# If you're just starting out: reiterating a point



## boofis (8 June 2012)

Hello all, 

If you're just starting out I want to reiterate a point for you that people have been reiterating to me from the beginning. In the big scheme of things I am also just starting out, but I'm hoping this will save you some heartache, possible delusions of grandeur and hopefully help you increase your odds of 'making it'. 

If you're starting capital is: 
Less than $1000 = Keep saving
$2000 = Keep saving. 
$5000 = Keep saving. 
$10,000 = You're getting there, don't lose hope. 
$20,000 = Commissions won't be the end of you. 

I hated hearing this when I first came to the markets, but one needs to hear it: 
If you don't have enough money to approach this as a cut throat business, keep your money in the bank and LEARN before you lose your first lot of savings. Between commissions and just being a general noob and making mistakes, statistically you stand a very small chance of survival with small amounts of money! Note* even 20k isn't ideal, but it's more reasonable.  

If you want to be a 'day trader' there are a lot of free simulators available so that you don't have to lose EXCESSIVE amounts of money learning, in what will inevitably be a steep learning curve. 
Be patient and persistent. 
My 2c. 
Take it or leave it, just felt I should share it.


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## qldfrog (8 June 2012)

+1
100% true and I would add : to not borrow to reach the required minimum!!!


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## TMC93 (8 June 2012)

I have to disagree. Most beginners will "probably" lose some money. If you're going to lose money in the market at all, i would rather lose $1000 compared to $20,000. I think there is only a certain amount of information you can gather from a book before you have to actually put it all into practice. If the stock market was purely theoretical then there would be a lot more millionaires in the world. 

For those that want to start small, look at this good thread that nioka hijacked. 

https://www.aussiestockforums.com/forums/showthread.php?t=19955&page=2


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## boofis (8 June 2012)

TMC93 said:


> I have to disagree. Most beginners will "probably" lose some money. If you're going to lose money in the market at all, i would rather lose $1000 compared to $20,000. I think there is only a certain amount of information you can gather from a book before you have to actually put it all into practice. If the stock market was purely theoretical then there would be a lot more millionaires in the world.
> 
> For those that want to start small, look at this good thread that nioka hijacked.
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=19955&page=2




The reality is though mate, the key part is in learning whilst saving your dollars. You will be in much better stead due to time invested in learning and practising without being emotionally involved e.g. just wanting quick money, big money and the holy grail; all of which no beginner will achieve/find.

That threads got some good ideas for what to do with 1500, but imo those skills aren't going to help you if you one day plan to manage in the hundreds of thousands. You may disagree again!


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## burglar (8 June 2012)

boofis said:


> The reality is though mate, the key part is in learning whilst saving your dollars. You will be in much better stead due to time invested in learning and practising without being emotionally involved e.g. just wanting quick money, big money and the holy grail; all of which no beginner will achieve/find.
> 
> That threads got some good ideas for what to do with 1500, but imo those skills aren't going to help you if you one day plan to manage in the hundreds of thousands. You may disagree again!




*That thread* is for those who want to start, have $1500 (and for many reasons, not more than $1500) and are unwilling to wait.
Not all of us are chasing a dream, just putting ourselves in the path of opportunity.


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## Tyler Durden (8 June 2012)

Was this written with short term investing in mind?
I'd like to think a long term investment could begin with $1000.


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## Joules MM1 (8 June 2012)

boofis said:


> That threads got some good ideas for what to do with 1500, but imo those skills aren't going to help you if you one day plan to manage in the hundreds of thousands.




that implies you *do* have skills to help us manage 'hundreds of thousands'.....care to share ?


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## Joules MM1 (8 June 2012)

Tyler Durden said:


> Was this written with short term investing in mind?
> I'd like to think a long term investment could begin with $1000.




agree...appears the question is not (directly) a stake size, rather, a knowledge basis.......

initially costs eat and at the other end of the scale moving 300g's is easier to move than 3m ...still, the underlying management need not be any different.......


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## boofis (9 June 2012)

Should've clarified. Short term investment definitely in mind as well as mechanical systems trading. 

Yes, Joules, I'm biased and believe systems are by far the best management. Would gladly post results of just one year of a backtest of one of the first systems I tried trading with a positive expectancy that takes a loss for that year cause of commissions (especially when smaller capital amounts are used) but takes a profit if lower commission rate is used,  just to try and exemplify what I'm saying.


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## Joules MM1 (9 June 2012)

boofis said:


> ..I'm biased and believe..... ... one year of a backtest.




ok, thanks

now show the forward test......with positive outcome.....you could have the dosh _and_ kudos


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## boofis (9 June 2012)

I know what you're inferring that's why I underlined back test  
But will be happy to post outcomes at the end of the period I've designated to trade it (4 years).


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## tech/a (9 June 2012)

Joules MM1 said:


> ok, thanks
> 
> now show the forward test......with positive outcome.....you could have the dosh _and_ kudos




I agree re systems.
My first turned $30k to $360k in 5 years.
All traded live --- realtime---and still on the net for those interested over at " The Chartist "
Has a few pages in Nicks latest book " Un Holy Grails "

Enjoy.


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## StumpyPhantom (9 June 2012)

tech/a said:


> I agree re systems.
> My first turned $30k to $360k in 5 years.
> All traded live --- realtime---and still on the net for those interested over at " The Chartist "
> Has a few pages in Nicks latest book " Un Holy Grails "
> ...





Tech/a - Everything I've read on ASF over the last couple of months on ASF tells me you're going about this with real skill.

So link us in to your online teachers referred to above, please.  And also to ASF threads where you've applied your thinking and your systems.


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## qldfrog (9 June 2012)

tech/a said:


> Has a few pages in Nicks latest book " Un Holy Grails "
> 
> Enjoy.



I do not regret purchasing this book: are you one of the interviews?
I have built a basic system and am ready to follow it, but the rules I ended up choosing are preventing me from buying anything this months. 
And probably for the best..


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## boofis (9 June 2012)

StumpyPhantom said:


> Tech/a - Everything I've read on ASF over the last couple of months on ASF tells me you're going about this with real skill.
> 
> So link us in to your online teachers referred to above, please.  And also to ASF threads where you've applied your thinking and your systems.




Just google thechartist and it's the australian website not international.
The forum on system design is a wealth of information.
*Note, it seems I can't post a direct link to the website?


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## Boggo (9 June 2012)

Seems like the more money people have the sillier they become.
Then again though these people are "investing" other peoples money I suppose.

There is a lot more to be learned both on here from some of the overactive stock threads and from examples such as the one below of* what not to do* rather than trying to learn *what to do*.

Below is an extract from a QAN investor report to the ASX yesterday, the shares referred to closed on $0.97 yesterday (run that by your calculator !).
Admittedly it may be part of a bigger plan that will eventually unfold but it seems like they are hitching a ride in the wrong direction.


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## qldfrog (10 June 2012)

Boggo said:


> Seems like the more money people have the sillier they become.
> Then again though these people are "investing" other peoples money I suppose.
> 
> There is a lot more to be learned both on here from some of the overactive stock threads and from examples such as the one below of* what not to do* rather than trying to learn *what to do*.
> ...



Probably some tricky off market transfer for tax minimisation  purpose; I would not make too much of these


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## TMC93 (10 June 2012)

boofis said:


> The reality is though mate, the key part is in learning whilst saving your dollars. You will be in much better stead due to time invested in learning and practising without being emotionally involved e.g. just wanting quick money, big money and the holy grail; all of which no beginner will achieve/find.
> 
> That threads got some good ideas for what to do with 1500, but imo those skills aren't going to help you if you one day plan to manage in the hundreds of thousands. You may disagree again!




How does having more money help you exactly? Essentially what your saying is if i gave $20,000 to one person and $1,000 to another, the person with $20,000 will have more success? 

Personally as long as you meet the minimum requirement for your broker and you have worked out your appetite for risk then IMO no sum of money is too small to invest. Hell, i'm glad i started investing with small amounts , I don't think theres a substitute for putting real money on the line, paper trading only gets you so far.


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## Trembling Hand (10 June 2012)

TMC93 said:


> How does having more money help you exactly?



So you don't have to aim for stupid % returns just to cover cost and survive.



TMC93 said:


> I don't think theres a substitute for putting real money on the line,



Yes there is. Knowing before you do that you will be profitable and under what situations you will not be.



TMC93 said:


> paper trading only gets you so far.



 How has that worked out for you?


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## Joules MM1 (10 June 2012)

TMC93 said:


> How does having more money help you exactly? Essentially what your saying is if i gave $20,000 to one person and $1,000 to another, the person with $20,000 will have more success?




+1 to TH

the easy and quick answer is; if both strategies are equal the larger account can take more hits and not have the cost of doing business shred the profits or add to losses

....and the reason scared money is called scared money is the level that scared money lays out for their expectant return, the larger the capital the smaller is your risk exposure in terms of time to benefit from the same price travelled and larger accounts can negotiate discounts in transaction costs.....most importantly capital size reduces risk due to less time in a transaction......a 1 lot trade on a 1g account cannot be scaled out as a 5 lot trade on a 20g account and keep the same risk all of which comes long before strategy.....



TMC93 said:


> no sum of money is too small to invest..



 again, add in costs and this is not true....recall, even if youre talking about stocks alone, buy a stock with a $1,000 and the value needs to rise relative to how you divide the stock itself otherwise you cannot scale the stock without costs eating heavily into the divisor ....if you were to take advantage of yield, buy the stock and exit on post divies the cost you incur on 1g is heavier than the yield you gain on 20g even tho the yield itself doesnt change

underfunded is one of the leading reasons traders get beaten up then beat themselves up......


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## boofis (10 June 2012)

Joules MM1 said:


> underfunded is one of the leading reasons traders get beaten up then beat themselves up......




*Note: this is not a system I trade, have traded or plan to trade. This is purely hypothetical to demonstrate the impact commissions have. 

Period: start of 2010 - end of 2011
Profitable system
Initial capital: $5,000
Commission: Commsec rates
152 trades taken. 16 winners, 136 losers. (account ran out of money so no more trades could be taken)
Ending capital: -7.70

Same system but with $0 paid in commission.
Initial capital: $5,000
261 trades taken. 118 winners, 143 losers.
Ending capital: $9564.57

Same system again, but with an account size of 100k
Initial capital: $100,000
Commission: Arbitrary $50
272 trades taken. 102 winners, 170 losers.
Ending capital: $109226.49


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## TMC93 (11 June 2012)

Trembling Hand said:


> So you don't have to aim for stupid % returns just to cover cost and survive.




Because $1000 will be incurring huge amounts of costs. 



Trembling Hand said:


> Yes there is. Knowing before you do that you will be profitable and under what situations you will not be.




Let me start again as you obviously didn't understand the meaning of the sentence. As a beginner, there is no substitute (that i'm aware of) that replicates the same emotion as putting your own, real, hard earned money on the stock market. It may be different if you think you can foresee every situation that you will be profitable and vice versa but honestly i doubt a beginner could even start to comprehend that. 




Trembling Hand said:


> How has that worked out for you?




Great, thanks for asking.


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## TMC93 (11 June 2012)

Joules MM1 said:


> again, add in costs and this is not true




Again, If you read the post, no sum of money is too small to invest as long as you meet the broker minimum requirements. Last time i checked i could put $500 on shares as long as i had enough to cover the brokerage.


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## tech/a (11 June 2012)

Agree with T/H and Joules

Larger capital base easier to trade.
Mind you very large capital bases in my view become harder to trade.
Eg Managed Funds.

But also agree with TMC
There is nothing like the learning curve of using your own funds.

If $1000 is all you have on this planet then you'll learn more than if $1000 is .01% of your net worth.

But finally if you have no idea of your expectancy then your very likely gambling.
Oh and expectancy isn't predicting a 10% rise in an instrument.


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## Trembling Hand (11 June 2012)

TMC93 said:


> Let me start again as you obviously didn't understand the meaning of the sentence. As a beginner, there is no substitute (that i'm aware of) that replicates the same emotion as putting your own, real, hard earned money on the stock market. It may be different if you think you can foresee every situation that you will be profitable and vice versa but honestly i doubt a beginner could even start to comprehend that.



Well on that one will have to disagree. I've seen here time and time again how retailers train in hope and collect "experiences" as they go. It doesn't have to be that way.

From your comment about "foresee every situation" it would seem you don't understand expectancy?


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## TMC93 (11 June 2012)

Trembling Hand said:


> From your comment about "foresee every situation" it would seem you don't understand expectancy?




Actually i found that expectancy is rather important when it comes to developing a system so that you can compare risk multiples generated by profits and losses as a ratio to the price paid.


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## Trembling Hand (11 June 2012)

TMC93 said:


> Actually i found that expectancy is rather important when it comes to developing a system




Soooo.... starting blind with $1000 fits into that how?


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## TMC93 (11 June 2012)

Trembling Hand said:


> Soooo.... starting blind with $1000 fits into that how?




A) I never said anything about starting blind, would rather put all my money on black at the casino. B) This thread was started for people "starting out".


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## Garpal Gumnut (11 June 2012)

tech/a said:


> Agree with T/H and Joules
> 
> Larger capital base easier to trade.
> Mind you very large capital bases in my view become harder to trade.
> ...




+1

gg


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## Sir Osisofliver (11 June 2012)

TMC93 said:


> Because $1000 will be incurring huge amounts of costs.
> 
> 
> 
> Let me start again as you obviously didn't understand the meaning of the sentence. As a beginner, there is no substitute (that i'm aware of) that replicates the same emotion as putting your own, real, hard earned money on the stock market. It may be different if you think you can foresee every situation that you will be profitable and vice versa but honestly i doubt a beginner could even start to comprehend that.




TMC - the above comment says a lot about your psychology, not your methodology. The comment "you don't learn unless there's real money on the table" is one I've heard before. It's uttered by people who are high kinesthetics. I hate to say it (because I mostly fall into this category) but the people who are high auditory (which is code for @nal retentive) *will* learn from backtesting without money on the table.

Cheers

Sir O


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## Joules MM1 (11 June 2012)

TMC93 said:


> Again, If you read the post, no sum of money is too small to invest as long as you meet the broker minimum requirements. Last time i checked i could put $500 on shares as long as i had enough to cover the brokerage.




i get that a lot of these conversations are about being right.......

people new to the profession of trading bring a lot of excess personal baggage and go about creating a new version of that baggage just for trading

take that psyche to the person on the other side of your trade and they'll gladly let you be right while they take your money

put your thinking into common garden-variety things; as a spectator you can see the tour de france on a bike and not see much of the race itself or france , or, you can hire a campervan and get there in style.....the rout doesnt change, the competitors dont change the scenery doesnt change and even tho you might think the cost would be less with a bike vesrsus a campervan, well, think about it.....being underfunded is like being stuck at the back end of the race and once the competitors swing out of view youre forever sweating for nothing...on a hill, with a flat and no car!

cost versus task.....

think of your capital like your basic fitness, larger capital allows you to take more hits based on the same stake size, you can rebound, take the next opportunity, whereas, with a smaller stake your options are limited to.....well, being right......

btw, some of us  here  speak straight to the point because, obviously, diplomatic dancing around the subject is ineffective.......the person on the other side of my trade is a non-diplomatic type of character


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## TMC93 (11 June 2012)

Sir Osisofliver said:


> TMC - the above comment says a lot about your psychology, not your methodology. The comment "you don't learn unless there's real money on the table" is one I've heard before. It's uttered by people who are high kinesthetics. I hate to say it (because I mostly fall into this category) but the people who are high auditory (which is code for @nal retentive) *will* learn from backtesting without money on the table.
> 
> Cheers
> 
> Sir O




I didn't say people don't learn unless there's real money on the table, i was simply implying that while some people like yourself may learn a lot from the more theory side, some people can only take so much before actually trying it in practice. 

And yes as much as i would like to be auditory learner i suppose i am a kinesthetic learner.


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## TMC93 (11 June 2012)

Joules MM1 said:


> btw, some of us  here  speak straight to the point because, obviously, diplomatic dancing around the subject is ineffective.






Joules MM1 said:


> put your thinking into common garden-variety things; as a spectator you can see the tour de france on a bike and not see much of the race itself or france , or, you can hire a campervan and get there in style.....the rout doesnt change, the competitors dont change the scenery doesnt change and even tho you might think the cost would be less with a bike vesrsus a campervan, well, think about it.....being underfunded is like being stuck at the back end of the race and once the competitors swing out of view youre forever sweating for nothing...on a hill, with a flat and no car!


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## Joules MM1 (11 June 2012)

TMC93 said:


>




okydokes

how about, you start a new thread, mebe a blog-style, select a $ figure, inc costs for the funding and per trade, post a bunch of trades, warts and all........mebe you could start by restricting yourself to 4 lots of $500 and see how you go.....

you sound tuff enough to the challenge


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## TMC93 (11 June 2012)

Joules MM1 said:


> okydokes
> 
> how about, you start a new thread, mebe a blog-style, select a $ figure, inc costs for the funding and per trade, post a bunch of trades, warts and all........mebe you could start by restricting yourself to 4 lots of $500 and see how you go.....
> 
> you sound tuff enough to the challenge




If you honestly think i would go to that extent to prove that i am right (which is irrelevant because there is no right or wrong in this case, merely a difference of preference/opinion), then you sir are a hypocrite.


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## Joules MM1 (11 June 2012)

TMC93 said:


> If you honestly think i would go to that extent to prove that i am right (which is irrelevant because there is no right or wrong in this case, merely a difference of preference/opinion), then you sir are a hypocrite.




lulz, ok...i get where you're at.....thanks


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## boofis (11 June 2012)

TMC93 said:


> If you honestly think i would go to that extent to prove that i am right....




Not to prove you are right, but, as the saying goes "to put your money where your mouth is"

My money is firmly with systems trading, using a statistical edge and a large enough capital base to be able to take hits and survive. 

Guys like TH, Joules, Tech and others have demonstrated in other threads on this forum that they can use smaller amounts of $ and achieve profit, but there's no way in hell a beginner could come close to doing what they do in terms of trading skill/style/implementation.


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## tech/a (11 June 2012)

It's more about turning a consistent profit.
Anyone can have a winning trade-- we all hear about those
But never here about. String of losses or those so far gone
You put them in the bottom draw and never ever tell the missus!

Seriously very few trade here for a life influencing return.

I think the aim should be at least a second wage.
Your not going to get that with $1000
Even $50000 and your unlikely.
This of course would be the aim of anyone investing in their SMSF or living off it.

So for the vast majority trading is a bit like a win at the pokies or the track.
It will be sometime before they are in a position to influence their lives through their trading.
Best spend the time getting it right.


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## TMC93 (11 June 2012)

boofis said:


> Guys like TH, Joules, Tech and others have demonstrated in other threads on this forum that they can use smaller amounts of $ and achieve profit, but there's no way in hell a beginner could come close to doing what they do in terms of trading skill/style/implementation.




I fully agree, a beginner could not consistently come close to either Tech or TH.


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