Practicing share investing.....

willing2learn_3

Hi Big Spender

I too don't have time to watch the markets. I would love to hear from anyone out there who is able to fit trading into a life that is organised around full time work.

I think such people exist and i would love to learn how they do it.

I too will be practicing.....hopefully :-(........soon. At the moment i'm overwhelmed by too many practice sites. I made about $400 on a US site (investopaedia).

I'm also overwhelmed by how much stuff i need to read and learn. I find every time i come online to practice i just find more stuff to read......and i'm not sure which sectors to focus on and/or which country even!

but now i'm back tracking. Cheerfulcat told me to go to Digital Look and i haven't managed that today.

Ok tomorrow i will pick some sectors and begin practice trading. I'll report here for those that are interested. :-)

cheerfulcat

willing2learn wrote: »

One thing i would ask, i seem to have done a LOT of reading over the last 6-7 months....and still not sure what to do re investing (partly this is lack of money though). Can i ask would you say this is usual?

I don't want to still be reading stuff in a year's time and not acting......unless of course this is advisable. It's such a huge subject.

Do you mind me asking if you have invested in the stock market? I guess from your posts that you have. I'd love to hear about your experiences.

Hi, w2l,

Yes, I've been investing for 20 years or so - started because I thought it must be possible to get a better return than the 12% offered by the Britannia building society savings account!

Started off with IFAs and unit trusts but got a taste for directly-held shares with the first privatisations. It really took off when I realised that some companies pay dividends - it tickled me to think that if I owned shares in Tesco, I'd be shopping in a supermarket which I part-owned ( OK, only a tiny bit of ownership, but still...) and I'd get some of my money back! Bought shares in those companies I used which paid dividends, joined the Motley Fool and discovered that I had a fledgling HYP.

I learned a huge amount from the Motley Fool discussion boards. If you don't want to wade through all of the posts on any given board, you can sort by recs ( go to the index of the board and click on the Recs column ).

As to your question of reading and not investing - as you say, it's a huge subject, and there are many and various opinions about how to go about it. FWIW, I am still reading and learning. If you feel the need to do something, you could do worse than set up a regular investment in a tracker fund - at least you'll be in the market ( if that's what making you fret ).

willing2learn_3

willing2learn wrote: »

Cheerfulcat...thankyou! It's taken me all afternoon to find something like this! Thanks to you i've found it!

LOL!

Yes it took me all afternoon....

and now, two months later i've managed to revisit the site and now i can't work out how to search for companies according to their sectors......!

Back to square one! :mad:

Welcome to my world

ebyard

www.share.com is also worth a go, you get a £15k practise account to try your ideas without risking real cash. I have made a bit, and lost a bit, but it's interesting stuff.

Interesting in terms of being able to watch companies performance at a glance and so you can take a fairly hands-off approach to investing.

willing2learn_3

thanks ebyard!

I've made some virtual money on investopaedia.com.

I think now i'm wondering what to do with real money......and seeing as i've only got a few hundred to play with i'm looking to practice trade with that in mind.

By the way, i've found what i was looking for on digital look now, we have progress.

Blah99

willing2learn wrote: »

I think now i'm wondering what to do with real money......and seeing as i've only got a few hundred to play with i'm looking to practice trade with that in mind.

By the way, i've found what i was looking for on digital look now, we have progress.

I'll try to answer some of your questions. Firstly, if you only have "a couple of hundred to play with", direct equity investing is not for you. You need to be buying at least £1500 to £2000 of shares per trade, otherwise the fees, spread and stamp will make the required return too high, which increases your risk. This is known as your profit point. Here's an example, using Tesco. If I buy £300 of Tesco shares today, this is what happens:

First, the current offer price of Tesco is 337p, so I can buy 90 shares for £303. Then I have to pay £10 trade fee to my broker, and 0.5% stamp duty to Gordon Brown. That means the shares cost £314.28.

However I'm also going to have to sell the shares at some point, and that costs another £10 trade fee, so the total basic cost of owning this share is £324.82

That's £324.82 spent, and I only own the shares. I also buy them at the offer price of 337p - if I was to sell them immediately I must sell at the bid price, which is currently 336p. Yes, you did read that right. I have to buy at a high price and sell at a low price. This is called the bid-offer "spread", or "touch".

So despite the shares actually only costing me £303 I have to cover all my losses before I sell them. That means the bid price of the share must move from 336p to 360p, which is a 7% increase, for me to simply break even. That is a massive expectation to set on every share you buy.

Now imagine if I could invest 10 times what you can, say £3000. By investing this much money I only need the shares to move 4p, or just over 1%, for me to break even. Everything beyond that is profit.


Okay, all that aside let me answer some other questions. First and foremost, buy books and read everything you can on the subject. I recommend Robbie Burns' Naked Trader 2 and Alastair Blair's "Investors Guide to Charting" as starters. Next buy the Investor's Chronicle every week and read it cover to cover. Pay special attention to the tip updates, especially where they admit that their buy or sell tip was totally wrong - the experts don't really know much better than the rest of us.

Next, accept and understand that whilst you can learn the mechanisms of trading by doing paper trades (the "fantasy portfolio" thing you're doing), you'll not really start to gain experience until it's your money being spent. When a share dives for no apparent reason and you're watching the chart, the market and the news, it takes nerve, knowledge and understanding to either get out or stay in. When you're doing it with a fantasy portfolio the losses and gains (but more importantly, the losses!) aren't real, so they don't "affect" your decision making.

Next, do not, under any circumstances, buy shares with money you might need. For anything. If it's July and you have £3000 tucked away for Christmas, don't think "oh I'll just stick this in the market for a few months". The reason is simple - you can be forced into selling if the market turns against you for a while when Christmas rolls round, and a forced sale is the worst move possible.

Next, do not listen to anyone who tells you any of the following things:

1. They have a hot tip on a company you should buy. They don't. They're lying. If you're interested, do the research yourself (reading books will tell you how to do this) then buy for the right reasons, not because someone says so.

2. They tell you to buy penny shares. "Woohoo, the share is only 1p, if it goes up to 10p I'll make 10* profit!". Um, no. They're penny shares for a reason. It does very, very rarely happen, but penny share picking is a mugs game.

3. You should "pick shares", or "take a punt". Share purchases are investing, NOT gambling. You buy shares for clearly stated reasons ("the company will grow because of XYZ..."), not because you like the name of the company (hello Kalamazoo!).

4. They're hyping a share on a forum. Just ignore all the forum posts on specific shares. People like to think they are Warren Buffet, but in reality they're last in line at the buffet.

5. Use leveraged investments, or take advantage of gearing. Gearing is like putting a deposit on a whole load of debt. You're saying to a company, "here, I'm going to give you £10 now as a depost and you're going to lend me £100. I'll use that £110 to buy some shares, and I'll make 10* the profit I would have without you!". Right, but you also make 10* the loss. So steer clear of spread betting, CFDs etc until you absolutely understand them.

6. You must watch the markets all day, every day. Rubbish. All modern brokers have automatic trading tools that will buy and sell shares for you at preset points. This is a VERY GOOD THING when you're starting. You can say, "I'll buy Tesco when it's on the up and it hits 360p. If it falls back by more than 10% I'll sell it", and the trading platform will do it all for you. No more "oh, I've lost 20% but I'm sure it'll go back up - it's Tesco!". I bet lots of people said that about Northern Rock...


But a final note of encouragement. Trading is not magic. It's not rocket science, and it's not difficult. Anyone can learn how to do it as long as they spend some time reading up on the subject and keeping up to date on what the markets are doing (by, for example, reading Investor's Chronicle every week).

Good luck!

willing2learn_3

Blah99

Thankyou so much for taking the time to post that, i've learned so much from that. A friend and i picked some shares today just for paper trades. Unfortunately i just don't have the money to do it for real. The few hundred i mentioned is all that could be risked. I could get £1200 together, but i don't know, even with a lot of homework that i'd be prepared to use such an amount when i've never done this thing before......

but i also hear you that it really shouldn't be done with a few hundred.

I'm bored with just reading, like you say, it doesn't have the same effect....

Anyway i will continue to report back on what i've learned. Thanks for contributing! :-)

willing2learn_3

Blah99 wrote: »

Next, do not listen to anyone who tells you any of the following things:

6. You must watch the markets all day, every day. Rubbish. All modern brokers have automatic trading tools that will buy and sell shares for you at preset points. This is a VERY GOOD THING when you're starting. You can say, "I'll buy Tesco when it's on the up and it hits 360p. If it falls back by more than 10% I'll sell it", and the trading platform will do it all for you.

You know, i didn't actually know that! There was me thinking that once some shares were bought i'd be forever distracted, wanting to go watch the charts....lol

willing2learn_3

Ok, so today i am browsing on Digital Look. I have registered as they are free.

I am overwhelmed by the sheer amount of information but this is par for the course.....so this is my initial response:

I am going to look at food producers and maybe pick a couple of those for paper trades......

so far i have picked Premier Foods.....for no other reason than that i know someone who works for the company, so i have heard of them. The others i've heard of are Tate & Lyle....no other reasons to pick.

Okay i will try to be more speicific.

I will return when i have better reasons for picking stock. I will also come back when i have about 6 stock choices.

happy for any feedback or discussion/general chit chat :-)

willing2learn_3

wondering what all the indicators are for! I know about stochastic indicators because i've read about them......would anyone recommend from the list on digital look which indicators to go for ........for a complete novice....lol