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 jonathanseagull
Registered: 10/28/05
Posts: 736
Last seen: 8 minutes, 5 seconds
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 Short-term Stock Trading - teach an interested beginner!
#8120240 - 03/08/08 03:37 PM (5 months, 27 days ago) |
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Hi. I know jack squat about trading stocks. I've been interested since high school, and now it's finally feasible for me. I have questions, but don't really know the lingo and jargon to search to obtain the answers in an efficient manner, and I thought it'd be fun just to generate some conversation. So I ask...
Can you tell me all you feel I need to know, as far as basics go? What are some good sites like E-Trade that will handle my trading? What is the minimum amount that I can expect to have to deposit into an account to get started? What commission rates can I expect at that lowest amount? What do I need to read as far as "bibles of trading" go? Are there message boards where people share their good stocks, or post if one is on the rise, etc? Should I expect to lose my ass right off the bat, or gain some money, or what?
Fill me in! I know nothing; please be gentle.
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 AroundtheSon
Mr. President
Registered: 01/11/07
Posts: 1,886
Loc: Midwest.
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Re: Short-term Stock Trading - teach an interested beginner! [Re: jonathanseagull]
#8120308 - 03/08/08 04:03 PM (5 months, 27 days ago) |
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:insert Wiccan's post about Gold/Silver here:
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 Gr33nday43
EthnobotanicalFreak!
Registered: 01/05/08
Posts: 348
Loc: Kentucky.
Last seen: 6 hours, 31 minutes
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Re: Short-term Stock Trading - teach an interested beginner! [Re: AroundtheSon]
#8120446 - 03/08/08 04:42 PM (5 months, 27 days ago) |
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Short term trading will burn you.
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http://www.shroomery.org/forums/showflat.php/Number/8039498#8039498
It's for Salvia and the law. Go there!
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geokills
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Registered: 05/08/01
Posts: 13,157
Loc: city of angels
Last seen: 5 hours, 16 minutes
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 Re: Short-term Stock Trading - teach an interested beginner! [Re: jonathanseagull]
#8120507 - 03/08/08 05:02 PM (5 months, 27 days ago) |
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I realize you are asking about stock trading, but if you have less than $10,000 available to invest, I would suggest starting out in a low-fee S&P 500 Index Fund (such as the Vanguard 500 - VFINX). This will leave you with a diversified portfolio that closely mimics the overall market. In other words, you won't have to worry about underperforming the market, and since the long-term average market return has beaten any other asset class over the last many decades, this is not just the lazy man's way out, but actually a very sound investment strategy!
If you want to take on more risk with the potential for greater reward, you can try investing in more targeted mutual funds such as the CGM Focus Fund (CGMFX), which is managed by Ken Heebner and has an extremely impressive performance record - being up 54% in 2000 (when the market was down 10%), up 48% in 2001 (market down 13%), down 18% in 2002 (market down more than 23%), up 66% in 2003 (market up 26%). More recently his fund returned over 79% in 2007, a year where the average market returned about 4%! He is still outperforming the market this year, and I am close to personally committing a large part of my portfolio to his skilled hand.
Now if you already have $10,000 and want to actively trade individual stocks, you need to begin by watching the market for at least a few months. Setup an account with a discount online brokerage (typically charging $5 - $10 per trade) such as TDAmeritrade, E*Trade, or ScotTrade and familiarize yourself with their tools. There are alternatives that offer lower commissions per trade ($1 - $3 per trade), but they likely won't offer the same quality or quantity of research tools.
Create a model portfolio or watch list before you start playing with your own money. Remember that downside protection is the most important thing you can do for yourself. If you can sucessfully limit your losses, the upside will take care of itself.
Diversification will help protect you from sudden steep losses, so try to pick 4 or 5 different stocks, each in a different sector of the economy. Even if you know one sector is absolutely on fire, you need to keep your money spread around in different sectors in case that hot sector falls out of favor. Consider it insurance, diversification will substantially limit your downside.
For example: - mineral/mining (i.e. gold) company - Agnico-Eagle Mines
- oil company - Transocean
- agricultural company - Deere & Co'
- consumer staples company - Protctor & Gamble
- telecommunications company - AT&T
Do your Homework. For each stock you currently own or are about to purchase, you can expect to spend at least one hour per week keeping up to date on general news, quarterly and annual reports, conference calls, etc. The markets move fast, so you need to stay up to date. If you don't have the time to do this, hand your money over to a mutual or index fund.
You want to own stocks that you can understand. Don't buy into hype, develop a thesis for why you believe the company or sector you are investing in will do better than expected in the future, as well as what will help protect you from losing money (such as quarterly dividends and stock buy backs).
Once you decide to invest in a specific stock, never buy all at once. Everyone will make mistakes. You want to scale into positions slowly over time, so that you can take advantage of when the market drops. In similar fashion, you want to scale out of your positions by selling over time as the stock continues to appreciate in value, so that you lock in profits just in case there should be an unexpected drop on the horizon (which you could then consider using as an opportunity to buy back the stock at a lower price).
Don't turn a trade into an investment. If you buy a stock for a specific catalyst (such as an expected new product announcement, merger approval, drug approval, etc), don't turn that trade into an investment by holding onto it if your catalyst does not pan out. Learn to recognize which trades you are considering for short-term catalysts, and which investments you are considering for their long term growth potential. Don't mix the two up, stick with your original plan and don't be afraid to sell at a loss if things are not playing out the way you had anticipated. There is no sense in hoping that a stock will come back up, not all stocks will recover, and some will even go to $0.
Always have cash on hand - Never keep yourself fully invested! This was the biggest mistake I made in the beginning of my trading career. If you keep all your cash committed in the market, you are basically saying that you don't believe the market can drop from this point. With all your cash committed, you can't take advantage of buying your favorite stocks on sale when the market turns negative! Try to keep at least 10% of your portfolio (the money you have for investing) in free cash, so that you can put it to work when there are unexpected drops in the market.
You can take a look at my thread here that I have been using to journal my own trading ideas and actions. Mind you, I'm not a professional, but I have been at this for a few years now and I feel that I am getting a better handle on it with each additional day of experience - it is not easy. The market is very difficult right now, and though I had a handsome 24% gain in 2007, I have been bleeding money in 2008 and underperforming the market so far this year. Be very cautious, and if you want to put some money on the line as you teach yourself about the market, do it through an S&P 500 index fund as I first mentioned in this post.
Suggested reading for stock trading: Jim Cramer's Real Money
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Liquidkick
H2O
Registered: 05/03/02
Posts: 2,195
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Re: Short-term Stock Trading - teach an interested beginner! [Re: jonathanseagull]
#8125361 - 03/09/08 09:37 PM (5 months, 25 days ago) |
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Ok, i learned the hard way....DO NOT USE ANY OF THOSE SHITTY ONLINE DISCOUNT BROKERS LIKE ETRADE OR SCOTT TRADE OR AMERITRADE..etc to actually trade with.
the fees are not worth it. Do sign up though and open an account since there are no minimums for ameritrade or etrade and use their screeners and resources for research and news.
I recommend interactive brokers or mbtrading.com
They are direct access brokers and if you are trading less than 500 shares at a time the per share plan is the way to go.
MBtrading is probably best if you are not an active trader or day trader.
Next since you listed short term trading...you might want to consider setting up a corporation and paying yourself a salary. Capital gains tax on short term gains is high at 35%.
That should get you started....
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phi1618
old hand
Registered: 02/14/04
Posts: 3,669
Last seen: 3 hours, 24 minutes
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Re: Short-term Stock Trading - teach an interested beginner! [Re: Liquidkick]
#8126953 - 03/10/08 10:42 AM (5 months, 25 days ago) |
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I also use Interactive Brokers - low commissions and TWS is a great source for real-time and historical market data.
Most important research you can do with historical trading data and SEC filings:
http://www.sec.gov/edgar/searchedgar/companysearch.html
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wiggles
One Winged Angel
Registered: 11/09/05
Posts: 2,387
Last seen: 9 days, 5 hours
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Re: Short-term Stock Trading - teach an interested beginner! [Re: phi1618]
#8137355 - 03/12/08 03:03 PM (5 months, 23 days ago) |
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My advice about day trading:
don't.
Especially right now. With the US in such a deep recession your best bet is investing the 10k into something that is sure to stick around (title companies, etc). You'll get a ton of bang for your buck because everything is hurting right now price wise. We come out of the recession, and you're going to see quite an immense profit. PLUS most stocks tend to see a pretty marked increase after a recession because the economy is picking itself up and getting off to a strong gallop.
Day trading may seem exciting, but trying to predict the market day to day, while making enough money on trades to stay afloat (and coming out ahead after capital gains taxes, and brokerage fees) is next to impossible. Buy and hold. Time is an investor's best friend, and day trading goes directly against that. You shouldn't have to work at investing, your money should be working for you.
Also, another important thing is to know that price should not be the reason you buy a stock. Look into different ways to evaluate stocks, like the Price/Earnings ratio, etc. There is some relatively simple math involved, but nothing you can't handle. Also look into dollar cost averaging (a personal favorite of mine because you avoid trying to buy at lows and sell at highs and instead grow your wealth almost like it was a savings account).
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You can turn your back on a person, but never turn your back on a drug, especially when its waving a razor sharp hunting knife in your eye.
Hunter S. Thompson
Edited by wiggles (03/12/08 03:05 PM)
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jonathanseagull
Registered: 10/28/05
Posts: 736
Last seen: 8 minutes, 5 seconds
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Re: Short-term Stock Trading - teach an interested beginner! [Re: wiggles]
#8138351 - 03/12/08 07:01 PM (5 months, 23 days ago) |
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At this point, I've been told by people IRL I've been asking that I need to consider putting back a $1000 emergency fund (which I used to have, but took a different job and now don't have), then think about an IRA Roth (which I don't know jack about, and also they said it may not even matter if the Fair Tax bill goes through, which I know jack about), and then think about investing in mutual funds or something like that, since I won't have massive amounts of money.
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The Home of Dkaid, Black Apathy, and Geist!
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geokills
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Registered: 05/08/01
Posts: 13,157
Loc: city of angels
Last seen: 5 hours, 16 minutes
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 Re: Short-term Stock Trading - teach an interested beginner! [Re: jonathanseagull]
#8139593 - 03/12/08 10:39 PM (5 months, 22 days ago) |
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> IRA Roth (which I don't know jack about ...
Click Here.
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YidakiMan
Registered: 09/28/02
Posts: 2,020
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Re: Short-term Stock Trading - teach an interested beginner! [Re: jonathanseagull]
#8140778 - 03/13/08 10:07 AM (5 months, 22 days ago) |
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Quote:
jonathanseagull said:
At this point, I've been told by people IRL I've been asking that I need to consider putting back a $1000 emergency fund (which I used to have, but took a different job and now don't have), then think about an IRA Roth (which I don't know jack about, and also they said it may not even matter if the Fair Tax bill goes through, which I know jack about), and then think about investing in mutual funds or something like that, since I won't have massive amounts of money.
$1000 is a fair goal for emergencies and if you are gainfully employed you should always be putting money into an IRA. If you work for a corporation, chances are your IRA is full of company stock. Sell as soon as allowed and diversify. Imagine if something horrible happened, and your company went down the shitter and you got laid off. Not only are you no longer employed but your IRA is worthless.
As far as other investments go, I would first bring up your emergency fund to at least 4 months worth of expenses or even more. It really depends on your job security. $1000 will be fine if your car needs repairs, but what if you lose your job? We're entering a recession so if you lose your job, it might be very difficult to find a new one, depending on your skills and your ability to market yourself to employers. Once you have 4 months worth of emergency funds I would move them into "laddered" Certificates of Deposits or CDs. I'm not sure about rates right now but perhaps a money market would be better.
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wiggles
One Winged Angel
Registered: 11/09/05
Posts: 2,387
Last seen: 9 days, 5 hours
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Re: Short-term Stock Trading - teach an interested beginner! [Re: YidakiMan]
#8140943 - 03/13/08 11:00 AM (5 months, 22 days ago) |
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Quote:
YidakiMan said:
Quote:
jonathanseagull said:
At this point, I've been told by people IRL I've been asking that I need to consider putting back a $1000 emergency fund (which I used to have, but took a different job and now don't have), then think about an IRA Roth (which I don't know jack about, and also they said it may not even matter if the Fair Tax bill goes through, which I know jack about), and then think about investing in mutual funds or something like that, since I won't have massive amounts of money.
$1000 is a fair goal for emergencies and if you are gainfully employed you should always be putting money into an IRA. If you work for a corporation, chances are your IRA is full of company stock. Sell as soon as allowed and diversify. Imagine if something horrible happened, and your company went down the shitter and you got laid off. Not only are you no longer employed but your IRA is worthless.
As far as other investments go, I would first bring up your emergency fund to at least 4 months worth of expenses or even more. It really depends on your job security. $1000 will be fine if your car needs repairs, but what if you lose your job? We're entering a recession so if you lose your job, it might be very difficult to find a new one, depending on your skills and your ability to market yourself to employers. Once you have 4 months worth of emergency funds I would move them into "laddered" Certificates of Deposits or CDs. I'm not sure about rates right now but perhaps a money market would be better.
The 7-day yields on money markets have been suffering pretty bad recently... like dropping 1-2% which is pretty significant. I'd reccomend bonds.
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You can turn your back on a person, but never turn your back on a drug, especially when its waving a razor sharp hunting knife in your eye.
Hunter S. Thompson
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