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Stock trading for complete beginners

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  • Malthusian
    Malthusian Posts: 11,055 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Photogenic
    OK, no harm in stating stats:

    2013 Yr 1 84 %
    2014 Yr 2 67.5%
    2015 Yr 3 19 %
    2016 Yr 4 37.3% (with 64 trading days left this year).

    [snip]

    But to answer your question directly, if you had started with X in 2013, and you could copy my trades (and got the fills), you would now have 3.72 times X, plus your original capital being X back.

    According to your year-by-year stats I should have 5.04 times X including my original capital.

    But whichever it is, those are extremely impressive results even taking into account the level of risk. And if I was you I would be cashing in my chips and writing my book about how to make a fortune from day trading right about now. I'm entirely serious about this. You can write a book now setting out how you came to pick such good stocks (obviously it's all hindsight now but that doesn't matter) and traded your way to 4 or 5 times your original capital in 4 years. People have sold thousands of books on the back of much less compelling evidence of expertise than that. If next year is a bad one then you don't sell nearly as many books.
  • EdGasket
    EdGasket Posts: 3,503 Forumite
    edited 29 September 2016 at 10:35AM
    Yes I make that 5.04 times original capital (1.84 X 1.675 X 1.19 X 1.373) and it is indeed impressive and indeed worthy book material; never mind if just plain lucky so long as you can back it up with evidence if called on. A '5 times your capital in 4 years' book would probably make you some safe money on the side from trading.

    BTW were these all or mostly actual day-trades or a longer timeframe? I find daytrades don't work for me but have had some over a week or two that have worked very well. Plus some 'day-trades' that turned into long-term holds; basically short timeframe trades that didn't work out but as the underlying investment looked OK wasn't worth selling up at a loss.
  • Malthusian wrote: »
    According to your year-by-year stats I should have 5.04 times X including my original capital.

    But whichever it is, those are extremely impressive results even taking into account the level of risk. And if I was you I would be cashing in my chips and writing my book about how to make a fortune from day trading right about now. I'm entirely serious about this. You can write a book now setting out how you came to pick such good stocks (obviously it's all hindsight now but that doesn't matter) and traded your way to 4 or 5 times your original capital in 4 years. People have sold thousands of books on the back of much less compelling evidence of expertise than that. If next year is a bad one then you don't sell nearly as many books.

    Apologies I am a little confused by your first sentence.

    With that said, and if we can put our little spat behind us, I'll comment on the rest of the post.

    Firstly if you genuinely mean it regarding the results then thank you. However, all of the knowledge anyone needs is already out there. Admittedly out of the twenty or so books I've purchased, with hindsight I could probably whittle those down to about ten which for me get to the numb of the matter, regarding trading in general and not just day trading.

    Secondly, the real money is made in the waiting not doing what I do, I accept that but as I previously stated, your style of trading has to fit with your psychology. I will attempt to swing trade at some stage, but not yet.
  • EdGasket wrote: »
    Yes I make that 5.04 times original capital (1.84 X 1.675 X 1.19 X 1.373) and it is indeed impressive and indeed worthy book material; never mind if just plain lucky so long as you can back it up with evidence if called on. A '5 times your capital in 4 years' book would probably make you some safe money on the side from trading.

    BTW were these all or mostly actual day-trades or a longer timeframe? I find daytrades don't work for me but have had some over a week or two that have worked very well. Plus some 'day-trades' that turned into long-term holds; basically short timeframe trades that didn't work out but as the underlying investment looked OK wasn't worth selling up at a loss.

    Hi EdGasket,

    I can back it up via the two brokerages (iweb & iii) I used, but as I previously stated the knowledge is already out there.

    Apart from three over night trades, all have been intra-day.

    There was one horrendous loss in year three which made me stop for a month go back and hit the books and put my ego back in the box so to speak that was Plus500, hence the poor performance in year three. The other two were good to me and one I did get lucky in that it got taken over the next day Valiant Petroleum, after purchasing a few at 3:30 pm the day before.

    I can only go from my experience, but I don't get into the fundamentals of a company, I am looking for sentiment and news, either good or bad to profit from, but I only play it from the long side, I don't short via spread betting firms, not because I have any strong feelings against short selling, just because I am not that sophisticated unfortunately.

    Personally I think the playing field is a lot more level now than it used to be for retail traders / investors. I mean for £570 I get full level II with charts which is excellent. Although not as pretty as some packages it gives live prices and historical price charts going back ten years plus. It also allows me to screen multiple charts on the monitors.
  • EdGasket
    EdGasket Posts: 3,503 Forumite
    I remember the takeover of Valiant by Ithaca; had shares in both.

    Could you post your recommended reading please or pm me if you prefer?
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Post of the Month
    A problem for most people is the large capital requirement needed to make sure you have adequate funds to get involved in a decent number of trades and avoid risk of total ruin through poor money management.

    If you're going to give up a day job that might pay a risk free salary of, say, £50k plus, in order to make yourself properly available to be placing momentum trades at 3.30pm on a random midweek afternoon, then you need to have say £150k+ of capital so that your 30% profit on what you deploy gives you that £50k (assuming some years you make 20% and others 40% and it averages out).

    But, your various positive annual results were all obtained during what has been a general bull market since 2009, and as you're "long only" then presumably the pickings are slimmer in the lean years when there are more (or larger) downs than ups.

    So, you'd have to expect some years where you made 0% not 30%, so you'd need your full year's salary in the bank rather than hoping to make it from your trading.

    And really you need to expect that you could lose 30% plus in a bad year, rather than a bad year just being flat/break-even, so in order to be able to go into the next year with £150k of capital again, you'd need the £50k salary in the bank, and the £50k money that can be used to cover up the losses in the bank, as well as the £150k starting capital.

    So, if someone wanted to get into this game instead of doing a well paid day job, they'd need a quarter of a million quid, and they'd need to not mind losing it over a multi year losing streak (which happens to most of the people who try it, whether or not they get interviewed for case sudies for your books). Really you need funding to survive losing heavily two or three years in a row and still have seriously meaningful capital available to keep going and recover it with better years in future. So maybe if you want to make £50k a year you need a stake of half a million plus. That would be only 10x your desired win amount which still carries significant risk of failure.
  • bulltraderpt
    bulltraderpt Posts: 82 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    edited 29 September 2016 at 12:39PM
    EdGasket wrote: »
    I remember the takeover of Valiant by Ithaca; had shares in both.

    Could you post your recommended reading please or pm me if you prefer?

    No worries, I'll do it this evening as I am stalking a few, currently.

    Well done on IAE, although the small oilies have, in general been hit hard since Oil's drop.

    I was just lucky on Valiant, a lot of people I read, were disappointed as they felt IAE bought it too cheap.
  • EdGasket
    EdGasket Posts: 3,503 Forumite
    I remember the same day that the takeover was announced, Valiant had just reported another 'duster' in a long series of 'dusters'. You were lucky with that one because without the takeover Valiant would have fallen that day.
  • bowlhead99 wrote: »
    A problem for most people is the large capital requirement needed to make sure you have adequate funds to get involved in a decent number of trades and avoid risk of total ruin through poor money management.

    If you're going to give up a day job that might pay a risk free salary of, say, £50k plus, in order to make yourself properly available to be placing momentum trades at 3.30pm on a random midweek afternoon, then you need to have say £150k+ of capital so that your 30% profit on what you deploy gives you that £50k (assuming some years you make 20% and others 40% and it averages out).

    But, your various positive annual results were all obtained during what has been a general bull market since 2009, and as you're "long only" then presumably the pickings are slimmer in the lean years when there are more (or larger) downs than ups.

    So, you'd have to expect some years where you made 0% not 30%, so you'd need your full year's salary in the bank rather than hoping to make it from your trading.

    And really you need to expect that you could lose 30% plus in a bad year, rather than a bad year just being flat/break-even, so in order to be able to go into the next year with £150k of capital again, you'd need the £50k salary in the bank, and the £50k money that can be used to cover up the losses in the bank, as well as the £150k starting capital.

    So, if someone wanted to get into this game instead of doing a well paid day job, they'd need a quarter of a million quid, and they'd need to not mind losing it over a multi year losing streak (which happens to most of the people who try it, whether or not they get interviewed for case sudies for your books). Really you need funding to survive losing heavily two or three years in a row and still have seriously meaningful capital available to keep going and recover it with better years in future. So maybe if you want to make £50k a year you need a stake of half a million plus. That would be only 10x your desired win amount which still carries significant risk of failure.

    There's too much to comment on there. I would say this though, yes you are correct, since 2009 to the present day the markets have been in a bull phase although the big money for tracker and most actively managed funds were made at the start of it (so far).

    However, since 2013 the FTSE has only gone up about 18% (from 5878) excluding dividends (and I suppose if you throw those in we could be talking 30% ish), although it has gone lower than that this year.

    There are numerous technical signs that will give traders a heads up before a potential moves to the down side. I would argue one of the huge advantages a day trader does have over institutions is their lack of size and nimbleness, so when moves do occur they can take advantage of them or stand aside.

    I would disagree with you about the amount you need, although each to their own regarding risk position sizing and the like. Of course, yes, the key to your capital is your reserves and that stands to reason.

    When we do get a bear market or a transition to one, history shows you get violent whipsaws and volatility which creates opportunity, I've already seen this last year in Aug and in January this year it felt like it might have been the start of one, but wasn't as we know.
    I do trade disappointment when companies get hit, so I do have experience of trading in the ashes of company specific micro moves down but I am more experienced trading micro events than macro, but that's only to be expected.
  • EdGasket
    EdGasket Posts: 3,503 Forumite
    edited 29 September 2016 at 3:50PM
    Article 'Why most traders lose money...":

    https://vantagepointtrading.com/archives/7665

    The comments at the end are worth reading too. A salutary note from one of them:

    "Nearly 2 decades under my belt and just blown up. So many lessons learned but after a certain time the mental fight slips, this game requires ur best not ur 2nd best, no less than constant excellence to win in the long term."
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