fund managers and especially wealth managers deal with this sort of issue. They've also got access to faster systems (really, really, really important) and the benefit of lower charges too, as well as the ability to use a wider range of financial instruments.
If you really want to get into day trading, sure, go for it. Otherwise, I'd suggest finding a good professional team you can trust and work with and leaving it up to them.
R
Rocketman
Guest
^ And even in the hands of experts, you should expect reasonably modest returns. If your returns, over several years, average out to about six to eleven percent, you can consider yourself lucky.
Alternatively, you can research passive investment strategies and do it yourself. The returns will be in the above range, and it takes almost no effort.
Perhaps I should apologize for my rather strong reaction upthread, but it needs to be driven home that 90% of the population has no business day trading, or picking individual stocks. The stock market won't make you rich overnight. But it can increase your wealth over the course of several decades.
Alternatively, you can research passive investment strategies and do it yourself. The returns will be in the above range, and it takes almost no effort.
Perhaps I should apologize for my rather strong reaction upthread, but it needs to be driven home that 90% of the population has no business day trading, or picking individual stocks. The stock market won't make you rich overnight. But it can increase your wealth over the course of several decades.
I feel very confident leaving all stock decisions in the hands of my broker. I have precisely zero interest in online trading.
R
Rocketman
Guest
Investopedia has a very nice stock market simulator you can use.
Would you feel the same way about an online casino?
This is probably the best advice.
I haven't made any trades now for more than two years, and the system I had in place for equities lost more money than it made (in the middle of one of the greatest bull markets in history
). I did do well in GLD though, back in 2005-2006.If/when I start investing in the markets again, it will probably with a professional.
Wrong.. trading is NOT gambling.
Okay couple of things before you do this. Are you trading (quick gains, in and out) or investing (for the long haul). Whatever strategy you choose will determine what stocks to pick.
Personally I disagree with time. Hell look at all the Lehman Bros, Meryl, AIG. These guys spend 10+ hours a day doing this and look what they did.
The key is understand what are your goals and through that will determine what you invest in.
My "pick" for the uninformed is look for ETFs (exchange traded funds) that mirror the DJI or FTSE or whatever exchange. B/c in the long run those exchanges goes up. By long I mean like 50 odd years and depending when you buy. Also if you "feel" economy is going to do bad you can use that gut to decide whether to buy or sell. It is also very easy to follow b/c every day you hear on the new DJI went up 2%, well if that happened your stock went up 2%.
But regardless I stronly recommend people to use all avenues to diversify their portfolios and take control of your investments. Whether they be tresurry bonds or mutual funds whatever. Governments aren't going to be able to pay for your pesnions so the sooner you save the better.
RoJoHen,
I just wanted to post this for you to consider. I'm not trying to tell you to do one or the other, nor am I saying trading is bad and you'll lose money.
The following graph tracks the performance, from 1994 - 2008, of $10,000 being invested every year into a regular CD vs. $10,000 being put into the S&P 500 Index every year.
http://www.ritholtz.com/blog/2009/07/sp500-vs-cds-1994-2008/
I just wanted to post this for you to consider. I'm not trying to tell you to do one or the other, nor am I saying trading is bad and you'll lose money.
The following graph tracks the performance, from 1994 - 2008, of $10,000 being invested every year into a regular CD vs. $10,000 being put into the S&P 500 Index every year.
http://www.ritholtz.com/blog/2009/07/sp500-vs-cds-1994-2008/
RoJoHen Just know what the hell you're doing before you start, and expect to lose money, especially at first. The problem is there is no magic formula to online trading and there are no get rich quick schemes. You need to study, and study, and study, and pay attention to everything.
Join an investment club, or similar group and talk to the people about their experiences with day trading.
The husband of someone I work with does online trading as a sideline and I asked her how much money he really makes, she admitted that he probably breaks even, and even so, he'd like to quit his real job and do it full time.
Personally I stick to relatively safe investments like mutual funds and a little bit of stock, and I don't have the desire or the time to do day trading. After this recent downturn I'm putting a little more money into my mutual funds every month since the market is essentially on sale right now.
Whatever you do, good luck.
Join an investment club, or similar group and talk to the people about their experiences with day trading.
The husband of someone I work with does online trading as a sideline and I asked her how much money he really makes, she admitted that he probably breaks even, and even so, he'd like to quit his real job and do it full time.
Personally I stick to relatively safe investments like mutual funds and a little bit of stock, and I don't have the desire or the time to do day trading. After this recent downturn I'm putting a little more money into my mutual funds every month since the market is essentially on sale right now.
Whatever you do, good luck.
Nm
The guy in response said it best "Imagine holding the right SPX stocks and exiting equities in October 2007. This chart tells me investing is all about understanding many things including cycles"
This is great advice, IMO. I agree 100%
RoJoHen it's a great thing to become involved in the markets for the reasons above. In fact, I'd say nobody can afford not to invest any more.
I'm going to sound like your dad here, but I would think about becoming an investor as distinct to a trader.
Treating the markets like a casino will probably be as successful as a visit to one for your long term wealth.
Again, boring advice, but the only reliable predictor of returns is the amount of diversification you have in your investments.
Buy index funds that track blue chip companies that pay dividends year after year for as many regions/countries as you can, and drip feed in spare cash a regular interval no matter whether the market is up or down, that way you won't be buying too much of the market when it is too expensive. Also buy bonds and cash (the % of these last two should be roughly the same as your age).
Keep at it, and soon you'll be stuffing your pockets with tax advantageous (well they are, at least, where I live) dividends every month - it's your regular spending money forever, and to know it will be there month after month gives you a peace of mind that you just can't beat.
When you feel you have invested across a nice wide spread of funds, maybe then treat 5% max of your investing money as "play money" to back your hunches and do some share picking if you feel you need to be more active.
None of this is rocket science, or very exciting, but it works if you stick with it - good luck with whatever you decide to do.
R
Rocketman
Guest
Actually, it mentions a strategy, market timing, that is often advised against, and talks about 'economic cycles', which may sound somewhat learned and sensible, but it would actually happily surprise economists to hear about magical cycles that can reliably predict the behaviour of markets.
Think about it this way: if you had a crystal ball that told you Ford stock would be selling at $20 a share in six months, would you buy? Of course you would. Now, imagine if everyone had such a crystal ball. What would happen? Ford stock would soar to something very close to $20 a share overnight. Because even if you only make a dollar on the sale in six months, that's a tidy profit.
There are no means to predict the stock market that are both reliable and widely known. It's that simple.
As discussed here, market timing can work--in simulation. Techniques like dollar value averaging bear out the same conclusion, but, these techniques may not work in the future, precisely because they've worked in the past.
