Do you have to day trade to trade full time?

[AlterEgo]

Given the timeframe he's talkinga about, he may be talking about 0.5% of total capital.

No. He said:

consistent return of 0.5% profit on each trade

 

[shortlist]

Remeber you don't need to close or hold onto the entire position. Partial sells at good profit while letting some ride might be a good way to become comfortable. I haven't been doing this much longer than you.



Given the timeframe he's talkinga about, he may be talking about 0.5% of total capital.

I'll confess that I hadn't really though about retaining a percentage of the shares and holding them for more gains. Again, my inexperience told methat if the share price was right to sell then get out before it slides down. Market movements and timing are massive subjects to understand after all.

 

[shortlist]

No. He said:

Yes let me clarify, I meant buying a good amount of shares and being happy to sell them if they should rise as little as 0.5% or 2%, the logic being the quantity would more than cover brokerage and supply a small profit, but our conversation is making me think twice about this..........!

 

[tasmanian]

Yes let me clarify, I meant buying a good amount of shares and being happy to sell them if they should rise as little as 0.5% or 2%, the logic being the quantity would more than cover brokerage and supply a small profit, but our conversation is making me think twice about this..........!

I wouldnt even think about it anymore.Forget that idea.Taking 1-2% profits there is no way you will last very long.Your account will be gone before u have even realised that u have started.

Now taking 1-2% losses is worth thinking about.

Personally I wouldnt even set a % for profits.100% profit on 1 trade is not easy and doesnt happen all the time but have a look at a few charts and see how far some stocks have come on the last 6 months.Quite alot 100%+.thats what u should be aiming for.Thats how u make the big money in the markets imo.

Sell losers quick.Let winners run as far as u can.Emotions play a huge part in this and no book or advice can teach you this only time.How you deal with these emotions wont be known until you actually experience it with your hard earned cash.Demo accounts are good for learning the basics but still wont prepare you mentally until your money is on the line.Thats when the real fun starts

Enjoy it,have fun and if u really have a passion for the market eventually you will be succesful.

,

 

[shortlist]

I wouldnt even think about it anymore.Forget that idea.Taking 1-2% profits there is no way you will last very long.Your account will be gone before u have even realised that u have started.

Now taking 1-2% losses is worth thinking about.

Personally I wouldnt even set a % for profits.100% profit on 1 trade is not easy and doesnt happen all the time but have a look at a few charts and see how far some stocks have come on the last 6 months.Quite alot 100%+.thats what u should be aiming for.Thats how u make the big money in the markets imo.

Sell losers quick.Let winners run as far as u can.Emotions play a huge part in this and no book or advice can teach you this only time.How u deal with these emotions wont be known until u actually experience it with your hard earned cash.Demo accounts are good for learning the basics but still wont prepare u mentally until your money is on the line.

Enjoy it,have fun and if u really have a passion for the market eventually u will be succesful.

,

Thanks for the encouragement, tasmanian. I'm getting a lot of good ideas on here but I won't be "going live" with my own money for some time. How long have you been trading?

 

[Sir Osisofliver]

Perhaps you shouldn't be looking to do things the usual way? You're also talking like an investor, not a trader, and you're not going to make a living (or even just a nice supplementary income) investing unless you have a serious amount of capital. I consider longterm investing to be a loser's game anyway, once inflation and variance is considered.

HI Mr J,

I find this an interesting comment and was wondering if you would mind expanding your thoughts on it a bit. I'll likewise expand my thoughts here and hope I don't derail the thread.

I differ by 180 degrees on this view. I think long-term investing is something that everyone should be doing. Personally even though I like to trade I ever only commit 20% of my investing funds into doing so, with 80% in a long term share portfolio. I also plough trading profits back into long-term investments depending upon where we are in terms of market cycle and how attractive the real estate market looks.

Reasons

1) Cost based yield. Example. I bought BHP shares in '02 for roughly $8.00 when the company was paying a 5% yield (40 cents div). Even at the worst of the corrective phase of the market why would I have sold it? I'd have had to pay CGT and I would have lost my cost based yield. Even during the worst of the market doom and gloom BHP was paying a dividend of roughly $1.12, so on my original investment my yield is 14% fully franked and by balance of probability will only get better over time. What other ASX top 20 stock would it have made it worthwhile for me to sell that holding, pay the CGT and better that yield? There aren't any. Notice I used a mining company for this example. Higher yielding sectors of the market look even better from a cost based yield perspective. (This also doesn't take into account any money I would have made by hedging this position atthe top of the market).

2) Cost of investing. I can use my long term investment portfolio to borrow money. (Yes I know I can use leverage effectively in a trading system as well but I cannot rock up at the bank and ask them to lend me money based upon my trading history alone). The advantage in using other people's money to fund my investment is that at certain points of the cycle I can borrow money to invest long-term and still be positively geared. What does this investment cost me? Absolutely nothing. So when my portfolio goes up in value over the course of the market cycle, I've turned something that cost me nothing into something that produces a compounding rate of return over time and grows faster than inflation.

I'm not done yet but it's beer o'clock on Friday I'll visit on Monday and put a bit more in here.

Cheers

Sir O

 

[tasmanian]

Ive been involved in the sharemarket for probaly 10 years.Started of with no idea like we all do.Just bought anything that was recommended in a magazine or whatever.Then started to try and work out FA.Personally I think its a waste of time reading all those reports etc.

Im sure alot will disagree with me on the FA but personally I just think all the answers are in the charts anyway.So eventually I found charts and thats where my passion was and will always be.

Im definetely no professional but have been profitable every year for the last 5 years or so.Some really good years and some average.

It all just takes time.Im still learning everyday and Im serious everyday I learn something new.I look back on what I was doing even a year or 2 ago and see how much more profitable I could have been but thats part of the game.Experience is the key.

I could write and write but its really up too you.Keep asking questions and feeding your brain with as much knowledge as u can.Then eliminate the good from the bad .Eveyone will have different advice on how to trade what to trade but eventually its up to you to decide.

One thing is everyone has a different opinion on what the markets going to do.Trust your own judgement because its your money in the end and really nobody knows what the market is going to do..

oh yeah read Stan Weinsteins book.Profiting in a bull and bear market.Its a great starting point and will definetely start u on the right path to understanding the cycles of the stock market and individual stocks.

good luck and just enjoy the learning process.Theres no rush the markets will be there whenever you feel ready.
Better to start off small too.Trust me youll understand once u start putting your money on the line and realise how quick your account balance can change in the space of a week.somedays you feel king of the world.Next day you come back to reality pretty quickly and realise this sharemarket game is not easy.

 

[Tysonboss1]

Peoples comments on the size of your captial base are absolutly correct.

I know a guy that was trading with a capital base of only $100,000 and was doing ok pulling about $60,000 pa profit.

the trouble was he spending all his profits on living expenses, then when the GFC hit he made a few losses and started eating his capital base down to abot $30,000, He is now back in the Army.

I wise man once said, "you only have to get rich once". The bigger your capital base the less risk you have to take to deliver you that $100K a year income.

If you have $100K you have to make a 100% pa return to earn a $100K.

if you have $1M you only have to earn 10%pa return to earn a $100K.

 

[shortlist]

Ive been involved in the sharemarket for probaly 10 years.Started of with no idea like we all do.Just bought anything that was recommended in a magazine or whatever.Then started to try and work out FA.Personally I think its a waste of time reading all those reports etc.

Im sure alot will disagree with me on the FA but personally I just think all the answers are in the charts anyway.So eventually I found charts and thats where my passion was and will always be.

Im definetely no professional but have been profitable every year for the last 5 years or so.Some really good years and some average.

It all just takes time.Im still learning everyday and Im serious everyday I learn something new.I look back on what I was doing even a year or 2 ago and see how much more profitable I could have been but thats part of the game.Experience is the key.

I could write and write but its really up too you.Keep asking questions and feeding your brain with as much knowledge as u can.Then eliminate the good from the bad .Eveyone will have different advice on how to trade what to trade but eventually its up to you to decide.

One thing is everyone has a different opinion on what the markets going to do.Trust your own judgement because its your money in the end and really nobody knows what the market is going to do..

oh yeah read Stan Weinsteins book.Profiting in a bull and bear market.Its a great starting point and will definetely start u on the right path to understanding the cycles of the stock market and individual stocks.

good luck and just enjoy the learning process.Theres no rush the markets will be there whenever you feel ready.
Better to start off small too.Trust me youll understand once u start putting your money on the line and realise how quick your account balance can change in the space of a week.somedays you feel king of the world.Next day you come back to reality pretty quickly and realise this sharemarket game is not easy.

Excellent advice - enjoy the weekend. I'm off to grab a cold beer.

PS Will get the Weinstein book.

 

[shortlist]

Peoples comments on the size of your captial base are absolutly correct.

I know a guy that was trading with a capital base of only $100,000 and was doing ok pulling about $60,000 pa profit.

the trouble was he spending all his profits on living expenses, then when the GFC hit he made a few losses and started eating his capital base down to abot $30,000, He is now back in the Army.

I wise man once said, "you only have to get rich once". The bigger your capital base the less risk you have to take to deliver you that $100K a year income.

If you have $100K you have to make a 100% pa return to earn a $100K.

if you have $1M you only have to earn 10%pa return to earn a $100K.

Thanks Tysonboss. I have a good capital base but would only be investing a fraction of it until I was returning a consistent profit - no matter how small. I don't mind going slow and taking it easy. I'm not chasing big bucks and I'm not in a rush. Your friend was making a great percentage return p.a., no? I mean considering it was post-tax.

 

[nunthewiser]

Good post Sir O

most people forget the simple things in wealth creation because they are so much in a hurry to become a "stock market trader"

The building of assets and long term wealth and high yield incomes often left by the wayside in peoples search for riches

cheers

 

[tech/a]

I differ by 180 degrees on this view. I think long-term investing is something that everyone should be doing.

I second that.

But seeing we are talking "Day Trading"

Personally I dont strictly day trade (Never hold positions overnight).
but discretionary trading is short term.
Its always a proces of trade management.
Culling Non performers,raising stops,analysing various timeframe to find reasons to keep or add to a trade.

I have a very strong major rule.
If I buy a stock I expect that the analysis to anticipate immediate profit--that day if not within the next hr.

I wont trade a wide range of stocks at the one time.
I call "trading" adding aggressively---moving stops.
I will have many pending orders in front of a move. I'll also cancel them if they move away. I want movement now.
I wont sit and wait unless in PROFIT.
Stops always get moved to B/E if over a day old.
Since using Limit stop orders (Buy and sell stops) slippage has become very rare.

Learn HOW TO THINK.

 

[Nick Radge]

Some articles I wrote some time ago in support of Sir O's comments...

The Art of Share Collecting

https://www.aussiestockforums.com/images/tc/487118.PDF

The Strength of Dividends

https://www.aussiestockforums.com/images/tc/487118b.PDF



This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.

 

[tasmanian]

Some articles I wrote some time ago in support of Sir O's comments...

The Art of Share Collecting
The Strength of Dividends

Gday Nick,

Thanks for sharing your articles.I like the idea of having a long term dividend type growth portfolio.I did have one a few years ago but sold out of them all and now mainly trade.Am looking at starting another one in the near future

Just wondering with the recent sell off we had in stocks would you or did you still hold the stocks during the downturn or did you sell and buy back at a lower price?
Or just keep buying as stocks got a better div yield?I realise the tax implication in selling etc but seems abit scary to me holding those stocks through the whole downturn.Looks like it would pay off now but not sure if I could handle that sort of drawdown.

Any advice would be greatly appreciated.

cheers

 

[Tysonboss1]

Your friend was making a great percentage return p.a.,

Yes, he was. But keep in mind it was during the bull market, Then the gfc devastated him.

 

[Kryzz]

Why would you focus so much on long term investing if you can earn a better % return p.a. doing something else, ie, swing trading?

Also, there have been many people calling that the market will be range bound or heading lower etc etc, would u still be buying and holding then?

Is it just the dividends your referring too re. long term investing?

 

[Trembling Hand]

Why would you focus so much on long term investing if you can earn a better % return p.a. doing something else, ie, swing trading?

Also, there have been many people calling that the market will be range bound or heading lower etc etc, would u still be buying and holding then?

Is it just the dividends your referring too re. long term investing?

Why would a butcher sell minced meat when he makes more on eye fillet?

 

[Sir Osisofliver]

@ Nick - Nice articles - I've written similar stuff before but you presented that nice and concisely.

Gday Nick,

Thanks for sharing your articles.I like the idea of having a long term dividend type growth portfolio.I did have one a few years ago but sold out of them all and now mainly trade.Am looking at starting another one in the near future

Just wondering with the recent sell off we had in stocks would you or did you still hold the stocks during the downturn or did you sell and buy back at a lower price?
Or just keep buying as stocks got a better div yield?I realise the tax implication in selling etc but seems abit scary to me holding those stocks through the whole downturn.Looks like it would pay off now but not sure if I could handle that sort of drawdown.

Any advice would be greatly appreciated.

cheers

@ Tas - Yup I held a bunch of stuff all through 08 (about 37 lines of stock from memory). To quote Buffett "My ideal holding timeframe is forever" These are also the same stocks that I had options coverage on. Setting up an options coverage across a portfolio like that costs on average about 6-10% of the value of the portfolio. Think of it like a insurance payment... I do.

Essentially what this does is transfer the CGT implication from the direct share (where I want to preserve the Cost based yield) into the option hedge. I still have to pay CGT however when I sell the option, so if you want to perfectly hedge the value of the share at a specific time you need to not just cover the position, but purchase enough additional contracts to cover the tax implications.

What I then did is use the money generated from the hedge to buy back into the market...and the advantage in doing so is that I'm buying the shares at the bottom of the cycle when everyone hates the market, the sky is falling and the doom and gloom merchants are having a field day.

Mind you I did get burned on one of them but hey that's investing and frankly I needed the tax deduction.

Cheers

Sir O

 

[Sir Osisofliver]

Why would you focus so much on long term investing if you can earn a better % return p.a. doing something else, ie, swing trading?

shaunkris - how much time does swing trading take in comparison to long-term investing? I know that's a little bit like asking how long is a piece of string, because some people would probably spend the same amount of time, reading research reports and newspapers, attending AGM's and reading annual statements and the like, but I have very careful selection criteria when I enter these stocks. This means that essentially the portfolio becomes set and forget and I review it half-yearly. (It's easy for me because I spend so much time dealing with stocks anyway that usually I know about any negative events as they happen).

So not only does the portfolio not cost me anything because it's positively geared, it doesn't take much time at all to deal with it, leaving me free to do other things.

Also remember that this is wealth creation, not trading so that activity doesn't add directly to my income (beyond dividends) like trading does. When you add in the compounding benefits over time I've spent very little time comparitively to a trading activity, without the excitement or stress or trading. (beyond what I want to do).

Also, there have been many people calling that the market will be range bound or heading lower etc etc, would u still be buying and holding then?

Is it just the dividends your referring too re. long term investing?

I don't subscribe to the belief that the market is going to range down again.

Whilst there is the potential for a formation where we see sideways movement over the next couple of years, if my portfolio is positively geared...what do I care? It just means I have to wait a bit longer before buying my solid gold toilet seat. (It also means that if the stock market is moving sideways and unattractive looking that the property market has a much higher probability of being an area of investment focus - and hence that portion of my assets will return better).

Cheers

Sir O

 

[Mr J]

Yes let me clarify, I meant buying a good amount of shares and being happy to sell them if they should rise as little as 0.5% or 2%, the logic being the quantity would more than cover brokerage and supply a small profit, but our conversation is making me think twice about this..........!

0.5% per trade just isn't enough. For shorterm trading, you won't cover fees, and for longterm trading these trades just won't be worthwhile. Don't look to sell them just because they rose x%, you sell because you think the trade will more than likely not go up any further.

HI Mr J,

I find this an interesting comment and was wondering if you would mind expanding your thoughts on it a bit. I'll likewise expand my thoughts here and hope I don't derail the thread.

The statement I made was a little too simple to represent my entire view. I was refering to the 'investors' who achieve ordinary returns and have poor risk management in place and get hit hard in crashes. If they're only achieving 10% a year, it's a pretty miserable return considering that half of that is inflation, so that they may suffer a 50% drop just to gain 5% per year.

I have no problems with longterm investing if it's far better than 10%, or that measures are taken to significantly reduce the fluctuations in capital. I admit that I'm biased against investing, and that shorter term trading makes me completely unable to appreciate 10% or 20% gains. A great trade can make that in a day, so it's not hard to see why I'm pretty dismissive. I see extreme longterm trading (i.e. investing) as a minimal activity/minimal return exercise. Like picking up a sport and just rocking up every couple of weekends.