A Plan for New Share Investors/Traders

[swingstar]

Many, many jobs pay $10,000 a month plus super, expenses, overseas trips, health insurance, 4 weeks holiday etc.

Not many for 22 year olds I agree. 26 to 28 is probably the starting age for these jobs. If you don't get in on the ground level you wont get there.

Also I'm not sure I believe you will make $10,000 profit each and every month. How's June looking for you?

You're right, it'll be more, taking compounding into account.

June, I am only up $1k. Would have been a lot more if I was home Friday.

Regarding overseas trips, how many jobs allow you to work anywhere in the world, like mine?

 

[Realist]

Dejected, Abner took his problem to Old Man Mose, the font of all knowledge in Dogpatch. Said the sage: Double your money 20 times and Appassionatta will be yours (1, 2, 4, 8.....1,048,576)..."

Thanks Dennis.

Warren Buffett did not say it though, Old Man Mose did.

It's pretty obvious from your statements here, and on other threads that you aren't a fan of trading. Do you mind if I ask why?

Brokerage, tax, stress, false expectations, and too many dreamers.

I am not against trading per se, and I am no expert on it and am very interested to learn more about it. I find there's all to much bullshet spouted about it though. And many traders are dreamers. Even infomercials peddle trading to the masses in the States. People harping on about doubling their money yearly, or 10% returns a month. It angers me, being a realist I like commonsense, realistic and logical approaches, not get rich quick schemes.

I'm of the opinion most people lose money trading.

And a select tiny few make enough to live off it

What do you think Prof Frink?

 

[Realist]

Regarding overseas trips, how many jobs allow you to work anywhere in the world, like mine?

Dunno, you are lucky I suppose.

How did you get all your captial to start trading in the first place?

You started with about $100,000 to start with right?

You still live at home? or flatting?

 

[swingstar]

I saved about $20,000 and got a loan of about $20,000 and built it up within a year. I'm also coming into more funds from my mum's property which I'll be trading with soon and be taking a small percentage, so I'll be trading about a quarter of a million. I'll be more conservative and doing less directional trading with that though (ie. spreads).

I'm still living at home, but I pay board. I'm moving to Prague within the next 9 months, I'm just finishing off uni.

 

[Ageo]

If you wanna be rich - get a job or a carerr at least.

LMAO!! Realist please tell me your a financial advisor?


Oh as for Buffet's returns please answer me 1 thing. Whats his capital that he is investing with?



And as frink mentioned before Trading is much more flexible with a smaller capital base. When i have a capital base of $10million+ then i will be happy to invest in companies and achieve returns of 10-40%p/a (less risk and less work). Even still thow if my view was strong about a company such as BHP now wtf would i buy shares outright when i can buy CFD's over them?

Using other peoples money can times your return 10 fold. But if you dont have the balls or the patience to learn its limits then i suggest you be happy with your job and 10% p/a

Adrian

 

[cuttlefish]

I saved about $20,000 and got a loan of about $20,000 and built it up within a year. I'm also coming into more funds from my mum's property which I'll be trading with soon and be taking a small percentage, so I'll be trading about a quarter of a million. I'll be more conservative and doing less directional trading with that though (ie. spreads).

I'm still living at home, but I pay board. I'm moving to Prague within the next 9 months, I'm just finishing off uni.

are you saying that after only a year in the market you're about to punt the equity in your mothers house on your trading skills?

 

[swingstar]

are you saying that after only a year in the market you're about to punt the equity in your mothers house on your trading skills?

Yeah, why not? I have a trading system, one that I'm programming so it's more mechanical, it's not like I'm going to trade the whole lot on a call/put option or something.

 

[wayneL]

Tsk Tsk

The ol' investor vs. trader argument again, eh?

The two cannot be compared.

One seeks to earn a profit on stock-holding, much like a grocer seeks to earn a profit on cabbages, cornflakes, chux superwipes, and Womans Day magazines. It is a purely mercantile endeavour, and therefore fits into the catagory of small business.

The other seeks to benefit in the growth of economies and the business itself over a much longer term.

To draw a parallel. There is the business of buying and selling money for profit, as in foreign exchange and the business of lending and borrowing money thereby profiting on the spread.

Then there is investing cash for the purpose of compounding interest.

Same institutions different goals.

Therefore when traders speak of outsized gains, the investors immediatly leap to the compounding argument to discredit those returns. However the professional trader is removing a chunk of those returns for living expenses, entertainment and other frivolities.

He/she will only be compounding a portion of those gains. He/She may even "invest" those gains in longer term investments. There will be a maximum tradable account size, and as a trader learns to use leverage, it will probably be less than seven figures.

However an Investment account size has no upper limit. Therefore a successful trader will become both; a small busnessman AND an investor... just like the successful shop owner.

Therefore when a person decides to be a full yime trader, he/she is in effect opening up a shop for business, and should EXPECT returns far in excess of normal "investment" returns. Otherwise go find something else to do.

The fact that most fail in this endeavour merely reflects the inherent reality in ANY small business; remarkably, the failure rate is similar in both.

Cheers

 

[cuttlefish]

Turning $100,000 into $1 Million would realistically take over 20 years minimum, and few investors achieve that.

Also someone earning $50K a year and planning to be a millionaire after 10 years is dreaming. It doesn't matter if you plan for it or not, you wont get there unless you earn more, live very frugally and save and invest amazingly well being extremely patient, reducing taxes and brokerage fees.

Person on $50K
Year 1 - saves $10,000
Year 2 - uses the $10,000 to borrow $100,000 and achieves a 4% return after interest and tax, also saves another $10,000. total at end of year 2 -$24,000
Year 3 - uses the $24,000 to borrow $240,000 and achieves a 4% return after interest and tax, also saves another $10,000. total at end of year 3 - $43,600
... etc. etc. ...
Year 11 - total at end of year 11 = $987,000

I know its an optimistic scenario but not completely unrealistic. Move the returns down to 3% and it'll take them 13 years.

 

[professor_frink]

Brokerage, tax, stress, false expectations, and too many dreamers.

I am not against trading per se, and I am no expert on it and am very interested to learn more about it. I find there's all to much bullshet spouted about it though. And many traders are dreamers. Even infomercials peddle trading to the masses in the States. People harping on about doubling their money yearly, or 10% returns a month. It angers me, being a realist I like commonsense, realistic and logical approaches, not get rich quick schemes.

I'm of the opinion most people lose money trading.

And a select tiny few make enough to live off it


What do you think Prof Frink?

When it comes to trading normal shares, then I agree- 10% a month is hard to do consistently in the australian market. Some may be able to do it, but I couldn't. Leveraged instruments, such as options, futures, etc enable traders to make returns that most investors scoff at, as we have seen with you! But it can be done.
These are definately not for the faint hearted, and should be done after someone is competant trading shares first, and has a thorough understanding of the instruments they are trading.

The issue with traders compared to investors is scalability- it's completely different from investing in that 1 person can only trade so much before they have to diversify and start taking on long term positions. So as an account gets bigger, the returns tend to get smaller.A trader that can make 100% on 100,000, won't be able to do it on 10 million. That's why you won't find any short term traders on the rich list- it's very hard to double up 100 million.

In regards to the B.S out there you are spot on. There is heaps of it! "trading gurus" selling $5000 options courses that promise you the world and deliver very little give trading a bad name, but these courses seem to be the most attractive to the uninformed public who wants to get rich quick.
Most people do lose money trading, but most businesses go bust as well.

What's the secret? For me it's sufficient Capital, good research, a good work ethic, and a good frame of mind. Once these are in place then the sky is the limit.

 

[professor_frink]

Crap- should have refreshed the screen before posting that. I just said basically the same thing as wayne

 

[wayneL]

Crap- should have refreshed the screen before posting that. I just said basically the same thing as wayne

SNAP!

 

[swingstar]

Good posts. I don't know what's so hard to understand.

Agree with the small business analogy. The good thing about this business (if you're an introvert like me), is as mentioned, there are no employees, customers, products, driving hard bargains, competition, you can be anywhere in the world so long as you have a phone or Internet access, etc. It's the best business in the world from my point of view.

I look forward to the weekdays, so I must be doing something right. I know I didn't when I was working, not to mention I was only making a small fraction of what I've been making.

Some traders can consistently trade large accounts, although most train employees for them. Not all though, ie. Marty Schwartz. That guy is my hero.

 

[wayneL]

The good thing about this business (if you're an introvert like me), is as mentioned, there are no employees, customers, products, driving hard bargains, competition,

A very good point too.

I'm noy really an introvert, but having done the above in a manufacturing business, I just didn't enjoy it...too soft and too much of an idealist. The thought of sacking someone would upset me for weeks. And dealing with folks who are unethical (as you do inevitably find in business) was depressing in the extreme.

So this business is perfect for me too.

On the other side of the coin, some people love all the cut and thrust of normal business, and wouldn't enjoy what we do.

So it is definately not for everyone.

 

[Realist]

Some good points guys.

I am an old school Benjamin Graham follower. I buy the most boring shares you can, and never sell them. I've only sold 1 share in my life. (highly amusing to you traders I know.) So trading is foreign land to me.

Trading does interest me though. I can not get my head around it. I've tried, I read Darryl Guppy's book and thought it was complete bollocks. And went back to reading Ben Grahams book for about the 8th time.

4 quick questions about trading.

1.) What is the best trading book there is? The greatest of all time?
2.) What is the best thing for a beginner to trade? options, forex, cfd, shares??
3.) What is the best company or software to use to do trading? Where do you get your info from? I use Commsec now.
4.) Can you do trade adequately while still working fulltime?

I'm sure these have been asked 100 times, but a quick list of answers would be good. I'm sure I could do trading, I have a degree in Computer Science and am pretty good at maths, and fairly logical (although soem here would disagree), and fairly ballsy. I think I have the characteristics, or do I?

 

[professor_frink]

4 quick questions about trading.

1.) What is the best trading book there is? The greatest of all time?
2.) What is the best thing for a beginner to trade? options, forex, cfd, shares??
3.) What is the best company or software to use to do trading? Where do you get your info from? I use Commsec now.
4.) Can you do trade adequately while still working fulltime?

Good books to start with are IMO-
van tharp-trade your way to financial freedom
alexander elder- trading for a living
mark douglas- trading in the zone

Dunno about there being a greatest book, as every trader will have a different opinion on this.

To start with trade shares. Leverage is not a good idea for beginners!

Software I use for charting is amibroker. Most of the online brokers will do for executing trades. I use medved quotetracker for intraday charting as well.

You can definately trade and work at the same time(obviously depends on your job of course!) Most people still have a job while they trade. For end of day share trading, most of the analysis is done outside of market hours so it's pretty easy to do.

 

[professor_frink]

I'm sure I could do trading, I have a degree in Computer Science and am pretty good at maths, and fairly logical (although soem here would disagree), and fairly ballsy. I think I have the characteristics, or do I?

Good knowledge of maths and computers will be a definate plus, especially if you chose to program a mechanical system. It's not absolutely neccessary to go down this path, but there is a pretty strong case put forward for it by some people on these forums. Tech/a has developed a longer term mechanical system and information on it is freely available here and on reefcap if you want to find out more.