Stock trading for complete beginners

bulltraderpt

EdGasket wrote: »

Good luck bulltraderrpt. But your record so far doesn't prove you won't get a wipe out at some point (like that trader with 20 years under the belt who got wiped out). It's one person over 4 years or so; not enough to prove trading by amateurs works; still in the possibly just lucky territory. e.g. that Valiant trade was definitely lucky and as i said they actually announced a negative drill result on the same day as the takeover by Ithaca. Luck like that helps your stats a lot.

Good luck/trading anyway.

Thank you for your good luck, we'll I'll keep hold of the cash tightly so I'd like to think I won't blow up as doing this you need automatic stops in place, and other criteria to ensure you don't blow up.

BTW I lost 4 times more on Plus500 than I made on IAE, so I think you might be having a thought that I put on positions so large that's how I make cash, I don't, I now position correctly with regards to the pot balance.

I'll come back at the end of the year and then periodically give stats at the end of next year.

There are plenty of ratios you can employ to guard against either over trading or correct position sizing and these apply equally to swing trading.

I like to ensure draw downs are small and I like to know where my percentage increase / decrease is compared to the overall markets.

bowlhead99

A few obvious comments on some of your comments:

bulltraderpt wrote: »

I think you might be having a thought that I put on positions so large that's how I make cash, I don't, I now position correctly with regards to the pot balance.

So, you *now* position correctly with regard to pot balance. Money management and reducing the risk of ruin when trading or gambling and faced with difficult odds, is paramount.

From the language used I would surmise that before you learned to do this (position correctly wrt pot balance) you had some periods of overtrading, but got lucky.

So, the trading performances of previous years when they were the result of overly large trades which were risky but happened to be successful, should perhaps be modified to exclude the overly large successful trades because you would not recommend people to indulge in overly large trades (any more).

I'll come back at the end of the year and then periodically give stats at the end of next year.

People on anonymous forums often offer to share their results after the fact, to prove they were right. We take them with a pinch of salt because any number can be fabricated, so it's not really worth your time and effort doing it.

Secondly: If I can do it understanding sentiment and very basic charting, then there enough meat out there for everyone.

You have tried to make this point several times.

You might as well say I know very little about tossing coins but if I can be in the top 5% of people getting heads then there are enough heads for everyone, so don't worry, it's not only one out of 20 people who will be fortunate enough to get in the top 5%, even though the statistics say only 5% get to be in the top 5%. The other 95% fail to get in the top 5% because they don't try hard enough, not because the odds of getting in the top 5% are stacked against them.

Thirdly, price don't move randomly I could show you this because what you consider to be random is quite possibly pull backs to support or an algo flash crashing to fill orders, and those are great if you get it when they pull the market down.

So prices are not random, and for the micro movements you can see why they are moving in real time with sufficient notice to place winning trades, rather than merely being able to explain after the fact why they moved back to support in line with your expectation.

If this were true, it seems to me that the returns you get from your system, which appear to be well under 100% a year, are pretty damn poor.

bulltraderpt

bowlhead99 wrote: »

A few obvious comments on some of your comments:
"So, you *now* position correctly with regard to pot balance. Money management and reducing the risk of ruin when trading or gambling and faced with difficult odds, is paramount.

From the language used I would surmise that before you learned to do this (position correctly wrt pot balance) you had some periods of overtrading, but got lucky."

There is nothing wrong with 'over trading' if you are calling sentiment correctly, given you can be in and out of a stock for £10, that's not a lot of commission. Although it is true that as you develop your style you change, nothing wrong with that.

"So, the trading performances of previous years when they were the result of overly large trades which were risky but happened to be successful, should perhaps be modified to exclude the overly large successful trades because you would not recommend people to indulge in overly large trades (any more)."

No they weren't overly large, because that would be stupid! The amount of people I have read on bb who have no idea about position sizing is just incredible.

"People on anonymous forums often offer to share their results after the fact, to prove they were right. We take them with a pinch of salt because any number can be fabricated, so it's not really worth your time and effort doing it."

I was asked, I never put it up there so you are wrong on that as the thread will show.


"You might as well say I know very little about tossing coins but if I can be in the top 5% of people getting heads then there are enough heads for everyone, so don't worry, it's not only one out of 20 people who will be fortunate enough to get in the top 5%, even though the statistics say only 5% get to be in the top 5%. The other 95% fail to get in the top 5% because they don't try hard enough, not because the odds of getting in the top 5% are stacked against them."

That's complete nonsense and common sense should have told you this before you posted it.

"So prices are not random, and for the micro movements you can see why they are moving in real time with sufficient notice to place winning trades, rather than merely being able to explain after the fact why they moved back to support in line with your expectation."

You certainly can, not all the time as you'll get other players who'll come in etc, algo's which will change or other unknown information which can and does change prices positively or negatively, however thinking in probabilities can and does give traders an edge, going short or long.

"If this were true, it seems to me that the returns you get from your system, which appear to be well under 100% a year, are pretty damn poor."

Well, given the market is an ever changing beast as sentiment waxes and wains 40% so far this year isn't to be sniffed at, I am sure your managed fund has managed to beat this hasn't it?

grey_gym_sock

position sizing is 1 aspect of trading which it's possible to get right (or less wrong). keep it within reasonable limits, and you can reduce the chances of your completely running out of money to play with. that doesn't stop you losing money, as most traders do. if you're adding to your trading pot from (e.g.) a salary, you can keep going indefinitely, losing however much of your salary you are prepared to trade with. if you're not adding to your trading pot, you can obviously lose it all, but you can postpone that for a very long time if you bet small enough, and more so if you also take a break after a string of losses, and scale down your positions in line with your reduced pot.

i suspect that many traders have no idea about their total losses/gains, because they don't know exactly how much they've added to their trading pot from their salary. this is a problem which affects many longer-term investors, too, not just traders - e.g. see https://en.wikipedia.org/wiki/Beardstown_Ladies

apart from position sizing, any apparent competence in trading is likely to be deceptive. by which i mean: any trader who thinks they are competent is most likely fooling themselves (never mind what anybody else thinks about it). this is the effect of following a "system" which isn't a system - i.e. an incomplete system, where you have to fill in the gaps with "judgement" or "psychology".

the system doesn't tell you what trades to make; it just gives you a language to describe how the market moves. e.g. this is the trend (in any price or index); if it continues to move the same way, that's because of the trend; if it goes the other way, that's because the trend broke down or there was a reversal. which tells you nothing: either it will continue to move the same way, or it will go the other way. no sh*t! but aren't there also signs to watch for, which tell you when a trend is likely to break down? well, there is more terminology, to describe more precisely how it does or doesn't break down, but it still doesn't actually tell you 1 way or the other - it's down to your "judgement". all you have is a sophisticated language, enabling you to talk about why you made or lost money.

reflecting on your own "psychology" is an easy way to deceive yourself. if you made money, you're going to think you had the right attitude; if you lost money, the wrong 1. combine that with the flexibility of the technical language, and you can easily explain anything: e.g. most of a series of trades worked, so perhaps you say your psychology was right, but 1 or 2 failed, so perhaps you come up with a technical error to explain those losses.

there's another layer of ambiguity in the issue of to what extent, when following the movement in 1 price/index, you should also be considering the movements in other things. e.g. if you're trading an individual share, should you also consider movements in broader indexes? or if you're trading a UK index, should you consider what the US index is doing? and so on. basically, no definitive answer is ever given to this. which gives you broad scope to explain anything after the event. don't know why a trade went wrong? perhaps you should have thought about the movement in some other index before making the trade. but if it went right, you wouldn't bother asking whether it was an error to trade without considering the other index.

and if you can't explain it that way, you can always fall back to "psychology". you need to read the mood of the markets correctly, in order to fill in the gaps in the trading "system" which isn't a system. if you get it wrong, it's your psychology that's at fault, not the "system" which isn't a system.

and remember, most of the 95% of losing traders will be keeping as quiet as possible about it. not telling their friends, and perhaps not even their family, about how much they've lost. (if they've even measured it correctly.) and not posting about it on public message boards (even under pseudo-anonymous handles). the 5% winners (if it's that many - probably fewer in the long run) are more likely to post. and to genuinely believe they're skilled, though most (if not all) of them have just been lucky.

fairleads

Interesting is that the only people who have told me they’ve lost money on the stock market – and there have been quite a few - are Walter Mitty types.
And they all have one thing in common, they are all as poor as church mice thus leading us to believe their predicament was through no fault of their own and that before the sad event they were rolling in money.
Its a reverse (perverse) psychology thing.
It’s a similar thing to comments here by individuals who try to convince one and all that a)
95% of frequent traders lose money and
b)
most of the 95% don’t disclose the facts
But if that is the case how is it that some here can form a valid opinion on the fortunes of the frequent trader and present it on the web as gospel.

grey_gym_sock

fairleads wrote: »

Interesting is that

oh, dear, i hope this won't turn out to be another inaccurate complaint that everybody who says active trading is bad idea is biased, without addressing the substantive arguments that have been made about why it's a bad idea. well, let's see ...

the only people who have told me they’ve lost money on the stock market – and there have been quite a few - are Walter Mitty types.
And they all have one thing in common, they are all as poor as church mice thus leading us to believe their predicament was through no fault of their own and that before the sad event they were rolling in money.
Its a reverse (perverse) psychology thing.

you're implying that everybody who argues against trading has lost money trading. well, i'm arguing against it, and i've never even tried trading. does that make my opinion invalid? i've also never tried jumping into a killer-shark tank, and i'd recommend against doing that, too. i don't even know much about killer sharks. but i know enough to know it's a bad idea.

incidentally, it would actually be in my interest to encourage people to trade, since i own shares in IG group (the most popular platform for many kinds of active trading), and also in hargreaves lansdown (who are 1 of the biggest UK stock brokers). so this is a sort of heads-i-win, heads-i-win strategy for me: if i persuade people not to trade, i can feel good about giving them good advice; but if i fail, i have a good chance of profiting from their mistakes.

It’s a similar thing to comments here by individuals who try to convince one and all that a)
95% of frequent traders lose money and
b)
most of the 95% don’t disclose the facts
But if that is the case how is it that some here can form a valid opinion on the fortunes of the frequent trader and present it on the web as gospel.

1) evidence from firms who offer facilities for short-term trading, which all give very high failure rates, in that ballpark area.

2) simple arithmetic and logic:

a) we know that the average return before costs for all traders and investors, weighted by amount of capital employed, is (for a stock market) equal to the return from a capitalization-weighted total-market index. there are good and bad years, but in the long run the market return is unlikely to be much more than inflation + 5% per year. some traders/investors will do better than this average, but only to the extent that others do worse. and most of the money in the market is managed by professionals, with far more resources available to support them than a lone trader: that's who you're competing with.

(for markets other than stock markets, the average return varies. e.g. for trading currencies, the average return is nil. for shorting stocks, the average return is minus the average from return from stocks. etc.)

b) you also incur costs when trading/investing. to buy and later sell a UK share will cost 0.5% stamp duty + the bid-offer spread (perhaps 0.1% for a FTSE 100 share) + 2 dealing commissions (which are very dependent on deal size, e.g. if you pay £5 per deal and trade £5000 of shares at a time, that's 0.1% each time, so 0.2% in total). that comes to 0.6% + dealing commissions (e.g. perhaps 0.8%).

(again, this varies depending on what you are trading, and how. some forms of derivative will be cheaper to trade, especially if you have short holding periods.)

c) put (a) + (b) together, and most traders will lose money. e.g. if you day-trade shares, an average share on an average day in the stock market will rise by inflation + about 5% / 250 = 0.02% ... and your buying and selling costs are at least 0.6%, and more likely at least 0.8% ... so that's an average loss of c. 0.78% per trade.

(clearly, the numbers vary for different kinds of trading. but - spoiler alert! - there aren't any short-term trading strategies where they are in your favour. it just varies how much they're against you.)

that's 2 reasons. please feel free to critique them. and to state what percentage of traders you believe fail, and how you arrived at that figure.

bulltraderpt

Hi grey gym sock, enjoy;

"oh, dear, i hope this won't turn out to be another inaccurate complaint that everybody who says active trading is bad idea is biased, without addressing the substantive arguments that have been made about why it's a bad idea. well, let's see ..."

Well, let's see if your post turns into one of those a little knowledge is a dangerous thing type posts as you profess some kind of professional knowledge to all and sundry..

"you're implying that everybody who argues against trading has lost money trading. well, i'm arguing against it, and i've never even tried trading. does that make my opinion invalid? i've also never tried jumping into a killer-shark tank, and i'd recommend against doing that, too. i don't even know much about killer sharks. but i know enough to know it's a bad idea."

Ah ha! Right from the off you are arguing against something you've never tried! You try and justify this by giving a ridiculous example about jumping into a tank with a killer shark! I mean, really...

"incidentally, it would actually be in my interest to encourage people to trade, since i own shares in IG group (the most popular platform for many kinds of active trading), and also in hargreaves lansdown (who are 1 of the biggest UK stock brokers). so this is a sort of heads-i-win, heads-i-win strategy for me: if i persuade people not to trade, i can feel good about giving them good advice; but if i fail, i have a good chance of profiting from their mistakes."

So, from what you state you must have a managed fund, possibly even a FTSE 350 index tracker as the two component companies are listed in the aforementioned index.

Your next sentence is one of those couched; "I'm only doing this for the greater good" type sentences, when really it's supposed to mean I know more than those I am speaking to so listen up people!

"1) evidence from firms who offer facilities for short-term trading, which all give very high failure rates, in that ballpark area."

Give me evidence from short term trading please. As the comments I have read states it all types of trading, whether short or not. The only evidence I could give is what I've read in several trading books, but does this show all account retail and professional? Probably not and of course that 'evidence' I've read is entirely possibly out of date.

2) simple arithmetic and logic:

"a) we know that the average return before costs for all traders and investors, weighted by amount of capital employed, is (for a stock market) equal to the return from a capitalization-weighted total-market index. there are good and bad years, but in the long run the market return is unlikely to be much more than inflation + 5% per year. some traders/investors will do better than this average, but only to the extent that others do worse. and most of the money in the market is managed by professionals, with far more resources available to support them than a lone trader: that's who you're competing with."

This is complete hog wash as it shows you've drunk the cool aide from those vested interests in the industry!

There are a good minority of active funds who beat the indexes go and research them. Just because you, appear to have opted for main index trackers doesn't mean your funds performance is in anyway superior to other players in the market.

"b) you also incur costs when trading/investing. to buy and later sell a UK share will cost 0.5% stamp duty + the bid-offer spread (perhaps 0.1% for a FTSE 100 share) + 2 dealing commissions (which are very dependent on deal size, e.g. if you pay £5 per deal and trade £5000 of shares at a time, that's 0.1% each time, so 0.2% in total). that comes to 0.6% + dealing commissions (e.g. perhaps 0.8%)."

News flash! Not all shares attract stamp duty, doh! So that rather makes the above example null and void. You evidently didn't know that otherwise you'd have thought first before posting it. Or, perhaps given some of you other 'musings', you'd have carried on regardless...

Although of course I have traded numerous times companies with stamp duty.


"c) put (a) + (b) together, and most traders will lose money. e.g. if you day-trade shares, an average share on an average day in the stock market will rise by inflation + about 5% / 250 = 0.02% ... and your buying and selling costs are at least 0.6%, and more likely at least 0.8% ... so that's an average loss of c. 0.78% per trade."

Inflation? What's that got to do with day trading? Are we in some Zimbabwe type environment currently? Nope don't think so...

"(clearly, the numbers vary for different kinds of trading. but - spoiler alert! - there aren't any short-term trading strategies where they are in your favour. it just varies how much they're against you.)"

Hang on, you now STATE there aren't any short term strategies where they are in your favour?

Really. And this from someone who by their own admission doesn't trade, probably has never traded, not even read a basic book on the subject on short term or longer term trading, but is happy to give his cash to 'professionals' who hardly ever beat the market!

"that's 2 reasons. please feel free to critique them. and to state what percentage of traders you believe fail, and how you arrived at that figure."

Perhaps the reason why so many appear to fail is because, like you, they haven't actually engaged with the subject matter, but are more than happy to spout off on an anonymous bulletin board as though they know what they are talking about.

Go try your comments on proper investor / trader forums they'll metaphorically rip your throat out with the stuff you just posted. I was being pleasant by the way, it could have been so much worse, you got away lightly.

bowlhead99

bulltraderpt wrote: »

bowlhead99 wrote: »

bulltraderpt wrote:

you might be having a thought that I put on positions so large that's how I make cash, I don't, I now position correctly with regards to the pot balance

"So, you *now* position correctly with regard to pot balance.

From the language used I would surmise that before you learned to do this (position correctly wrt pot balance) you had some periods of overtrading, but got lucky."

There is nothing wrong with 'over trading' if you are calling sentiment correctly

Yes of course you are right, what was I thinking, there is nothing wrong with making any kind of stupid and inappropriate bet, if it later turns out that you win it by it turning out that by some luck, you called it correctly.

bulltraderpt wrote:

bowlhead99 wrote:

"So, the trading performances of previous years when they were the result of overly large trades which were risky but happened to be successful, should perhaps be modified to exclude the overly large successful trades because you would not recommend people to indulge in overly large trades (any more)."

No they weren't overly large, because that would be stupid! The amount of people I have read on bb who have no idea about position sizing is just incredible.

You said you "now position correctly with regards to the pot balance". I suggested that your use of the word 'now' means you did not position correctly with regard to your balance in the past, and so your high return came from taking excessive risk at a level which was not sensible, because you were not positioning correctly with regards to your pot size.

Your response is that your trades were not overly large because that would have been stupid. Yes, damn right it would have been stupid. But you did it anyway because you were naive. You modified your behaviour since those excessively risky times, so you 'now' postition correctly with regard to your pot size, as a result of learning more about what you are doing. Fortunately you were not wiped out before you modified your behaviour so are here to tell the tale, boasting about your historic returns and now pretending that you never made overly large trades because only a stupid person would do that.

I call BS.

bulltraderpt wrote:

bowlhead99 wrote:

"You might as well say I know very little about tossing coins but if I can be in the top 5% of people getting heads then there are enough heads for everyone, so don't worry, it's not only one out of 20 people who will be fortunate enough to get in the top 5%, even though the statistics say only 5% get to be in the top 5%. The other 95% fail to get in the top 5% because they don't try hard enough, not because the odds of getting in the top 5% are stacked against them."

That's complete nonsense and common sense should have told you this before you posted it.

It is the logical extension of your argument. In the short term (over a period of broadly positive market sentiment when markets are rising) you have had some success at trading, which most people do not have because trading is difficult and fraught with risk. Only a small proportion succeed because the odds are stacked against them.

Your argument is that they could all be winners, on the grounds that you did it, so the odds can't be stacked against them.

That is like a top CEO saying everyone can be in the x% of the population that have an IQ of 150 and become CEO of a successful international business, or Ronaldo saying everyone can be in the x% of people in contention to win the Golden Boot, on the grounds that they did it and are living proof.

It would perhaps be irresponsible for either of them to suggest that someone gives up their job stacking shelves and don't worry about not having any income while you are waiting for that perfect role to come along, you just have to be in the right place at the right time to get that perfect opportunity (or that dream trade which covers the losses for the rest of the year).

bulltraderpt wrote:

bowlhead99 wrote:

"So prices are not random, and for the micro movements you can see why they are moving in real time with sufficient notice to place winning trades, rather than merely being able to explain after the fact why they moved back to support in line with your expectation."

"If this were true, it seems to me that the returns you get from your system, which appear to be well under 100% a year, are pretty damn poor."

You certainly can, not all the time as you'll get other players who'll come in etc, algo's which will change or other unknown information which can and does change prices positively or negatively, however thinking in probabilities can and does give traders an edge, going short or long.

Well, given the market is an ever changing beast as sentiment waxes and wains 40% so far this year isn't to be sniffed at, I am sure your managed fund has managed to beat this hasn't it?

Yes, 40% in 9 months does sound poor if you are claiming that the market movements are non-random and can be predicted (if not with certainty then with probability).

What you are saying as your excuse for not making more than 40%, is that you have a system which only works:

(a) as long as no new 'players' come in

(b) as long as the algorithms to determine how to make money in any given situation and which predict how people will react, don't turn out to be wrong

(c) as long as there is no new information that comes into the market which can and does change prices

Hmm. Well for (a), the size of the market is the hundreds of thousands of traders worldwide, so I doubt it is going to be shocked by one new person coming in and deciding they want to 'play' in the market. Doesn't your model for deciding how the market will react to a trend include the fact that someone might be attracted to join the market if there is a particular opportunity?

Or maybe you are talking about someone who suddenly decides he wants to acquire a company, or dump his interest in a company, causing the price to move significantly and unpredictably. It is almost like the markets are too random to predict with a high level of confidence simply by reading a chart of what happened in the past.

(b) and (c) are self-evidently explanations of why your short term success is not reliable and difficult for people to replicate, and why most people should *not* see that you were successful and believe that they could be successful too. You are basically acknowledging that you have a model that works when it works, and only fails to work in the situations where it fails to work, which can happen at any time. Where do I sign?

Ah ha! Right from the off you are arguing against something you've never tried! You try and justify this by giving a ridiculous example about jumping into a tank with a killer shark! I mean, really...

GGS was using theories and known data about what happens when people get into a tank with a killer shark (most of the time, they die) as an analogy for why they should be cautious about getting into day trading (most of the time, people fail to be succesful). By your logic, one should get into the tank because any opinion about what will happen in 95% of situations is worthless until you tried it to see if you were lucky enough to be in the 5% when the shark was not hungry.

You seem to be somewhat blinded by your rage against people who doubt you, and when we simply try to extend your logic with an analogy or metaphor to make it more obvious what we are getting at, you just want to write it off because 'that would be ridiculous'

So you have a trading system that does not give massive returns because it only works when it works, and we are not qualified to say it would be crazy to give up the day job to use such a system because we have not given up the day job to use such a system. Apparently, we are the crazy ones.

bulltraderpt wrote:

This is complete hog wash as it shows you've drunk the cool aide from those vested interests in the industry!

There are a good minority of active funds who beat the indexes go and research them. Just because you, appear to have opted for main index trackers doesn't mean your funds performance is in anyway superior to other players in the market.

I can't see any evidence in GGS's post that he 'appears to have opted for main index trackers', just because he mentioned having shares in two brokers which happen to be in the index.

FWIW I take my exposure to listed and unlisted equity from some active funds, some passive funds and some directly held shares whose activities I follow.

I do find it a little silly that if GGS or I were to say that this is more reliable way of making money over the long term while keeping a day job, you say this is just because we 'drank the kool-aid' served by people in the investment funds industry who all have their own self-interests ; while if we tell you that the books on how to day trade are written by self-interested people and perhaps you drank some kool-aid, the answer is no no no, those people who spend their life trading or blogging about it or participating in forums about it are not biased in any way and we should not knock it until we tried it.

bulltraderpt wrote:

grey_gym_sock wrote:

...example about trading costs...

News flash! Not all shares attract stamp duty, doh! So that rather makes the above example null and void. You evidently didn't know that otherwise you'd have thought first before posting it.

Actually, GGS does know that, as you would know if you had been on this forum longer, where he posts regularly. Stamp duty isn't payable on AIM or HGS shares or overseas shares that maintain their register outside the UK, even if they happen to be listed in the UK. His very next sentence was that this varies depending on what it is that you are trading. You snipped it out from your quote because you wanted to rage about him being naive. This doesn't paint you as a particularly worthwhile person to engage in a debate.

Perhaps the reason why so many appear to fail is because, like you, they haven't actually engaged with the subject matter, but are more than happy to spout off on an anonymous bulletin board.

Go try your comments on proper investor forums they'll metaphorically rip your throat out with the stuff you just posted. I was being pleasant by the way, it could have been so much worse, you got away lightly.

Ooh, I dread to think what terrible things you would say if you were being unpleasant.

Ah well, best leave you to your friends on the 'proper investor forums'. You can tell them about all your wins and only some of your losses and then it will seem like you're all making money together.

Have fun maintaining your win percentage and return percentage in the next bear market as a long-only trader. If you fail, you can blame it on "the algos changing" or "there was a new player coming into the market" or "there was new unknown information".

bulltraderpt

Bowlhead99,

I am not going to grace that with a response because you are, evidently a waste of time, some one who is set in their ways. Good luck with your index funds..:rotfl:

BTW, I'm up today by 0.20% (and having paid some dreaded stamp duty), with the ftse down 0.2% as I type how did that happen?

Malthusian

bulltraderpt wrote: »

I am not going to grace that with a response because you are, evidently a waste of time, some one who is set in their ways. Good luck with your index funds..:rotfl:

BTW, I'm up today by 0.20% (and having paid some dreaded stamp duty), with the ftse down 0.2% as I type how did that happen?

Why don't you tell us? You're the guy who successfully foresaw which shares were going to buck the market.

In fact, why didn't you tell us yesterday?