Ideas for establishing a capital base to begin investing - getting past first base

[MRC & Co]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

If trading intraday, I would call 10 points a gargantuan stop. But if trading EOD (end of the day - trading daily bars), 10 points would be rather too tight.

Thus, if trading daily bars, you would need a helluva lot more capital than 10k, and you would need a much wider stop also.

Intraday however, a 2 to 5 point stop would be entirely appropriate. Capital required for both margin and cash reserves can be calculated from there.

Yes, true. When you trade intraday, doesnt the trade only last a few minutes or perhaps shorter?

EOD, trading daily bars, is the same as position trading then yeh? (and dont you SH*T yourself overnight encase a gap opens through your stop)?

Trying to get used to the terminology for when I finally do make a leap of faith into futures.

You trade through IB yourself yeh?

 

[chops_a_must]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

25% per year out of the ordinary? Consider this is what Warren Buffett has done to become the richest man on earth I would consider this far from ordinary. And to say you can make a consistant return above 1% per month is ridiculous no matter how frequently you trade.

Iuno.

The dad tells me he averages 25% return over the long term. Granted, given his work he gets a lot of information that investors, and stuff probably even company workers don't get, analysing different systems etc. which has led to him buying a whole stack of OXR sub 30c for instance.

But even with that, he seems to be incredibly good intuitively with timing buys and sells. So it can be done. For sure.

I also don't understand why active traders aren't deemed "successful" if they can't live off their trading profits. There are many of us who are active traders, that don't make a living off it, but are still profitable. I don't consider myself in the 5% of traders, but I wouldn't say I'm not successful in it either.

And personally, half of my profits are now going towards building a base for long termers, and the other half for the short term trading. But that's a reflection of my age... if I was approaching 30 and getting ready to die, it might be different. :

But for young people like myself, who aren't going to have access to a massive capital base (unless you're one of those parent made children), I'd actually recommend shorter term methiods such as swing trading, if you can make it work.

Low potential drawdowns, less risk of ruin. Rather than a buy and hold strategy, which can bankrupt people on margin. Speaking of which, there haven't been many buy and holders around recently...

So yeah, shorter term trading may also be a good way to build a capital base (if you can work it), to build up to a position where you can adopt trend trading or buy and holding where the risk of drawdown and ruin is much higher, and where you need more capital to get the same returns.

 

[wayneL]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Yes, true. When you trade intraday, doesnt the trade only last a few minutes or perhaps shorter?

There's different approaches. Some scalp a few points, as per Tayser's forex thread. I like to go for bigger intraday swings and try to pick up the equivalent of 5 - 20 points at a time. There is everything in between as well.

EOD, trading daily bars, is the same as position trading then yeh? (and dont you SH*T yourself overnight encase a gap opens through your stop)?

Yes & err... yes and no. Most markets are electronic and 24 hours now and you can have an out of hours stop. Position sizing is of course important when trading daily bars. Keep an eye n the underlying value and volatility of what you're trading.

Trying to get used to the terminology for when I finally do make a leap of faith into futures.

You trade through IB yourself yeh?

Yes IB... also have a phone up broker for backup and if I want to trade through the pits. (many options are still pit traded and livestock is a bit freakin thin on globex)

 

[MRC & Co]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Thanks Wayne.

Chops, I have also noticed the buy and holders disappearing Where did they go

But I use about 25% of my portfolio for long-termers, waiting for their true value to be realised . Selling covered call options at least to generate some income out of them once I get that part active in IB.

15% is with the number one European hedge fund (according to the latest awards).

60% for position trading. Dont have the skills for intraday trading yet.

At least thats the way it is at the moment.

 

[resbequoi]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

That's what you call out of the box, in the box thinking. $1,000,000 for a box of ads! Fantastic.

tech/a, I enjoy the wisdom that you guys impart. Thank you.

I'd like to add one to your list, which is in addition to point#9. Buy only what you NEED, not what you WANT. Learn how to distinguish between a WANT and a NEED.

All good comments and I wholeheartedly agree.

Just wanting to my own experience of building capital. I work for my money and am very conservative - so I put that money in super, cash at the moment and property. That money represents blood and sweat and so am very conservative with it.

I play with shares but would rather use money I get from passive income to purchase them.

So for the capital base of my next round of shares, I am going to up the ante on my rental income by adding to it some income from my new website/hobby as an infopreneur. Only four months old, 25 pages in it and continuing to add content, traffic to the site is growing (now approx 30 visitors a day average), and when I'm ready will start earning money by putting google adsense ads on it, and having affiliate links to other money-making websites.
It is not get-rich-quick, I still have to work hard at writing good content, and traffic takes time to build, but when I'm done I just have to sit back and let the billions of people out there help me earn money.
The thing is that I get to write about something that I love and know a lot about, and if it earns enough for me to quit my day job, then whoohoo i cant wait. But for now my goal is for it to provide some nice change.

So this might be a strategy for people who are new to the sharemarket and want to minimise the risk to their hard-earned.

There are no ads on my website at the moment www.fond-farewell.com, so I'm not trying to get anyone to click on them! For any would-be-infopreneurs out there it is an example of writing good free content to get visitors to the site. And if your site is a niche site, then it has a hope in hell of actually getting traffic in the massive world wide web. I will let you know how it all goes.

This might not be for everyone, but its another way of getting capital.

 

[alwaysLearning]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Non sequitur.

The point was not that one should stay poor, but that there may be a price for becoming rich and that a balance of effort between training the mind to be happy, and chasing money should be struck.

Let's leave the cliche's well and truly out of it please.

but what if you want money not only for yourself, but also so that you can help others. If I was good enough to get wealthy, I could give money to others who need it. Man, I'd feel so good if I had enough funds to help somone else in the community who really needed it. Like paying for a sick person's operation or something that the parents couldn't afford but then step in and pay for it. (If i had enough wealth to do that).

At the end of the day, how much is enough anyway?

I guess it depends on ones motivation for gettting into the sharemarket if you do it for a living. I'm not trading but I sure as heck am enjoying learning about it. If I was trading for a living I'd be happy analysing graphs and charts etc. And if I somehow was able to train myself up to gain big wealth, then I would really like to help people out. (a new car wouldn't hurt me either though )

edit: and yes there is a price that one would have to pay to lean how to be a good trader. Even if it is balance, I think it would be worth it in the long run. (as long as that lack of balance doesn't go on for too long)

 

[alwaysLearning]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

I forgot to add my idea for getting that capital base.

I will be saving as much as I can from work each year. But while I save up, I will be studying the market very hard and learning a lot about the fundementals including, psychology for trading, technical analysis, and building a solid trading plan. Furthermore this time also allows me to systematically test various forms of technical analysis and try to be profitable from a 'paper trading' perspective.

Reading this forum is quickly telling me that rushing into trading is up there with the dummest mistakes a person can make. I wouldn't be too quick to jump in if you haven't learnt enough about the fundementals in order to be profitable. (I'm a parrot now, haha, but I'm reading lots of books which say the same thing too + it makes logical sense).

 

[wayneL]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

but what if you want money not only for yourself, but also so that you can help others. If I was good enough to get wealthy, I could give money to others who need it. Man, I'd feel so good if I had enough funds to help somone else in the community who really needed it. Like paying for a sick person's operation or something that the parents couldn't afford but then step in and pay for it. (If i had enough wealth to do that).

At the end of the day, how much is enough anyway?

I guess it depends on ones motivation for gettting into the sharemarket if you do it for a living. I'm not trading but I sure as heck am enjoying learning about it. If I was trading for a living I'd be happy analysing graphs and charts etc. And if I somehow was able to train myself up to gain big wealth, then I would really like to help people out. (a new car wouldn't hurt me either though )

edit: and yes there is a price that one would have to pay to lean how to be a good trader. Even if it is balance, I think it would be worth it in the long run. (as long as that lack of balance doesn't go on for too long)

You've reinforced my point. If you can be rich AND be happy (by giving to/helping others {one of the secrets to happiness IMO}) that's fantastic. I submit that if you can remain generous and happy, while making money, you have indeed struck a the balance I mentioned.

But my observation is that not many do that... very few in fact.

Money is good, mental health (in terms of managing one's mind) is better, money and mental health is best.

The price of money is in what one must sacrifice to get and keep it and that is the rub. How many people are successful at the expense of their family life? Plenty!!

So many who waffle on about giving to others, don't after they've experienced the cut and thrust of business. Only a few hold to that ideal.

 

[julius]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

I like to go for bigger intraday swings and try to pick up the equivalent of 5 - 20 points at a time.

wayne,

5-20 point target using 2-5 point stops ; is that correct? Which markets ?

Also, If you don't mind me asking what W% do you avg using the R:R above ?

I use 4-7 point stops for 14-21p targets on the SPI. I prefer the wider stops around the open if its choppy.

 

[alwaysLearning]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

You've reinforced my point. If you can be rich AND be happy (by giving to/helping others {one of the secrets to happiness IMO}) that's fantastic. I submit that if you can remain generous and happy, while making money, you have indeed struck a the balance I mentioned.

But my observation is that not many do that... very few in fact.

Money is good, mental health (in terms of managing one's mind) is better, money and mental health is best.

The price of money is in what one must sacrifice to get and keep it and that is the rub. How many people are successful at the expense of their family life? Plenty!!

So many who waffle on about giving to others, don't after they've experienced the cut and thrust of business. Only a few hold to that ideal.

Yeah wayneL, I was agreeing with that you said. Also I can't argue with what you've said in your most recent post either (that I've quoted here)

The more one depends on external causes and conditions for happiness, the more easily you'll experience suffering. The simple reason for this is that we aren't actually in 'control' of our lives (in an 'absolute' sense). We can influence (and do our best to predict) what happens in life but all things are uncertain and subject to change and therefore as you say 'mental health' first and money wealth second. But both (mental and money wealth) is obviously best.

 

[Hakkers14]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Thanks for the discussion guys, has made for very interesting reading. I'm 21 and at uni at the moment and have been thinking a lot about the sorts of questions raised here..

The more one depends on external causes and conditions for happiness, the more easily you'll experience suffering. The simple reason for this is that we aren't actually in 'control' of our lives (in an 'absolute' sense). We can influence (and do our best to predict) what happens in life but all things are uncertain and subject to change.

I agree with your sentiments alwaysLearning...I think the point is, the only thing you truly have control over, 100% of the time, is your mind (mental state, attitudes, outlook etc.) It's your filter for the way you percieve the world...it determines the label and meaning you give to your experiences, and (i believe), ultimately the level of your happiness.

Below is a link to a talk by a Harvard psychologist on 'happiness' which I found interesting. To summarise his findings; basically most people overemphasise the actual impact of achieving certain discrete external goals (eg. getting 'THE' job/mark/house/clothes..etc) and miscalculate the effect that will have on 'real' happiness. Worthwhile thinking about I feel before one commits to a blood, sweat and tears approach to accumulating a capital base...(if that's the chosen way!)

http://www.ted.com/index.php/talks/view/id/97

 

[josh_in_a_box]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Hey all,
Truely a great discussion.
Keep up the good work, I wish I had found such valuable insight when I first started investing.

 

[pthomas]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Hey Tech/a

First of all Thanks for such an awesome thread - lots of little side comments do lose your intended purpose tho.

I find myself in the situation this thread is intended. I cashed in my trading account to move interstate - having homeloan and suddenly going from 2 income to 1 income ate through my small trading (learning) account!

The hardest thing about having no trading capital is all the time you think about what to trade, what you want from the market, all aspects from trading. To get through that i've put myself to work, reading many books (man you can get some good books (i.e new market wizards for $3.50!!!) from op' shops if you look frequently enough) & researching.

I am now resaving to get back in business. In my downtime i have been revising everything I do - i've got amibroker so I have been building and backtesting systems around my belief's in the market (and then doing hypotheticals to add options on each trade - as amibroker is stock only)


So for me having no trading account is giving me the time to throughly backtest and helping give me real expectations from my system (forward testing with paper trade also)

One thing that does scare me is talk of people with large accounts and ready to leverage to the hilt and go make some money. Leverage is such a double edged sword. I'd be very careful and have a throughly tested system before thinking like that.

Just my 2c Happy trading all

 

[nizar]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

To get through that i've put myself to work, reading many books (man you can get some good books (i.e new market wizards for $3.50!!!) from op' shops if you look frequently enough) & researching.

Are you serious?
I think I paid around $35 for mine

 

[pthomas]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Yeh, im in melbourne - in sunshine is the st vinnies state office and they get first pick of books - I'll drop past every now and then and all books are basically 3.50!

So far i've also picked up: how to make money in stocks (william oneil - canslim system), share trading & trading tactics (daryl guppy), options: trading strategies that work (eng/guppy), the winning investment habits of buffet & soros (mark tier)

I mean I have yet to see something like: technical analysis of the financial markets, or options as strategic investments - however the books I have been getting are fairly ok reads!

 

[Stan 101]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Great thread, here's a snippet of the way I gained a capital base.

Getting closer to 30 than I really cared to believe, I was over $30k in the red on several credit cards, unsecured personal loan and other bad debts. Actually the figure was closer to $40k. I had a great job paying reasonably well in a design office yet still lived pay packet to pay packet in an area just south of Noosa.
My only assets were some furniture, a great AV setup, about $10k of scuba gear, a reasonable late model car worth less than the payout figure and my mind. The mind was slowly being destroyed by partying and blowing my pay packet from thursdays to sundays.

I did have some great experiences getting to that point. Have dived some of the best locations all over the world and enjoyed the culture of over 40 countries to name just a few things.

Enough rambling. Well this is what I did.

1. Moved from the coast. Noosa is a lovely place but prospects are limited so it was back to Brisbane for new employment.
2. New job. I said I had my mind. I secured a job in a design office with a 75% increase in my income from my old job on the coast. More hours, though.
3. Found cheap digs away from the nightlife and close to work.
4. Took a second job. I sub contracted for a gourmet pizza place delivering pizza. This did two things. I used my car to earn an income and turned it into a tax deduction instead of a straight liability. It also stole from my leisure time and therefore my ability to spend my income on booze. I became fitter and healthier than I had ever been living beside the beach.
5. Honed skills. I ended up earning almost as much on tips as I did delivering with that second job. That was through excellent customer service. I also gained some humility when "friends" realised I was delivering pizza.
6. Debt free. In 12 months or so I was debt free and in the black. I downgraded car and left the pizza delivery gig. I moved in with a girlfriend and was saving more again on accommodation. In no time I had a small capital base to start investing. From there it just grew.

Be sure to reward yourself for staying on track with your plan. It's important. Set goals and continue to monitor the situation. Downgrade your expectations if they are becoming unreasonable, upgrade if the energy levels or situation allows. You'll look back and love the journey..


Sorry for the long thread..

Cheers,

 

[tech/a]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Stan 101.

Now THATS a success story!!

And thats ---"You'll look back and love the journey.."
Worth more than any of your earnings!

Love it thanks for sharing.

 

[Timmy]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

Stan 101 - that is a great story and well done! Looks like you found out who your real friends were too?

 

[brettc4]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

I guess I have talen a more traditional approach.

I simply saved money from my day job and used the moeny to buy into the first Telstra Share offer, my first foray. This went quite well and I ended up selling at about $8 and used the money to pay off a car loan and to help with a deposit for a house.

My Wife and I then did everything in our power to pay the house off as quickly as possible, it took just over 5 years. Once I paid of the house I begun saving to get back into the market. I basically saved up enough to have a barrier in case something went wrong and then saved $10,000 and bought AMP, which I still hold (hasn't done great for growth but the dividends and capital returns have been nice).

I then continued to save and would transfer $5,000 to my trading account when I could. This eventual lead to me deciding to include a margin loan and some additional funds to buy ANZ (okay not the best of the banks, but it was also going to be a long term hold).

I am now saving for as big a deposit as possible to buy a bigger family home.

Throughout this time, my place of employment closed down, but I did get a reasonable payout, my wife and I had a child and we went down to one income for a while (but still managed to open a managed fund for my little girl and add $100 per month to it). Presently we have one and a half incomes, but am still saving weekly to build the house deposit.

This has been on a slightly above average income based on our education, experience and attitude.

All in all, as a 32 year old with a beautiful and healty baby girl, a house we own outright, approx $40,000 in shares, a $60,000 new house deposit, I am very happy, but still looking at how to make the best us of my (our) money to reach financial freedom.

Good thread Tech/A
Cheers

 

[adobee]

Re: Ideas for establishing a capital base to begin investing - getting past first bas

I have read this whole thread and think alot of people are off topic and not really providing any ideas for helping people without a capital base establish one.. i am bit unsure about people saying forget about money its about happiness but they are on a trading forum.. are you kidding ? anyone who is on this forum obviously has some interest in generating income and requires a capital base if they wish to do so via shares and trading ..

Anyway back to the point .. I unfortunately still have not achieved the elusive capital base I require for my daily share trading to allow me to spend the rest of my day running fishing charters and diving ..

upon deciding to accumulate a capital base i felt i had to paths -
(into my second semester at uni)

1. Compete uni, work on a higher base income which should counter act the four years of low / no income whilst studying
2. Leave uni on an avg income and reduce to costs 'live within my means' so as to have the extra saving..
3. Fast track this method and enter a field where there was potential for increased income based on hard work.. ie commission based profession..

So the choice was made (3) and i decided work as a realestate agent had the potential to reap the highest rewards. After some time in realestate i discovered that whilst the sales income was great the property management income had the potential to be a safe residual income and that there was a multiplier affect if i was the business owner .. ie the rentroll could be sold on x3 basis, further i established that there was potential for leverage by way of assistants and staff who on commission had low costs and high returns..

In summary I have found that for those of us that dont have the great creative ability to come up with new ingenius ideas then a well choosen commission based job gives the ability to largely fast track your capital base..

Lastly I have found that dedicated focus on one role (ie r/e sales) will generally reap greater bennefits than trying to undertake to jobs at the same time (r/e sales & pizza shop at nights)..