Borrowing - a dumb idea for a novice trader?
- Thread starter bumclouds
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If he is under 21 (like me)
He only needs $3000 US to open an account
Cheers
Brad
Even better!
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"Individuals age 21 or younger USD 3,000 (or USD equivalent)"
http://www.interactivebrokers.com/en/accounts/fees/minimumDeposits.php?ib_entity=llc
Also check out their fees....
http://www.interactivebrokers.com/en/accounts/fees/commission.php?ib_entity=llc
Only downside for you is you won't get market data with them. That costs $37.50/mth. One way around that will be to use the free basic market depth you'll get with an Aussie broker and just execute the trades through IB.
But this is getting ahead of the game...first work out a game plan.
One beauty of IB is when you fund a real account with them you can then open their paper trading account which lets you "trade" the way you would but without risking any dollars.
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Take a look at the interactive brokers site and you will find out!
Just kidding, here you go buddy
Cheers
Brad
^ lol, thanks!
Eep. A game plan I'm not sure about. I was hoping you guys could help me with that ^_^.
I was thinking that borrowing from the M&D bank (mum and dad, lol) combined with a fixed fraction risk management technique might be okay. If combined with low brokerage, how do you think this might play out?
For instance, say I set my FF at 10%. Then when i have 8k i will put $800 into each stock. And if things go bad and I get reduced to say, 5k, then I will put $500 into each one.
At at 500 dollar investment, the stock would only have to go up by 2.4% to cover the $6 x 2 brokerage fee involved in that trade.
If things went well from 8k and it turned into 10k, then I would be putting $1000 into each stock.
I would like to put the FF below 10% but at 8k, it doesn't look feasible to me. Thoughts/flames?
Eep. A game plan I'm not sure about. I was hoping you guys could help me with that ^_^.
I was thinking that borrowing from the M&D bank (mum and dad, lol) combined with a fixed fraction risk management technique might be okay. If combined with low brokerage, how do you think this might play out?
For instance, say I set my FF at 10%. Then when i have 8k i will put $800 into each stock. And if things go bad and I get reduced to say, 5k, then I will put $500 into each one.
At at 500 dollar investment, the stock would only have to go up by 2.4% to cover the $6 x 2 brokerage fee involved in that trade.
If things went well from 8k and it turned into 10k, then I would be putting $1000 into each stock.
I would like to put the FF below 10% but at 8k, it doesn't look feasible to me. Thoughts/flames?
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Don't know how this would work
People normally used fixed fractional to determine position size based off risk
For example $8000
Risk = 1% of account per trade
Risk = $80
Entry Price = $10 per share
Stp Loss = $9.50 per sare
Risk per share = $0.50
Therefore you can buy $80/$0.50 = 160 shares
Which works out to be 160*10 = $1600 position
Another stock you are looking at is $0.50 per share
And you want the stop at $0.48
So you can buy $80/0.02 = 4000 shares
Which costs 4000*0.5 = $2000
As you can see both positions are the different dollar amounts, but you are risking the same.
This helps even out volatility between higher price and lower price shares. $1000 worth of 10cent shares will react very differently to $1000 worth of $50 shares
Cheers
Brad
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http://www.interactivebrokers.com/en/general/education/highlights.php?p=a
which account do you guys have with IB... i looked at their site and theres like 10+ different accounts to choose from
which account do you guys have with IB... i looked at their site and theres like 10+ different accounts to choose from
Yes, you don't need all of your balance split among x amount of stocks. Don't force your money out there, just wait for good opportunities.
Anyone's guess. Nobody knows your skill, how it will develop, and more importantly, how favourable variance will be.
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Hey guys,
I started trading about 3 months ago. I have been reading these forums, and I read a book which is suggested often on here - Adaptive Analaysis by Nick Radge.
I've only done two trades so far, each over one month - I made 35% on Starpharma (SPL), and I made 38.8% on Avexa (AVX).
However I'm an undergrad university student and the amount which I invest is trivial, and so the returns I get are trivial
Is borrowing a daft idea?
Much Love
Andrew
I'd probably first try to hone my skills to the point where I'm making money consistently, even if its just betting lunchmoney. Read some good books and craft your system of rules. It ain't dumb to use OPM (other people's money). But first you gotta get to the point where you ain't losing your own. 3 month is nothing dude. Do it for a year or two and if you're well ahead, then consider borrowing.
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Hey Bumclouds (Great name by the way),
In my mind trading is a very different animal from investment. For trading you need to have a system of rules in place that incorporate some risk management techniques. Investigate things like trailing stops (they help you have your winners run longer and stop out the poor choices early), Optimization reserves (sums of cash or unused borrowing capacity squirreled away for a rainy day) and figure out what style of analysis (technical/fundamental) works for you within your framework.
As an example let me tell you how I invest my hard earned.
Over the long term my investments are 50/50 equity and real estate. As the economy cycles between boom and bust I will vary my focus between these two asset classes. At present I am investing heavily into equities and topping up my long-term buy and hold portfolio.
1) Investment - I have a core portfolio of stocks that are designated as long term buy and hold stocks. I create this portfolio by looking at the ASX 200 stocks and applying some parameters both technical and fundamental so that I end up with the highest quality stocks I can find. This makes up around 80% of the capital I will invest into equities.
2) Trading - The remaining 20% of my equity is placed into a leveraged trading portfolio. (Lets call this $100,000 for ease of calculation - 50k of my own money and 50K of borrowed money). I then have a system or framework that I use to do trades within this portion. On any particular trade I will risk no more than 5% of the portfolio, no more than $5,000.00 per trade and I will have a stop no greater than 7%. I rank my selections based upon a number of factors and come up with 5 to 10 targets per week, higher ranked selections get wider stops, lower ranked selections get smaller stops and entries.
You also need to have a clear understanding of which part of the market you are investing in and what drives that market. I follow a broad approach across the equity market using a system I devised over five years. Many others specialize within a particular type of trading, eg Currency, CFD's, Futures, or specific sectors of the market or market capitalizations. So it's important to find your niche and have a good understanding of what is going on that can affect your niche.
Paper trading is your friend whilst you set up your framework and system. It will help you build your skill set until you can be consistent.
Cheers
Sir O,
In my mind trading is a very different animal from investment. For trading you need to have a system of rules in place that incorporate some risk management techniques. Investigate things like trailing stops (they help you have your winners run longer and stop out the poor choices early), Optimization reserves (sums of cash or unused borrowing capacity squirreled away for a rainy day) and figure out what style of analysis (technical/fundamental) works for you within your framework.
As an example let me tell you how I invest my hard earned.
Over the long term my investments are 50/50 equity and real estate. As the economy cycles between boom and bust I will vary my focus between these two asset classes. At present I am investing heavily into equities and topping up my long-term buy and hold portfolio.
1) Investment - I have a core portfolio of stocks that are designated as long term buy and hold stocks. I create this portfolio by looking at the ASX 200 stocks and applying some parameters both technical and fundamental so that I end up with the highest quality stocks I can find. This makes up around 80% of the capital I will invest into equities.
2) Trading - The remaining 20% of my equity is placed into a leveraged trading portfolio. (Lets call this $100,000 for ease of calculation - 50k of my own money and 50K of borrowed money). I then have a system or framework that I use to do trades within this portion. On any particular trade I will risk no more than 5% of the portfolio, no more than $5,000.00 per trade and I will have a stop no greater than 7%. I rank my selections based upon a number of factors and come up with 5 to 10 targets per week, higher ranked selections get wider stops, lower ranked selections get smaller stops and entries.
You also need to have a clear understanding of which part of the market you are investing in and what drives that market. I follow a broad approach across the equity market using a system I devised over five years. Many others specialize within a particular type of trading, eg Currency, CFD's, Futures, or specific sectors of the market or market capitalizations. So it's important to find your niche and have a good understanding of what is going on that can affect your niche.
Paper trading is your friend whilst you set up your framework and system. It will help you build your skill set until you can be consistent.
Cheers
Sir O,
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OMG that is so true. It happened to me and it wasn't long before i was
constantly lol. Fastfoward a year of full time simulation and live trading and I am still but getting closer to being profitable i think.- Joined
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i feel the need to say this from experience.
open a demo account if possible. If you can't do that then write your trades out on paper.
Your aim should be to double your demo account.
Then open a small live account and double it.
Then trade with a more moderate amount in your brokerage account.
And by double I mean doing it properly and risking no more than 1-2% per trade. If you can do that then you have enough skills to trade profitably over the longer course IMO.
hah, and I'm still not profitable after almost a full year of full time trading study. Getting there as mentioned in my previous post. This stuff is not easy.
open a demo account if possible. If you can't do that then write your trades out on paper.
Your aim should be to double your demo account.
Then open a small live account and double it.
Then trade with a more moderate amount in your brokerage account.
And by double I mean doing it properly and risking no more than 1-2% per trade. If you can do that then you have enough skills to trade profitably over the longer course IMO.
hah, and I'm still not profitable after almost a full year of full time trading study. Getting there as mentioned in my previous post. This stuff is not easy.
So would an example of a "part" be like.. Info Technology? or Health Care?
>Apocalypto<
20.03.2012
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Hey guys,
I started trading about 3 months ago. I have been reading these forums, and I read a book which is suggested often on here - Adaptive Analaysis by Nick Radge.
I've only done two trades so far, each over one month - I made 35% on Starpharma (SPL), and I made 38.8% on Avexa (AVX).
However I'm an undergrad university student and the amount which I invest is trivial, and so the returns I get are trivial
Is borrowing a daft idea?
Much Love
Andrew
Could be extremely dumb and painful!
As a Newbie you have enough problems with emotions with out having the added pressure to perform so you can make/meet the repayments.
I am not licensed to give any financial advice but Andrew I strongly advise you don’t do it. The potential downside far out weighs the upside.
Good luck.
You need to read some more about stop losses. The idea is not to let your portfolio decline (too much, would that be right everyone?), but to cut your losses short to preserve your capital (starting amount).
The other thing i've learned is that it is sometimes good to go in with small positions in order to get used to holding (not saying to hold into a loss, just saying to hold when your position looks good).
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I personally find it easier to keep track of finance and materials/resources sectors... the main industries for the asx are Finance, materials, Consumer, Industrial, Energy, Telco, Healthcare
Theres a description of each sector here on the right of the page
http://www.asx.com.au/research/industry/index.htm
Kryzz
shaun
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I have been looking into taking out a student deferred loan payment (NAB) to fund a trading account in the near future, no repayments of interest or principle would be required until completion of my studies (by which time i would hope i would have turned the a/c into somewhat of a profit , to cover interest + principal when the loan is payable)
I suppose i would still consider myself somewhat a novice trader (maybe a step up from novice, whatever that may be), have been burned on a few options and stock plays and understand the importance of cutting losses short, and have paper traded on and off the last couple years and it is wearing thin now and am really eager to begin live trading properly. Would taking out such a loan seem like a stupid idea still?
Cheers,
Shaun.
, to cover interest + principal when the loan is payable) I suppose i would still consider myself somewhat a novice trader (maybe a step up from novice, whatever that may be), have been burned on a few options and stock plays and understand the importance of cutting losses short, and have paper traded on and off the last couple years and it is wearing thin now and am really eager to begin live trading properly. Would taking out such a loan seem like a stupid idea still?
Cheers,
Shaun.
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I have been looking into taking out a student deferred loan payment (NAB) to fund a trading account in the near future, no repayments of interest or principle would be required until completion of my studies (by which time i would hope i would have turned the a/c into somewhat of a profit
I suppose i would still consider myself somewhat a novice trader (maybe a step up from novice, whatever that may be), have been burned on a few options and stock plays and understand the importance of cutting losses short, and have paper traded on and off the last couple years and it is wearing thin now and am really eager to begin live trading properly. Would taking out such a loan seem like a stupid idea still?
Cheers,
Shaun.
http://www.nab.com.au/wps/wcm/connect/nab/nab/home/personal_finance/21/71/2
I'm sure trading doesn't fit into any of those categories... even the last one
: Do you have someone to guarantee the loan for you? and how do the interest payments get calculated?Its an interesting thought though.... if you can manage to get one, let us know. I woulnt mind getting one of those to trade.