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Help for (Humble) New traders: Best stocks to invest $1000

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@Sdajii

Re paper trading.

I agree if you look at the scenario of paper trading $1000.

However, he could and should use multiple strategies and multiple amounts.

He will gain a wealth of knowledge if he trades all of them at the same time.
Each will trade differently and he can run multiple ideas
He needs to expand his thought process.


Mind you if he is serious he would have developed multiple Positive expectancy
strategies which he would be ready to paper trade.
 
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tech/a said:
@Sdajii

Re paper trading.

I agree if you look at the scenario of paper trading $1000.

However, he could and should use multiple strategies and multiple amounts.

He will gain a wealth of knowledge if he trades all of them at the same time.
Each will trade differently and he can run multiple ideas
He needs to expand his thought process.


Mind you if he is serious he would have developed multiple Positive expectancy
strategies which he would be paper trading.
Click to expand...
personally i found paper trading very good at detecting flawed strategies , after you work out why that strategy failed , you are a little wiser and still have the wallet undamaged

i did try a little 'channel trading '

that is set a target target entry price for a stock that seems to be trapped in a ( reasonably ) wide range , and selling at a pre-determined price ( or above )

stocks chosen ( at the time ) were WHC , BPT , QBE , and SUN

while i am currently in profit on all 4 stocks , i deem WHC and QBE a success ( for a while ) and BPT and SUN as failures as they dropped into the 'buy range' rose to the 'reduce range ' but never ( so far ) came back to the buy range ( so i could buy and reduce again

please note currently all four stocks are well above my 'buy range ' ( so are NOT current recommendations )

this strategy is very crude and you need a LOT of patience ( it took three years to get my entry price in BPT ) and reducing/selling is merely at the whim of the market ( it could happen any time ) ( or never )

chances are you will not like the waiting involved in this strategy
 
divs4ever said:
personally i found paper trading very good at detecting flawed strategies , after you work out why that strategy failed , you are a little wiser and still have the wallet undamaged

i did try a little 'channel trading '

that is set a target target entry price for a stock that seems to be trapped in a ( reasonably ) wide range , and selling at a pre-determined price ( or above )

stocks chosen ( at the time ) were WHC , BPT , QBE , and SUN

while i am currently in profit on all 4 stocks , i deem WHC and QBE a success ( for a while ) and BPT and SUN as failures as they dropped into the 'buy range' rose to the 'reduce range ' but never ( so far ) came back to the buy range ( so i could buy and reduce again

please note currently all four stocks are well above my 'buy range ' ( so are NOT current recommendations )

this strategy is very crude and you need a LOT of patience ( it took three years to get my entry price in BPT ) and reducing/selling is merely at the whim of the market ( it could happen any time ) ( or never )

chances are you will not like the waiting involved in this strategy
Click to expand...

To be clear, I'm not trying to discourage anyone from paper trading, and acknowledge it's very useful for a lot of people. I totally agree that one very valuable application of it is identifying flawed strategies, and if you're going to use trading strategies according to strict protocols, it's absolutely invaluable, although in that case you can just do it retrospectively. I was pointing out the fact that what happens with paper trading often flies straight out the window with real trading, because fear and greed, the most powerful forces on the stock market, don't exist in paper trading and are suddenly introduced for the first time when using real money, and often people throw all their planning and protocols out the window once actually trading for the first time.

If people want to paper trade that's great, it obviously has its benefits for many people, but you should understand the limitations. We're also all in different circumstances.

For me personally, paper trading would have been quite counterproductive because it would have made me even more confident than I was with real trading (I started in a massive bull run) and during that time of paper trading would have thought I was some sort of genius, put all my money in once I'd missed the bull run during which my paper trades went so well and lost real money, likely leaving me confused and discouraged enough to have given up.

Paper trading also just wouldn't fit my personality - if it's not real I just won't pay attention or care in the same way. I've made some costly mistakes along the way, but I've learned from them in a way I wouldn't have with paper trading (paper trades are free, I'd make many of them, frivolously, and take none of them seriously - nothing to learn). Of course, that's just me, not everyone is the same, I'm not saying paper trading is bad for everyone, just that it's not good for everyone, and for almost everyone including the ones who will benefit from using it, I think it's very important to be aware of the limitations and pitfalls of paper trading, along with the benefits.
 
paper trading has it's flaws and strengths , one flaw is it can build false confidence , for instance waking yup early and placing a trade ( on paper ) can be very different from getting the damned stock , actually bought or sold with real cash and real market activity

i use it to test strategies and find flaws in that strategy , a great strategy might win you a few bucks in a competition ( both are better than crushing your war-chest )

ALSO most have very different emotions when actually parting/collecting cash

paper trading also helps the novice be familiar with stock codes , trading conditions ( like trading pauses and cross-trades ) and percentages

but in the end it is just a learning tool
 
Re paper trading

I used paper trading to test my theory whether X strategy would have a positive expectancy and how I could slightly tweak if need be before live trading. But I found just because a system may have a positive expectancy for you in paper trading doesn't mean it will have the same PE when traded with live money. Once your psychology is in the mix, that's the REAL test IMHO.
 
trender said:
Re paper trading

I used paper trading to test my theory whether X strategy would have a positive expectancy and how I could slightly tweak if need be before live trading. But I found just because a system may have a positive expectancy for you in paper trading doesn't mean it will have the same PE when traded with live money. Once your psychology is in the mix, that's the REAL test IMHO.
Click to expand...
Taking an idea and paper trading it to determine positive expectancy is highly unlikely to be beneficial .
You need good systems testing software and the ability to test your ideas.
You should have a set of conditions to enter
A set of conditions to exit
A risk contingency
Correct position sizing To name a few.

But

There are other options.
There are systems that have tested positive expectancy and publicly available.
In Nick Radge’s book un holy grails there are 3 or 4 in there. Including on of mine “ Techtrader” I trade a hybrid method in my super fund. You’ll also learn what you need to know and WHY you need to know it. The book is still available on line.
Nicks in Bordeaux at the moment but Zac is in control just contact “ The Chartist” Google it

There are sites where you can lease systems.( never done it or know anyone who has )

Systems trading is specifically designed to negate your psychological interference.
If your suffering from PI then you don’t have a complete understanding of what you’re trying to achieve.
 
tech/a said:
Taking an idea and paper trading it to determine positive expectancy is highly unlikely to be beneficial .
You need good systems testing software and the ability to test your ideas.
You should have a set of conditions to enter
A set of conditions to exit
A risk contingency
Correct position sizing To name a few.

But

There are other options.
There are systems that have tested positive expectancy and publicly available.
In Nick Radge’s book un holy grails there are 3 or 4 in there. Including on of mine “ Techtrader” I trade a hybrid method in my super fund. You’ll also learn what you need to know and WHY you need to know it. The book is still available on line.
Nicks in Bordeaux at the moment but Zac is in control just contact “ The Chartist” Google it

There are sites where you can lease systems.( never done it or know anyone who has )

Systems trading is specifically designed to negate your psychological interference.
If your suffering from PI then you don’t have a complete understanding of what you’re trying to achieve.
Click to expand...
I will check it out, thanks!

With regards to paper trading I was actually meaning back testing looking back at past history to see how my set of rules and risk parameters would have performed. I'd take my strategy and look back for a period of time with say a sample of 200 trades.. and see if there was any edge.

I think I mixed up that with the term paper trading.
 
trender said:
I will check it out, thanks!

With regards to paper trading I was actually meaning back testing looking back at past history to see how my set of rules and risk parameters would have performed. I'd take my strategy and look back for a period of time with say a sample of 200 trades.. and see if there was any edge.

I think I mixed up that with the term paper trading.
Click to expand...

One thing to be careful of when paper trading, especially retrospectively (testing it in a previous timeframe) is that you can end up with a system which works really well in one market condition but won't generally work. My first attempt at this, as a teenager decades ago and about 10 years before I ever actually made a trade worked very consistently because it basically said if x then y happens, z will happen. I tested it with dozens of companies and it had about a 90% success rate with very small losses on the other 10%.

Unfortunately, all I had been doing was recognising a pattern which happened to have played out on the macroeconomic scale, so almost all large companies were following the same pattern simply by following the market. That being the case it was never going to have any value in any time other than in the couple of years prior to when I came up with the model, making it useless. This was a good example of pseudoreplication, the first I ever became aware of, but something I learned all about a few years later at university.
 
Sdajii said:
One thing to be careful of when paper trading, especially retrospectively (testing it in a previous timeframe) is that you can end up with a system which works really well in one market condition but won't generally work. My first attempt at this, as a teenager decades ago and about 10 years before I ever actually made a trade worked very consistently because it basically said if x then y happens, z will happen. I tested it with dozens of companies and it had about a 90% success rate with very small losses on the other 10%.

Unfortunately, all I had been doing was recognising a pattern which happened to have played out on the macroeconomic scale, so almost all large companies were following the same pattern simply by following the market. That being the case it was never going to have any value in any time other than in the couple of years prior to when I came up with the model, making it useless. This was a good example of pseudoreplication, the first I ever became aware of, but something I learned all about a few years later at university.
Click to expand...
Thanks for the advice and caution, much appreciated. The strategy I've mostly been trading has a success rate of approx 35% but my average RR is approx 4.1. over the last 7 years I've been consistent so that's all I can go off. Who knows, my next 7 years may take all my gains. I find if unlikely because I'll modify my risk management if I have streaks off losses. But that could be just a slower death.



But based off my last 10 years, after 3 years gained consistency. That's what I'm going with.
 
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