$5000 to $50000 in two years - let the odyssey begin

[rozella]

G'day CanOz,

Well done mate! I enjoy reading your posts in the dividend thread. I had no idea you started with only 5k.

The dividend trading thread is completely separate to my CFD trades. I have been anti CFDs for about the last 3/4 years, but since its popularity, I decided to test it out......this time with a different slant, using $5000 rather than testing on paper.

G'day damok,

I'm also a avid fan of spreadsheets to do a lot of work for me. I'm just wondering how the 'DDE' links work. Would love to implement something like that.

I believe you can liven your spreadsheets using yahoo finance for free, however, I use Sanford as one of my brokers & they have the facility. So when you open a spreadsheet, along the top line you have the normal:
File, Edit, View, Insert. Format, Tools, Data, Window, Help then Sanford Pro.
The code must have the exchange attached i.e CBA.ASX NAB.ASX

You can select from a box which info you need such as volume, last price, 52 weeks low, bid, ask.......etc etc then click on the icon & the info appears.

If you do a lot of spreadsheets like I do, then it saves hours of researching individual items. You can setup your own customised watchlist with the net profit/loss ticking over live per each individual stock after interest & brokerage with a bottom line net result.....it does keep you aware of your position at all times.

I plan to trade in normal ASX200 stocks for about two years until I feel nice and confident, then apply the same system to CFD's

Conventional marginlending is much more relaxed than CFDs as there is more room to move with buffers etc & not so highly geared, where CFDs can be very cut throat to the unwary, so don't blink too often.

On my CFD spreadsheet I have set my stoploss as an amount after interest & comm, rather than the stock share price rate. When the amount hits the stoploss it automatically shows "TRUE"

Keep us informed of your progress.

 

[Sir Burr]

Conventional marginlending is much more relaxed than CFDs as there is more room to move with buffers etc & not so highly geared, where CFDs can be very cut throat to the unwary, so don't blink too often.

Hi Rozella,

I haven't traded CFD's or even had a margin loan so these comments maybe totally wrong.

Say the set margin for a share CFD is 5%, is there anything stopping you making it 50%?

If so, I can't see why they are any more cut throat than normal margin lending? Is there any difference between CFD's while using the same margin as you get using a margin loan?

Cheers SB

 

[rozella]

G'day Sir Burr,

As you know the market can move against us very quickly from world events. An example of this was the 11th September 2001 when the XAO dropped about 290 points in 4 days (around 9%)

The problem with these events is that the market usually opens already down about 5% & no stoploss can help except against a further drop.

Lets say that we are starting with $5000 & compare between a conventional margin loan (ML) & CFDs. For the sake of the exercise we will disregard interest affecting the buffer.

In both accounts we buy 4 stocks, WDC, CGL, AMP & WOW.

In the ML we use the full facility & all stocks have a LVR of 75% so therefore we have invested $1250 in each stock, which means we can buy:
4 x $5000 = $20000
buffer provided by marginlender = $2000

In the CFD we use 50% of our $5000 & all stocks have a LVR of 95% so therefore we have invested $625 in each stock, which means we can buy:
4 x $12500 = $50000
our self imposed buffer is $2500

We will take 2 examples.

1. The market moves against us 2%
ML portfolio = $19600
buffer = $1960

2. CFD portfolio = $49000
buffer now = $1500

1a. The market moves against us 5%
ML portfolio = $19000
buffer = $1900

2a. CFD portfolio = $47500
buffer = nil

The above is extreme but can happen. If the ML portfolio had an average LVR of 70% then there would be more buffer left than the $1900

However, if you have a proven sound strategy & disciplined to act when required, then CFDs are great, but the point I am making is that with conventional marginloan there is more chance of staying in the game.

 

[Sir Burr]

Rozella,

Thanks for your detailed reply.

What I was thinking is there maybe some benefits to using CFD's over a ML. Possibly easier to manage, cheaper to use or even to short.

Anyway, is there some rule with CFD's where you must use a LVR of 95%? Taking your examples, here's my idea:

In the CFD we use the full facility & all stocks we use a self imposed LVR of 75% so we invest $1250 in each stock, which means we buy:
4 x $5000 = $20000
Buffer is $5000

1. The market moves against us 2%
CFD portfolio = $19600
Buffer = $4600

1a. The market moves against us 5%
CFD portfolio = $19000
Buffer = $4000

1b. The market moves against us 25%
CFD portfolio = $15000
Buffer = $0

Cheers SB

 

[Dutchy3]

Hi SB

Yes is the answer ... I never drop below 25% equity is any position and generally stay around 33% ... Still the market can gap overnight so any leverage can still be too much.

CFD's are the majority of my positions ...

 

[rozella]

G'day Sir Burr,

It is up to you on the self imposed buffer that you use.

In the example 1. we have capital of $5000
4 x $5000 = $20000
our equity utilised would be $1000 (5%)
so our buffer is the balance $4000 not $5000

If the market drops 2% we lose $400 leaving $3600 buffer

If the market drops 5% we lose $1000 leaving $3000 buffer.

In this case we are still using $1000 + $4000 buffer = $5000
We would be better off using a conventional margin loan as the interest is fixed at 75% of the initial purchase & we own the stocks. We are still only buying $20000 of stocks so the gross profit/loss will be the same in either the ML or CFDs. The CFD interest is mark to market on 100% of the current price on a day to day basis.

The main advantage of CFDs is the leverage, so if we leverage the same as a ML, then there is nothing to gain.

Just to make it clear, I am not knocking CFDs, as I think it is a great instrument.....& I am now using them as in my previous post, even though in a small way atm. I am just staying with my original statement that a ML is a more comfortable position to be in than CFDs, but there is more opportunity to make much bigger returns with CFDs if you have your wits about you with the same outlay.

 

[nioka]

First time poster, and to be honest just discovered the forum tonight.... but enjoying the learning process.

So a bit about my plan. I have signed up for the SITM Smarter Starter Pack and am doing the course this weekend. Now after reading some of the forums I had second thoughts for a while, but I stand by that decision. I guess my rational is that 4 weeks ago I knew nothing about shares, now I have a reasonable idea of the mechanics. I understand the trading system that they propose, and it works well in my head. Outlaying the $4000 hurt a bit, but I figure that I will have the skills the rest of my life, and considering how much uni costs... well it doesn't sound so bad in perspective. Plus that outlay certainly inspires me to learn the material!!

So, I have just submitted the application for my CDIA Commsec account, which I guess I will only need to use for trading execution (the SITM software seems to tell me everything else I need as to when to enter/exit the trade). I'm starting with $5000, will invest a further $500 per fortnight (alloted from my salary) and hope to have $50000 in two years.

Now I'm not sure if this is a realistic goal or not. I have papertraded, and I've had some success. Though I have not made a single real trade as yet. My calculations would require me to make an annual return of about 40% to achieve my goal (happy to be corrected, I'm no maths guru). Once again, I'm not sure if this is a little over confident.

I intend to to trade purely in shares for the first six months or so before transitioning to either Options or CFD's. I'm quite happy with leverage and managing risk with stop losses. I would spend the first six months getting a better 'feel' for the market, getting my trading plan just right, and learning as much as possible (probably from you guys) on higher leverage trading.

I (like many) am attracted to the idea of only spending a couple of hours a day, wherever I am in the world trading shares. I fully appreciate that $50000 isn't a good capital base to plan to retire on or invest professionally - if it extends my holiday in Rio from one year to two, then I would be more than happy!

So my questions are:
*is this a realistic goal?
*is 40% expecting too much?
*what does a competent trader working with CFDs or Options expect as an annual return?
*how much time would your average swing trader need to spend per day trading (VERY subjective I know, or how much time do YOU spend trading)?

over to you and your expertise!

cheers,
damok

Remember this thread. Worth going back in time and seeing how it played out.

The thread was an inspiration for me and i decided to see if I could make it work. My results have astounded even myself.

I chose ADI, at the time a spec stock and bought 10,000 shares for under $4,000. Over time and without adding any additional outside capital into the project I have turned that investment into one worth $378,726.23 as at yesterday. This has been done by trading swaps between ADI,EKA and AUT who are three partners in the same project. Their SP relative to their interest changes almost on a daily basis and with each trade I ended up with a bigger interest in the overall project.

So I thank Damok for promoting the idea and AgentM for his informative posts on ADI which I have used as research on the project. Also the GFC made it all possible.

 

[Wysiwyg]

I chose ADI, at the time a spec stock and bought 10,000 shares for under $4,000. Over time and without adding any additional outside capital into the project I have turned that investment into one worth $378,726.23 as at yesterday. This has been done by trading swaps between ADI,EKA and AUT who are three partners in the same project.

About 100 times initial outlay and through the biggest stock market correction in 20 year too. Simply outstanding.

 

[nunthewiser]

Yes , seeing as no one required to provide any proof i turned $1000 into $48,000,000 million last year ....beat dem apples.

 

[nomore4s]

Yes , seeing as no one required to provide any proof i turned $1000 into $48,000,000 million last year ....beat dem apples.

You are a liar Nun, I know for a fact you started with $2000

 

[nunthewiser]

You are a liar Nun, I know for a fact you started with $2000

never let the facts get in the way of a good story my ole uncle chopper used to say

 

[vincent191]

Look at Andrew Forrester.....he turned a handful of dirt into billions.
I am still a slumdog.... "potential" millionaire.

 

[So_Cynical]

Amazing considering the SP of ADI when this thread started was around 20 cents and is now around 30 cents....big peak in between of course.

 

[MACCA350]

Amazing considering the SP of ADI when this thread started was around 20 cents and is now around 30 cents....big peak in between of course.

Nioka did say:

This has been done by trading swaps between ADI,EKA and AUT

cheers

 

[nioka]

Amazing considering the SP of ADI when this thread started was around 20 cents and is now around 30 cents....big peak in between of course.

And got as low as 5c. That is why it was so easy to accumulate. It is part of the numbers game as a small change in the relative SP of the three meant quite a few shares accumulated with each trade.

I know there are a few/many that will doubt that it happened but for those that have followed the stock on this forum and another they would have followed my progress and there are one or two that actually know some of the stock numbers that I control as a result of the trading.

It has not been possible by just trading ADI. It has been possible by swap trades of the three partners in the same project and inconsistancies in their relative price. My best trade was selling EKA and buying ADI at the same price and shortly after selling the ADI and buying twice the number of EKA. Most trades improved the numbers by 5 to 10% after allowing for brokerage.

Compare it with going to the beach on a daily basis and bringing home a bucket of sand each time. A few years down the track and you end up with your own beach.

 

[So_Cynical]

And got as low as 5c. That is why it was so easy to accumulate. It is part of the numbers game as a small change in the relative SP of the three meant quite a few shares accumulated with each trade.

Most trades improved the numbers by 5 to 10% after allowing for brokerage.

Compare it with going to the beach on a daily basis and bringing home a bucket of sand each time. A few years down the track and you end up with your own beach.

Yeah but at that low point all 3 stocks were at a low point...its just that i would think to produce such a spectacular result there would have to be greater variation between the movement of the 3 stocks...you know like going in different directions so you could jump off one moving down onto 1 moving up.

The comparison chart shows fairly similar movement between the 3 of them, indicating that your switching must of been almost mistake free, the sort of return your talking about would require you to be bringing home a bucket of sand every hour -15 hours a day - 7 days a week.

And what about the CGT along the way...with no discounts!
~

 

[nunthewiser]

Great story Nioka.

But you know that i know that some here are a very cynical bunch and not willing to believe these "rags to riches" fairytales they hear so often on the internet.

maybe a bit of proof provided via trading statements etc would maybe shut these buggers up once for all .....

I personally believe everything i read on these pages so im genuinely impressed.

anyhoo just trying to help just in case anyone else questions the authenticity of your claims and they dont just blow it off as another load of "hot air" as they so often do when they read these great back slapping posts on the internet.

i hope it helps.

 

[nioka]

Yeah but at that low point all 3 stocks were at a low point...its just that i would think to produce such a spectacular result there would have to be greater variation between the movement of the 3 stocks...you know like going in different directions so you could jump off one moving down onto 1 moving up.
~

Even the chart you show gives some indication of the variation in the relative prices but it only shows part of the story. The intraday variations made it possible to swap back and forth sometimes within the hour. There was/is a lag in the reaction of EKA to a price change in ADI and it is/was common for there to be daily swings of 5 to 10%. I seldom sell one without knowing that I could buy the other at a better deal.

Another misconception that was around was that AUT and ADI had double the interest held by EKA. That is not the case. Originally AUT and ADI had a 20% interest and EKA had 12.5%. A lot of times I saw EKA incorrectly quoted as 12%. A lot of those trading ignored market cap as well.

As my numbers increased it was possible to trade those larger numbers but this was often held back by the numbers available. There were some days where all the trades in one or the other were mine. As I have spent a lot of the last couple of years incapicated in one way or another I have had plenty of time to follow the quotes.

Don't be so cynical truth is sometimes stranger than fiction. With a little research you may find some stocks that have similar trading possibilities. To date I have tried a few but havent found another gold strike yet. However I'm still looking.:bricks1:

 

[Wysiwyg]

The comparison chart shows fairly similar movement between the 3 of them, indicating that your switching must of been almost mistake free, the sort of return your talking about would require you to be bringin home a bucket of sand every hour -15 hours a day - 7 days a week.

And what about the CGT along the way...with no discounts!
~

Definitive chart shows little to no advantage swapping between stocks. Considering the long down trend of all three and NOT being able to short sell these stocks; I feel all the facts aren't on the table.

One would have had to pinpoint the swing highs and swing lows (even in the down trend) to have a remote chance.

 

[So_Cynical]

Definitive chart shows little to no advantage swapping between stocks. Considering the long down trend of all three and NOT being able to short sell these stocks; I feel all the facts aren't on the table.

One would have had to pinpoint the swing highs and swing lows (even in the down trend) to have a remote chance.

Yep that's how i see it...every trade would have to be an almost instant winner, a 4 year mistake free run...i call shenanigans.