Can anyone recommend an appropriate strategy to get my feet wet?

[Steve C]

Hi all,

I have spent the last year reading and learning all I can about the market. I am lucky enough that my current role allows me to keep up to date in regard to commodities, mining and resources. In particular I have taken a liking to Nick Radge's momentum trading material.

I have a CMC stockbroking account and now feel that it is time to actually do some conservative (strict stop loss, trailing loss etc) trading in the real world. My main dilemma is that I am not currently in a financial position to use any real money in the market (I am aware most momentum strategies require at least $10K+).

I do still however want to get my feet wet and practice in the real world with the intention of using $1500 understanding that I am not going to make any money doing this, but with the hope of not really losing much either (besides brokerage). Can anyone recommend any technical analysis strategies or ways to go about my stock picks?

All input's (positive and negative) appreciated - I realise many will say completely pointless etc, but this is an exercise to practice in the real world till I can invest large sums in coming years.

Thanks,

Steve

 

[Gringotts Bank]

CFDs.

So long as your strategy and risk management is very solid, you can trade on margin. Wouldn't take long to eat through 1500 though.

 

[Steve C]

CFDs.

So long as your strategy and risk management is very solid, you can trade on margin. Wouldn't take long to eat through 1500 though.

Thanks for your reply Gringotts - I have considered CFD's using CMC Markets, I am a bit scared of "leverage" given I am a new entrant to this game, having said that though as you mentioned using tight stop losses etc should minimise any disasters. CMC is market marker not DMA - avoid?

Also any tips for actually picking stocks given the short term nature of the trades?

 

[Gringotts Bank]

Also any tips for actually picking stocks given the short term nature of the trades?

This sentence makes me think that your edge is not defined. Maybe do that first.

Entering trades randomly, even with a predefined 1:2 or 1:3 risk:reward, will not be profitable.

 

[Steve C]

This sentence makes me think that your edge is not defined. Maybe do that first.

Entering trades randomly, even with a predefined 1:2 or 1:3 risk:reward, will not be profitable.

Thanks Gringotts, point taken. There are just so many technical analysis indicators it can be hard to decide which two or three to use and stick with in this market when completing short term trades.

 

[Steve C]

Edit - have opened a IG Markets CFD account to take advantage of their DMA. Can't believe how easy it is to open an account and start trading, I guess they make lots of money with newbies and CFD's

 

[Gringotts Bank]

Thanks Gringotts, point taken. There are just so many technical analysis indicators it can be hard to decide which two or three to use and stick with in this market when completing short term trades.

I wouldn't worry about indicators. An edge can be as simple as a trendline break or a new 50 day high. Or if you have a good eye, gut feel can be an edge in itself - but you'd have to test this without committing money.

 

[skyQuake]

why not sign up to The Chartist since you're already going thru Nick's material?

 

[CanOz]

Maybe you could ask Nick what you should do, he's actually licensed to give advice.



CanOz

 

[Steve C]

Maybe you could ask Nick what you should do, he's actually licensed to give advice.



CanOz

Have done in the past - basically Nick politely told me that none of his strategies will produce any sort of positive expectancy with the tiny amount of capital that I currently want to play with in the market (which is completely valid and fair enough)

Perhaps, however I will conservatively use CFD's and a few of Nick's basic strategies just to have a real world "play"

 

[CanOz]

Have done in the past - basically Nick politely told me that none of his strategies will produce any sort of positive expectancy with the tiny amount of capital that I currently want to play with in the market (which is completely valid and fair enough)

Perhaps, however I will conservatively use CFD's and a few of Nick's basic strategies just to have a real world "play"

The only thing i can suggest is to try FX with micro lots. It wouldn't take much to put together something like Tech/Pavs stock trading but on a smaller time frame. With micro lots, you may be able to get your risk per trade down to 1% of the account, or $15.00.

You could still pattern trade, just different time frames and position size.

CanOz

 

[Steve C]

The only thing i can suggest is to try FX with micro lots. It wouldn't take much to put together something like Tech/Pavs stock trading but on a smaller time frame. With micro lots, you may be able to get your risk per trade down to 1% of the account, or $15.00.

You could still pattern trade, just different time frames and position size.

CanOz

Thanks Canoz - will look into this.

I keep getting the feeling that it isn't wise for an amateur like myself to be playing with CFD's and leverage, perhaps a better idea to just trade ASX stocks using CMC @ $10 a trade till I understand how the market works in real life a bit better and see how I go.

 

[CanOz]

Thanks Canoz - will look into this.

I keep getting the feeling that it isn't wise for an amateur like myself to be playing with CFD's and leverage, perhaps a better idea to just trade ASX stocks using CMC @ $10 a trade till I understand how the market works in real life a bit better and see how I go.

Well you need to understand how to manage risk, to stretch your capital to withstand the inevitable losses associated with a learning curve.

You've got a CFD account, so stocks or FX makes no difference as you will still be trading a derivative of the underlying.

Because FX allows micro lots (with some brokers) you may be able to manage the risk more effectively and preserve your capital long enough to learn something.

Otherwise you are wasting it on nothing.



CanOz

 

[skc]

I keep getting the feeling that it isn't wise for an amateur like myself to be playing with CFD's and leverage, perhaps a better idea to just trade ASX stocks using CMC @ $10 a trade till I understand how the market works in real life a bit better and see how I go.

What is it that you are actually hoping to learn with your $1500 that you couldn't learn without? If you don't have an edge in trading, your $1500 isn't going to last very long or teach you anything worthwhile with just a few semi-random buys and sells. If you can articulate those learning objectives, perhaps others can give more appropriate suggestions.

It feels like you just want to experience the thrill of having money in the market more than anything else. If that is the case I'd suggest don't rush it. Because that's the easy part and when you have $15k and an edge, the thrill would still be there.

P.S. There are $1 contracts in index as well with CFD providers. But again you'd be wasting money - not because your account is small, but because you don't know what you are trying to learn.