Am I going into trading too soon?

_Super

Eco_Miser wrote: »

Some do, others are constantly monitoring the markets for opportunities to improve their portfolio.
How about a £225k loss when it all goes pear-shaped in year 15?


5%pa plus inflation is a reasonable average expectation, but it's not going to be a nice straight-line graph, more like a roller-coaster in reverse.

Yeah I get that and that is fine by me. To be honest with you a market doesn't drop -90% over night. It would be all over the news, financial crisis, markets plummeting etc and I'll just get my money out immediately. If the market stabilises then I can just put it back in again.

N1AK

_Super wrote: »

Take the slow steady approach that will probably win in the end (25 years time)

Take the risky approach and try to get at least 50% return on your starting capital per year.

I guess a lot of it based on personal circumstances too, not to be rude but it does seem like a fair few of you are quite a bit older than me, like I said I'm only 22 and have pretty much nothing to lose

The choice is realistically:
1/ Slow & steady + almost certainly having a considerable amount of money in 25 years time
2/ Fast & Furious and almost certainly losing a few grand in a couple of months.

You've already persuaded yourself that passive investing isn't for you, and you're right that losing a few grand at your age isn't a big issue, so why not get on with it and have a 'learning experience' :beer:

Personally, as an old fogey (30), I see £15k invested passively as the ability for me and the missus to both retire, well, a couple of years earlier. Obviously I could live without it, but if I'm going to risk it on a different type of investment then it needs to be worth the risk!

noggin1980

_Super wrote: »

Yeah I get that and that is fine by me. To be honest with you a market doesn't drop -90% over night. It would be all over the news, financial crisis, markets plummeting etc and I'll just get my money out immediately. If the market stabilises then I can just put it back in again.

You sound like you are going to play a dangerous game.

Taking your money out after a massive drop because you think it's going to continue to fall and putting it back in once the market has stabilised has a very significant chance of losing you alot of money.

Eco_Miser

_Super wrote: »

Yeah I get that and that is fine by me. To be honest with you a market doesn't drop -90% over night. It would be all over the news, financial crisis, markets plummeting etc and I'll just get my money out immediately. If the market stabilises then I can just put it back in again.

So you panic sell after you see on the news that the markets have plummeted. That crystallises whatever your loss is at that point (maybe only 50% - say £100k). Then you have to decide when the bottom has been reached, and get in again before prices bounce back up.

Or you could stay invested, postpone your spending plans and wait for the bounce.

redbuzzard

_Super wrote: »

To be honest with you a market doesn't drop -90% over night. It would be all over the news, financial crisis, markets plummeting etc and I'll just get my money out immediately. If the market stabilises then I can just put it back in again.

Ah, but when do you sell? If you sell every time something goes down, you'll lose money. If you hang on, it might go down some more. If you're not careful, you'll finally decide it's a crash and sell at the point where buying would be quite good value.

I wonder how much research you have done, or to what extent you have thought this through.

I think it was Tim Hale who wrote that if you gave the average US amateur investor $100 and 5 years, he would typically turn it into $90, or something along those lines.

That happens because people buy when they see the market or the stocks they are following doing well, and they sell when they see them doing badly. They almost never sell at the highs, or buy at the lows. Often they will end up doing almost the opposite.

Here's how it happens, apologies to almost everybody for this old chestnut:



Believe it, plenty have done it.

What plan do you have that will enable you avoid this, as a trader rather than a buy-and-hold investor?

_Super

Honestly I'm a bit surprised at how stupid you guys are. Either you think I'm a complete idiot or you're the idiots.

I didn't say I would withdraw my money AFTER the market plummets, what good is that lol? It's too late now.

Instead you pay attention to the news and when you notice the market start to drop then you withdraw before it's too late.

Assume a FTSE 100 Index Tracker for example is currently at 80% after 5 years of investing. The news starts to flow that the financial sector is going down the shitter. Stock markets are unstable, a multibillion pound hedge fund has just gone bust, the index has dropped 6% in 1 day THEN you withdraw your money so I'd have lost 6% but I'm still 74% in profit from my original investment.

Look at the 2008 market crash graph. (I would link the history graph but I can't post links)


As you see the market bounces back. The world NEVER loses money... the economy just keeps growing and it always will unless world war 3 breaks out.

As you can see the market did not collapse in a single day... You go to sleep with 90% profit and wake up -90% what planet do you think we live on? No wonder you all say to avoid investing you haven't the slightest clue or even common sense it would seem!

So you wake up in the morning and see on the news that the FTSE 100 has dropped 6% in a single day, you open another newspaper and it says "Markets are crashing" you open another newspaper with the headlines "Financial sector plummeting" and you don't withdraw your money? Then I hope you lose absolutely every penny because you're a !!!!ing moron.

Moreover, even if you didn't sell and stuck with it, the markets pick back up and sure you've lost a lot of profit but at least you didn't lose your investment.

It seems that patience is peoples worst enemy, they see the market drop a bit and they like sell like the world is about to end. It would seem that patience is the biggest problem for 99% of home traders, not inexperience.


And yes I know individual companies like Google, Facebook, Tesco etc take massive hits too but they're such a powerhouse company they'll always rebound back.

Anyone who goes into trading thinking they'll never take a loss is delusional. I have never said that I won't lose money, of course I will, the smartest people on the planet lose money in the market... I lost 3% on my index tracker last week, did I sell? Of course not... Just let the markets do their thing. It's the people who try to win every time that probably lose the most.

*EDIT* Also remember that during the day the share price is almost always up and down up and down so there are numerous chances to buy low and sell high. I have looked at countless stocks and if you select the 1 day graph there is a good chance that the graph will be up and down up and down up and down all day and it might end up finishing positive or negative but as long as you capitalise when you see the change and don't try to be greedy and get more then you should be fine.

Make an agreement to yourself that if the share price increases by x% then you'll sell no matter what. Hanging on for a better price longer and longer is a recipe for loss as you know the market is going to drop at some point so make an agreement with yourself.

You could also try to same approach when the market drops too but this is your own personal strategy. It's like gambling, you allocate yourself a set amount of money and that's it... the people who lose are the greedy people who want "just 1 more roll"

Get out while the goings good and you'll always make a profit. And if the price drops you can chose to hang on for a few hours and see if it picks up or just sell but set yourself a limit.

But what do I know, I'm just a naive 22 year old looking to make £15k into £50k in 1 day.

masonic

_Super wrote: »

Instead you pay attention to the news and when you notice the market start to drop then you withdraw before it's too late.

News often follows price. By the time you receive the news, the market has usually already reacted to it.

Assume a FTSE 100 Index Tracker for example is currently at 80% after 5 years of investing. The news starts to flow that the financial sector is going down the shitter. Stock markets are unstable, a multibillion pound hedge fund has just gone bust, the index has dropped 6% in 1 day THEN you withdraw your money so I'd have lost 6% but I'm still 74% in profit from my original investment.

Look at the 2008 market crash graph. (I would link the history graph but I can't post links)

Yes, but you are day trading, not investing. You won't be invested long enough to build up 80% gains over 5 years. You need to predict the ups and downs of the market over a few days. You won't have the luxury of relying on recoveries that might happen in months or years.

Nobody here would disagree that investing over the long term and riding out the short term ups and downs of the market is a sensible way to invest. But that isn't what day traders do.

coyrls

_Super wrote: »

Honestly I'm a bit surprised at how stupid you guys are. Either you think I'm a complete idiot or you're the idiots.

I didn't say I would withdraw my money AFTER the market plummets, what good is that lol? It's too late now.

Instead you pay attention to the news and when you notice the market start to drop then you withdraw before it's too late.

Assume a FTSE 100 Index Tracker for example is currently at 80% after 5 years of investing. The news starts to flow that the financial sector is going down the shitter. Stock markets are unstable, a multibillion pound hedge fund has just gone bust, the index has dropped 6% in 1 day THEN you withdraw your money so I'd have lost 6% but I'm still 74% in profit from my original investment.

Look at the 2008 market crash graph. (I would link the history graph but I can't post links)


As you see the market bounces back. The world NEVER loses money... the economy just keeps growing and it always will unless world war 3 breaks out.

As you can see the market did not collapse in a single day... You go to sleep with 90% profit and wake up -90% what planet do you think we live on? No wonder you all say to avoid investing you haven't the slightest clue or even common sense it would seem!

So you wake up in the morning and see on the news that the FTSE 100 has dropped 6% in a single day, you open another newspaper and it says "Markets are crashing" you open another newspaper with the headlines "Financial sector plummeting" and you don't withdraw your money? Then I hope you lose absolutely every penny because you're a !!!!ing moron.

Moreover, even if you didn't sell and stuck with it, the markets pick back up and sure you've lost a lot of profit but at least you didn't lose your investment.

It seems that patience is peoples worst enemy, they see the market drop a bit and they like sell like the world is about to end. It would seem that patience is the biggest problem for 99% of home traders, not inexperience.


And yes I know individual companies like Google, Facebook, Tesco etc take massive hits too but they're such a powerhouse company they'll always rebound back.

Anyone who goes into trading thinking they'll never take a loss is delusional. I have never said that I won't lose money, of course I will, the smartest people on the planet lose money in the market... I lost 3% on my index tracker last week, did I sell? Of course not... Just let the markets do their thing. It's the people who try to win every time that probably lose the most.

It's probably going to be best for you to have a go with your strategy, it seems fool proof.... good luck!

Eco_Miser

_Super wrote: »

Honestly I'm a bit surprised at how stupid you guys are. Either you think I'm a complete idiot

This. Seeing as you've started with the personal insults.

redbuzzard

They don't hang a sign out you know. And they talk of "shares plummeting" when the market is 2% off.

The FTSE 100 has dropped c. 10% or more I think 4 times since the start of 2010. Again, ask yourself how you will know whether to sell, and when to buy back in. You are talking about timing the market - lots of people brighter than me think you can't beat buy and hold by doing that.

Anyway, you've had your fun with us, and we have to be nice to you because you're new, so goodbye, and good luck from this "stupid" person who tried to help you