Day Trading Idea & Broker Question

[systematic]

Hi All,

Please help JuniorR out with some responses.

JuniorR contacted me via PM after interacting with me in this thread here

Note:
Naturally...I have asked for and received JuniorR's permission to post our PM...I would never post a PM in the forum, otherwise!

Hey Ive been thinking of something else other then following like facebook and alibaba and few vangaurds. rather then building a portfolio.

What if I traded S&P ASX 200, or S&P 500 on the daily basis, maybe once a day. Buy say 9 or 9.30, sell around 10 or 10.30. They seem to be the highs and lows on the chart.
Could you do like a limit buy or add a stop loss, to reduce your risk of losing to much money.
To begin I'm only going to use my money if I am willing to lose it, so the money I do have saved up I am willing to lose.
Its just difficult to decide what to try first.

And also:

What trading platform would you recommend for Australians.
I have been waiting for Robinhood to come to Australia but after reading some stuff on google, I seen that its been going for almost 3 years now so I will probably need to go with a different trading platform.

Here is my reply to the JuniorR:

Hi JuniorR,

Thanks for the message.

Honestly, day trading the index is probably about as far away from my style of trading / investing that you can get. I trade the big moves and look for stocks that have a probability of outperforming the average stock in the market. I expect my usual trades to run for months - or a year or more.

Also re: brokers...I'm pretty set in my ways these days (i.e. comfortable doing what I'm doing) and don't have a need to keep up with the latest and greatest...so I can't help you with the best trading platform for you.

Sorry, but what I do is so far removed from what you are currently wanting to do, that I'd rather give you no answer...because any answer I give you isn't going to be a genuine help.

A lot of it depends on goals. I am investing my retirement funds, and returns (absolute returns, CAGR, compounding) is my key performance metric, along with a few caveats. That's about it. Pretty simple! So my trading plan should be built to try and match my goals.

Your goals might be different, so your trading plan would be different.

I don't even like to try and convince people that an empirical, or quantitative approach is better...there are many ways to beat the market (and many ways not to!)...but just as some food for thought relating to your day trading indexes question:
If I wanted to do that, I would have to ask myself, 'how do I know this will probably work BEFORE I start trading?'

You're doing what most beginners do...guessing what seems to be a good idea (i.e. observing market behaviour and coming up with an idea...which is great)...but wouldn't you now want to test out exactly how that has performed in the past...AND (not to be forgotten) assess that performance for probability of continuing into the future...AND THEN trading it?

My point is that you might be better off spending your time learning:
- how to test your ideas
- how to assess those tests

Doing that allows you to read books , blogs or forum posts etc for ideas that you can then go and test yourself...which also alleviates the desire to find the holy grail in a book etc.

Another option is:
If you feel like you have money to burn AND you have ideas that you would like to start trading...AND you don't want to spend time learning the above, I'd at least suggest that spending that money you have available to burn would be better spent paying someone to test your ideas rather than losing money trading an idea that has never showed promise in the past?
The good news is - there are definitely services out there that test trading ideas, so it is a real option.

Just a thought.

Would you be okay with me copying and pasting your questions and my responses into the forum so that others can chime in? If not, let me know and I will simply post my response as the answer to an anonymous post

Over to you now!

 

[Triathlete]

I do not know why beginners are in so much of a hurry...
I like your response systematic especially this part;

You're doing what most beginners do...guessing what seems to be a good idea (i.e. observing market behaviour and coming up with an idea...which is great)...but wouldn't you now want to test out exactly how that has performed in the past...AND (not to be forgotten) assess that performance for probability of continuing into the future...AND THEN trading it?

My point is that you might be better off spending your time learning:
- how to test your ideas
- how to assess those tests

They should look at weekly and monthly timeframes and forget about day trading if they cannot trade the slower timeframes and be profitable over say 2 years they have next to no chance of making it as a day trader in my opinion....




Monthly chart

If you are a medium to long term trader/investor you should always start with the monthly chart as it provides us with valuable information, which is often missed by traders who rely on only the weekly or daily charts, as it provides a view of the stocks movements. Always start your analysis of any stock or index by looking at a monthly chart to understand the longer term direction. The benefits are below:

A complete history of the stock.
Major trends in price and support and resistance levels are easily recognized
Able to recognize major lows and what stock cycles are present.


The weekly chart

Which is the most important chart in technical analysis,provides us with some valuable information that is not evident in the daily chart.This is the chart you should rely on the most in your analysis. The benefits are below:

Major support and resistance levels of previous highs and lows.
Recognizable patterns eg continuation, accumulation, reversals, head and shoulders, double tops , bottoms etc
Easy to recognize major moves and long term trends.


Daily chart

The daily chart is fast moving and at times quite deceiving, which for the inexperienced trader can lead to inconsistent trading results. A lot of traders find they become too reactive to the emotions in the market if they use daily charts to carry out their analysis, which can lead to very costly mistakes.The daily chart is used primarily to fine tune entry or exit points in the market.
Typically medium to long term traders rarely need to refer to the daily chart.

 

[tech/a]

Charts are easy to read in hindsite
Much harder to read with fore sight

For what it’s worth
I tend to be able to be correct for shorter periods over longer periods

 

[Triathlete]

Charts are easy to read in hindsite
Much harder to read with fore sight

There has been a few chartists on here that have made some long term predictions as to the probable directions and likely prices of certain stocks eg TLS,RHC,REA......but how you trade them till they get to those prices is another issue.

 

[Triathlete]

I tend to be able to be correct for shorter periods over longer periods

Can you give the OP the likely time horizon that it took you till you were both competent and profitable on that shorter timeframe....

 

[JuniorR]

I have written my long term portfolio plan for the future, will most likely tweak it a little before I start investing. Would you guys care to take a look and give your opinions?

 

[TortoiseTrader]

I have written my long term portfolio plan for the future, will most likely tweak it a little before I start investing. Would you guys care to take a look and give your opinions?

I’d like to see your plan buddy
I’m a budding ‘day trader’ myself and trade mostly futures. It sounds like most successful traders are longer term holders here though but don’t let that stop you

 

[tech/a]

Can you give the OP the likely time horizon that it took you till you were both competent and profitable on that shorter time frame....

Sorry Tri just saw this.

In answer---my own personal journey--

So of 25 yrs trading it was 5 before profitable and the learning NEVER stops.
But the SEARCH can stop once you know ---and you will know!

I couldn't trade short term until I could trade longer term and I couldn't trade longer term until I had
Worked for a couple of years developing systems.

Developing and trialing systems proved to me what works and what doesn't.

Many of the popularized ideas presented in books and seminars---just DON'T WORK

What trade management ideas helped and what didn't.
How risk management could be applied and when/how and where it helped.

Knowing a lot of the "mechanics'' of successful trading lead to being able to recognize shorter trading setups,understand the Trade/Risk management required to keep trades flowing profitably trade after trade. Winning and losing.

Others have found the same route but have taken different paths.
I see a great deal of correlation between Petes trading methods and my own with some of my ideas influencing (directly or indirectly as in coming to the same or similar conclusions) Pete and certainly some of his influencing mine.

With today's abilities in testing ideas everyone who is serious about placing serious money in the market, should spend the time gaining at least a basic understanding.

Without it your trading world is

THEORY and
HYPOTHESIS.

Yes Id like to see your plan JuniorR

Here are 3 rippers currently trading.
There is a lot in common with all.
In 3 aspects
Implementation
Risk
Management.



Perhaps you could write up how you would trade these and compare with what my plan is?

 

[Triathlete]

I like reading stories like yours Tech/a because it gives beginers the real deal not some crap about making 10k in 5 mins a day if you are a total beginer...Even with what i did it took me 18 months trading the longer timeframes before trying my hand at the shorter timeframes...At the moment i am about 6 years into trading and i do a bit of cfd trading on the shorter time frames with leverage but i made sure i was profitsble for 3 years before going onto the leverage but it opens up a whole new world of trading being able to trade both sides.

 

[JuniorR]

AGGRESSIVE PORTFOLIO

I've decided to go with a more aggressive portfolio due to being 25 years of age and having a higher risk tolerance. This is going to be a long term plan for my investment.
I'm going to be investing between $1000 - $3000 each month depending on my financial status at the end of the month. I have very little liabilities at the moment.
My portfolio is going to consist of three ETF's and two Blue Chip Stocks, after 5 years I will include 10% into bonds.

50% Vanguard Large-Cap ETF (VV) - A blended approach to growth & income.

25% Vanguard Total International Stock ETF (VXUS) - Foreign Stocks

25% Vanguard Small-Cap Growth ETF (VBK) - More aggressive rather then a value.

If I see a buying opportunity I will direct my money to a blue chip stock, If not I plan to dollar cost average into these 3 index funds. Dividends will be reinvested.

I still haven't started investing just yet, but when I do I will have to chip away at buying these stocks 1 by 1 each month to reduce brokerage fee's rather then go buy all of them in one hit.

Gambler
I do have a second plan that I am working on and would classify it as a "gamble". Hit or a Miss. I will direct a small portion of my money into that stock, Still unsure how often.

 

[tech/a]

So you’ve changed dramatically from your initial plan?

 

[Triathlete]

If we use your 3K a month of savings for 5 years you will have a tidy sum of 180K plus the earnings of the funds.....How would you feel or what do you have in place if we have another GFC and you lost 50% of your portfolio ......will you be able to handle that ????

 

[systematic]

My portfolio is going to consist of three ETF's...

Without commenting on the rest of your plan here, given that you were on Vanguard's site, did you read:
this short article? Just wondered why you went ETF's over funds?
Also, you seem to be referring to US ticker codes for the ETF's. So, by large cap you actually mean US large cap. Was that intentional?

Did you still want comments on your plan? My next comment (question, actually) is why that particular mix?

 

[tech/a]

So you’ve changed dramatically from your initial plan?

Lost me
From Day trading an index to——-

 

[Johny5]

Lost me
From Day trading an index to——-

I was just about to weigh in on the day trading debate, but it seems JuniorR wants to be some sort of Chameleon trader/investor.

So I will drop the day trading rave and instead touch on the subject of Trading Psychology or Mindset, the discussion has mainly been on instruments and methodologies. But I think the most important and yet difficult thing for a beginner to get right is their mindset, its no use having a fantastic edge or system if the execution fails because you act too quickly or freeze in the headlights. I'm sure many of us can recount tales of the position we sold for a small profit, only to sit on the sidelines as the price went on to more than double or tipple (the one that got away) or worse freeze as your position drops through the floor and your losses mount up to multiple digits. What did your system say to do, did you follow it or did you break your own rules? Is your portfolio now in tatters, are you blaming the market? You decide to hang on even though your system says to sell, only to find your position sliding further, you decide to average down (even though your system says GET OUT) still the position slides. Can you even think straight anymore, try it when more than half you portfolio has disappeared.

What a beginner needs to address their own greed and fear response regarding profits and large losses, will they act methodically according to their system or irrationally according to the whim of their emotions. I have been trading for many years and I still have some problems with emotions taking control of my actions, usually to the detriment of my portfolio.

A good book to read on the subject is Trading in the Zone by Mark Douglas (I'm sure others can suggest more titles). The main point is to know your emotions, learn to control or deal with them under extreme stress in all trading conditions even when you are facing huge losses, if you can your portfolio will live to another day and make you more profits.

 

[JuniorR]

Probably shouldn't have posted that in this thread but I did, I decided to have a long term portfolio while I learn to read charts, Since I don't need to make any trades and brokerage fees are low. I thought It would be a good Idea to have an aggressive portfolio while I watch more videos on day trading. Sorry for confusing the thread.

 

[tech/a]

So
Your long term trading what is your methodology
How do you know it has a chance of being profitable!

If you don’t know
Don’t trade.

 

[Johny5]

If you don’t know
Don’t trade.

Couldn't agree more, get it as right as you can before risking your hard earned money. Don't just play around on the market while you watch videos on how you should be doing it. By all means put to practice things you have learned by placing well thought out trades, keep a diary of your trades so that you can critically analyse how your methodology is doing, what methods are giving you consistent winners and which are producing losers.