Do you have to day trade to trade full time?

[Mr J]

I simply wanted to challenge your notion that there is no value in investin

That's fine, but you're not really challenging it :. When I posted to clarify my position for you, I said that my opinion was directed to the typical investors. I still think that they are wasting their time, and that it's a game that only pays for those who are skilled.

the point you seem to be missing is that the trader is increasing his/her income for a great deal of hard work

I'm not missing it, as I've said that trading will significantly outperform investing over time. Yes, at first the investor may receive a far better return for the effort put in, but over time that gap will narrow. At 30% a month, I'm sure a trader will quickly surpass the income of a $260k investment + ordinary job.

They are also two completely different situations, as I assume someone who borrows 500k to invest in the markets has another job. Someone who trades over short timeframes will usually not have a full-time job. If trading is their job, then I'd expect them to be able to get more than 10k together. As for someone who does both, well there's no debate to be had there.

Time equals Money Mr J. By doing BOTH of these activities how much better off are you?

We're not talking about people who can do both, well at least I'm not.

How would the above portfolio have lost $250k? there was only a $260k investment. The market didn't drop back 90% when I wasn't watching did it?

Sorry, I used the 500k figure. 130k then .

Trading you use your own money Investing in the manner I describe above, uses other peoples money. See the difference?

I know the benefits of using other people's money, but when you borrow money to invest, it is not other people's money! It is simply an advance on your future income. If you lose it, you must pay it back.

What greater risk? Because more money is involved? More money = more risk management I don't see your point. BTW I think the "typical investor" has their head up their bum.

The greater risk is that a 50% drop will turn the investor's $260k into $130k, while the same for the trader would be $2k to $1k. One has lost $130k, while the other has lost a grand. Now, I'll agree that a sharp investor would not lose at the same rate as the market, but it's still going to be significantly more than the trader in dollar terms. Yes, I'd agree with you about most investors, and that's who I refer to when I say "investing is a loser's game". I don't actually mean they'll lose, but they'll spin their wheels to gain a litte money, but a lot of frustration and emotional distress.

I'm not trying to make the argument that trading is better than investing or investing is better than trading.

It's all trading to me, I just view "investing" as trading over a long timeframe, and if they don't sell or ride the market both ways, as stupid trading . Trading can't be better than itself, so it's just a matter of how well it is done.

 

[Sir Osisofliver]

That's fine, but you're not really challenging it :. When I posted to clarify my position for you, I said that my opinion was directed to the typical investors. I still think that they are wasting their time, and that it's a game that only pays for those who are skilled.

Ahh well I see why we are talking at cross purposes then. I was talking to you and asking why YOU thought that investing was a mugs game. You don't strike me as the typical investor or unskilled so I was curious as to why you held that belief, given that I assume you could do both activities with a degree of skill above the average investor.

I'm not missing it, as I've said that trading will significantly outperform investing over time. Yes, at first the investor may receive a far better return for the effort put in, but over time that gap will narrow. At 30% a month, I'm sure a trader will quickly surpass the income of a $260k investment + ordinary job.

They are also two completely different situations, as I assume someone who borrows 500k to invest in the markets has another job. Someone who trades over short timeframes will usually not have a full-time job. If trading is their job, then I'd expect them to be able to get more than 10k together. As for someone who does both, well there's no debate to be had there.

But they are two very different activities, one being wealth creation and the other income generation. If you are going to do either of these things well, different advantages and disadvantages apply to both and knowing how to take advantage of those differences is important.

We're not talking about people who can do both, well at least I'm not.

I know the benefits of using other people's money, but when you borrow money to invest, it is not other people's money! It is simply an advance on your future income. If you lose it, you must pay it back.

I just want to correct a misconception here. Debt is an advance on your future income. Borrow money to fund a holiday and you cannot sell your memories of holiday snaps to pay off the debt you incurred. A liability on the other hand is where you borrow money to fund the purchase of an asset that can be sold to extinguish the liability. This is why plenty of banks will lend you 90% of the value of an investment property, because the value of the asset will extinguish the liability incurred in acquiring the asset should you wish to. Whilst I don't disgree that if you lose the asset you will need to pay it back (whereupon it becomes a debt), risk is a part of investing and managing that risk a central component of investing well. Just like the bank forces you to insure the investment property where they hold 90% of the equity in the asset, most "investors" should insure their share portfolio, but many lack the skills and knowledge to do so.

The greater risk is that a 50% drop will turn the investor's $260k into $130k, while the same for the trader would be $2k to $1k. One has lost $130k, while the other has lost a grand. Now, I'll agree that a sharp investor would not lose at the same rate as the market, but it's still going to be significantly more than the trader in dollar terms. Yes, I'd agree with you about most investors, and that's who I refer to when I say "investing is a loser's game". I don't actually mean they'll lose, but they'll spin their wheels to gain a litte money, but a lot of frustration and emotional distress.

See above. An Astute investor insures their shares as part of their risk management.

It's all trading to me, I just view "investing" as trading over a long timeframe, and if they don't sell or ride the market both ways, as stupid trading . Trading can't be better than itself, so it's just a matter of how well it is done.

Once again I'll quote Buffet "My ideal holding time is forever" - this doesn't mean I miss out on making money in the downturns, but does mean that over time my wealth creation benefits from compounding effects that will create a passive income that I don't have to work for.

Cheers

Sir O

 

[Mr J]

most "investors" should insure their share portfolio, but many lack the skills and knowledge to do so.

Which is precisely my point. They will borrow a large amount of money, and watch as their portfolio drops 40-50%. All to earn (assuming they achieve market returns) 10-12%, minus interest, fees and inflation. A very rocky road to earn an average of 5% or so per annum.

but does mean that over time my wealth creation benefits from compounding effects that will create a passive income that I don't have to work for.

That's a worthy goal for most people.

one being wealth creation and the other income generation

You may view them that way, but they're both wealth creation for me. I think we've talked about income versus wealth before. I can't recall our positions, so I will guess that you said income was how much we earn, while wealth is how much we use to build. My answer to this is that I reinvest almost all of my trading income, and will always do so. I would agree that trading can be an income for some (those who spend most of it), but for me it is mostly a tool to build wealth.

 

[shortlist]

You may view them that way, but they're both wealth creation for me. I think we've talked about income versus wealth before. I can't recall our positions, so I will guess that you said income was how much we earn, while wealth is how much we use to build. My answer to this is that I reinvest almost all of my trading income, and will always do so. I would agree that trading can be an income for some (those who spend most of it), but for me it is mostly a tool to build wealth.

Do you find compounding makes your trading significantly more efficient - more worthwhile than taking more long-term positions?

Update on my first week paper trading:

Earlier this week I opened five positions in the metals and mining sector. I made 8.7% on my first position, 10% on my second position, I lost 7.6% on my third position (got stopped out - set the SL too close to entry I think), I made 23% on my fourth position and my fifth position is still open (four days now). All gains/losses are percentages of the amount risked in each specific trade and also before brokerage fees and tax, of course.

In your opinion (or anyone's!) is this a fair start for a total newbie? Did I have too many open positions? Remember, this is the first week of paper trading with any seriousness and did involve using some basic TA and FA.

 

[marknz88]

A one week sample is not enough, espicially as this week has mostly been positive (i.e. most people blindly could have made some money)

You need to trade on paper for at least for 2 months worth to try and get a range of environments (i.e. uptrending, donwtrending, side ways markets)

Keep at it tho and see what your overall position is after say 2 months of trading to get a reasonable feel for how things might be (hopefully for your sake the next 2 months arent a bull market else you will get a fasl sense of secuirty)

 

[shortlist]

A one week sample is not enough, espicially as this week has mostly been positive (i.e. most people blindly could have made some money)

You need to trade on paper for at least for 2 months worth to try and get a range of environments (i.e. uptrending, donwtrending, side ways markets)

Keep at it tho and see what your overall position is after say 2 months of trading to get a reasonable feel for how things might be (hopefully for your sake the next 2 months arent a bull market else you will get a fasl sense of secuirty)

Thanks for the encouragement Mark. I intend to "paper trade" for a few more weeks yet, not least because I anticipate some serious falls in the global stock markets over the next few months and I don't want to get caught up in that, especially as I have not even contemplated shorting.

I'm not sure I agree with the buying blindly statement though - I also selected a few shares randomly and they did not fair as well, which fortifies the argument for good research and analysis!

Thanks again mate & have a good weekend, SL.

 

[Mr J]

Do you find compounding makes your trading significantly more efficient - more worthwhile than taking more long-term positions?

It's not more worthwhile than long-term positions, because they can't be compared. Compounding is part of capital management, while taking long-term positions is part of strategy strategy. There's no reason you can't do both.

In your opinion (or anyone's!) is this a fair start for a total newbie? Did I have too many open positions? Remember, this is the first week of paper trading with any seriousness and did involve using some basic TA and FA.

Don't worry about it, the sample is too small. An immense sample is needed to draw accurate statistical conclusions, but only a small sample is needed to draw reasonable conclusions from analysing methods and reasoning. I suggest you post trades and talk your way through them.

 

[shortlist]

It's not more worthwhile than long-term positions, because they can't be compared. Compounding is part of capital management, while taking long-term positions is part of strategy strategy. There's no reason you can't do both.



Don't worry about it, the sample is too small. An immense sample is needed to draw accurate statistical conclusions, but only a small sample is needed to draw reasonable conclusions from analysing methods and reasoning. I suggest you post trades and talk your way through them.

Thanks Mr J. I think posting weekly "paper trades" is a good idea, and so I'll call this week my first and I'll move on from here with an update on Fridays if I've done trading that week. My plan is slowly forming to one where I start with short-term trades, maybe some intra day trading, and see if I can get the ball rolling with some compounding and reinvestment. If things work out I could happily make longer trades.

Like I said above, I feel there are some "interesting times" coming to the markets in the next quarter, so now might not be the best time for someone with so little experience to get stuck in.

 

[weird]

Like I said above, I feel there are some "interesting times" coming to the markets in the next quarter

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way--in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

 

[Mr J]

Like I said above, I feel there are some "interesting times" coming to the markets in the next quarter, so now might not be the best time for someone with so little experience to get stuck in.

What better time to get into it?

As for timeframe, I'd suggest swing trading. It gives you more time to analyse and make decisions, and solidify your methodology, as well as lessening your potentional losses (which isn't a bad idea early on).

 

[shortlist]

What better time to get into it?

As for timeframe, I'd suggest swing trading. It gives you more time to analyse and make decisions, and solidify your methodology, as well as lessening your potentional losses (which isn't a bad idea early on).

I'm reading about swing trading right now in some books I got out my local library. It's all just a matter of time frame really, right? My plan is developing now to where part of my funds will be put in low-risk long-term blue chip equities for dividends, and part will be reserved for more speculative or small cap swing trading, with any profits from this constituent being transferred into the blue chips. It's all coming together!

 

[tech/a]

Think your basically punting.

You dont know if the way you trade will lead to profit.
Your basically going to be forward testing with no background result/blueprint and hard cash.

Hope you survive long enough to learn how to trade profitably.

 

[Mr J]

We're all punting tech.

 

[tech/a]

If I thought it was punting I wouldnt be trading.
A consistently advancing equity curve and a known blueprint to follow shows to me that my business of trading is successful due to sound business management not punting.

 

[Julia]

Mr J, you've made a lot of very authoritative statements in this thread.

As I recall your earlier comments a couple of months ago (ish) you conceded that you hadn't at that stage actually done any real trading with real money.

Are you able to share with us whether that is still the case?

 

[shortlist]

Think your basically punting.

You dont know if the way you trade will lead to profit.
Your basically going to be forward testing with no background result/blueprint and hard cash.

Hope you survive long enough to learn how to trade profitably.

You think I'm punting?

 

[alter1217]

I was just reading some posts before and some people said "traders don't contribute to society".

I intend to disagree.

Companies hand out shares and options to their executives and employees as part of their compensation. Companies also use shares as currency when acquiring other companies. Sometimes they also use their own shares to make purchases.

These shares would be worth a lot less if there was nobody you can sell them to and be stuck with collecting dividends until the company closes... This is where traders come in. Traders provide liquidity.

Who is going to drive down the price of an overvalued stock? Who is going to bring up the price of an undervalued stock?

That's right... traders.

EDIT:
my 2cents on trading: I've just got into shares since getting into commerce degree in Uni last year:

Trading shares is hard work, involves researching a whole lot poring through company reports, reading forums, newspapers... It would definitely be really nice to be able to stop trading when you have 1 million dollars and just collect 10% interest from some passive investment. This would only be possible if you feed your income into some long-term investment which is relatively risk-free compared to short-term trading, else you might get wiped by random events (like the gfc).

IMO The secret to this is just to consume less. Don't buy new car, don't buy big house, don't buy plasma TV. Not until you generate enough income from your passive investment to quit your jobs.

A single mother who receives $25k in pension spends only $15000 on expenses and invests $10000 in a 10% investment. In 25 years she's a millionaire.


I've gotten 70% return this year on my initial $3600. It was hard work and I've made alot of mistakes (like cutting profit when MQG got up to $18. now I cringe every time I see it on the "top 20 stocks traded" list); I spend maybe 6 hours a week researching, looking at charts, etc, even though we're in the midst of a 'bull market' (and I bet everyone else here has done better than me). It surely pays better than working at mcdonalds though, which I've since quit since I'm so sick of facing crappy food all night.

P.S Yes, I do live with my parents, who loan me $50 a week interest free for lunch expenses, which I have to repay when I get a full time job. But I'm not buying lunch.

 

[tech/a]

You think I'm punting?

Unless you know how your going to swing the odds in your favor to create a positive expectancy then YES.

You have a plan---great.
How do you know your plan isnt a plan for disaster?
Many are (Plans).
Answer is you dont.
You'll only know after you have traded it for a few years or your broke.

 

[shortlist]

I was just reading some posts before and some people said "traders don't contribute to society".

I intend to disagree.

Companies hand out shares and options to their executives and employees as part of their compensation. Companies also use shares as currency when acquiring other companies. Sometimes they also use their own shares to make purchases.

These shares would be worth a lot less if there was nobody you can sell them to and be stuck with collecting dividends until the company closes... This is where traders come in. Traders provide liquidity.

Who is going to drive down the price of an overvalued stock? Who is going to bring up the price of an undervalued stock?

That's right... traders.

EDIT:
my 2cents on trading: I've just got into shares since getting into commerce degree in Uni last year:

Trading shares is hard work, involves researching a whole lot poring through company reports, reading forums, newspapers... It would definitely be really nice to be able to stop trading when you have 1 million dollars and just collect 10% interest from some passive investment. This would only be possible if you feed your income into some long-term investment which is relatively risk-free compared to short-term trading, else you might get wiped by random events (like the gfc).

IMO The secret to this is just to consume less. Don't buy new car, don't buy big house, don't buy plasma TV. Not until you generate enough income from your passive investment to quit your jobs.

A single mother who receives $25k in pension spends only $15000 on expenses and invests $10000 in a 10% investment. In 25 years she's a millionaire.


I've gotten 70% return this year on my initial $3600. It was hard work and I've made alot of mistakes (like cutting profit when MQG got up to $18. now I cringe every time I see it on the "top 20 stocks traded" list); I spend maybe 6 hours a week researching, looking at charts, etc, even though we're in the midst of a 'bull market' (and I bet everyone else here has done better than me). It surely pays better than working at mcdonalds though, which I've since quit since I'm so sick of facing crappy food all night.

P.S Yes, I do live with my parents, who loan me $50 a week interest free for lunch expenses, which I have to repay when I get a full time job. But I'm not buying lunch.

I wouldn't rise to anyone saying trading didn't contribute anything. What does stacking shelves in a supermarket contribute? What does driving a delivery truck contribute? What does working in a factory packing junk contribute? What does lecturing in a university contribute? I have done all these jobs and a lot more and the contribution is whatever is brought home at the end of the month. You work to contribute to your family. If work was simply an exercise in altruism no one would do it. Furthermore, a trader provides liquidity and also taxable revenue.

 

[shortlist]

Unless you know how your going to swing the odds in your favor to create a positive expectancy then YES.

You have a plan---great.
How do you know your plan isnt a plan for disaster?
Many are (Plans).
Answer is you dont.
You'll only know after you have traded it for a few years or your broke.

I don't know my plan isn't headed for disaster, but I'm happy with that because neither does anyone else. You only know your plan has worked up till this afternoon.

Do you feel comfortable accusing someone of being a punter based on 62 posts which contain practically no details of his plan? You don't know me, my past experience, my capital base, my tolerance of risk, my capacity for learning or my knowledge of certain sectors' fundamentals. I am surprised at the comment.