Learning how to trade – an alternative to paper trading

[wayneL]

Trading a stock with CFDs based on fundamental analysis is going to be tough. Short-term moves are not based on Fundamentals, the market moves on sentiment in the short term. 3% margin trading on fundamentals is crazy. 3% move in BHP can be one days move, the fundamentals have not changed in one day while you have lost all of your margin!!!!! There is nothing wrong with Fundamental analysis but you have no wriggle room with CFDs.

As a fellow pedagogue, I know you would be interested to know that one doesn't have to use full leverage with CFD's. There is no reason one couldn't use CFDs for fundamental trading.

It is a similar principle to investors in commodity futures. The margin is a small percentage of the face value, but you can still invest unleveraged. Simply have a cash reserve equal to the face value of the contract or CFD in either a CMA or brokers account.

It's not what I would do (and I don't like CFDs either), but it could be managed that way.

 

[Julia]

This is a bit of a cheeky question...how do you determine a share is in a downturn? Do you look at a chart?

Not a cheeky question Gorilla. I probably should have said "dip" rather than "downturn" and - as I've previously said - I go for mostly blue chips which have a long record of growth and good dividends.
Yes, for something I haven't bought before I'll look at the chart.
But if I'm adding to an existing position I'm seeing the price every day and it's not exactly rocket science to see a buying opportunity with a temporary weakness.
There's nothing complicated about my approach so if you were looking for some fancy technical stuff I don't have it!

 

[Julia]

If your trading in a short time frame then this could have an effect.
If your trading medium to long term small variations will have little bearing on the total trade.

Well, if a stock is ranging from, say, $30 - $35, if I buy a mere 1000 at $30 rather than $35 then I'm $5000 ahead to start with. I don't think that's immaterial when choosing an entry point.

 

[Trembling Hand]

As a fellow pedagogue, I know you would be interested to know that one doesn't have to use full leverage with CFD's. There is no reason one couldn't use CFDs for fundamental trading.

It is a similar principle to investors in commodity futures. The margin is a small percentage of the face value, but you can still invest unleveraged. Simply have a cash reserve equal to the face value of the contract or CFD in either a CMA or brokers account.

It's not what I would do (and I don't like CFDs either), but it could be managed that way.

Yep very true. I guess if you were to use fundamental analysis that is exactly what you would have to do. You would also have to think of the trade in a longer time frame I think. Just because its got good fundamentals does not mean its going up this week, or this month!!! With that in mind you would have to reassess your stop placement.

zuluwarrior08 I think it is important that rather than saying this doesn't work for you (fundamental analysis) it maybe better to think how can I make this work i.e. Reduce risk buy decreasing initial entry size. 25% win rate is not great but I suspect your stops and risk per trade are not suited to fundamental analysis. Its pretty hard to figure out what you should be doing when you start but if fundamental analysis is attractive to you give it a good shot before giving it away. Because success normally comes when your own insight to the market (in you case TA & Fund A) is fitted to a trading plan that protects you when you get it wrong.

 

[theasxgorilla]

There's nothing complicated about my approach so if you were looking for some fancy technical stuff I don't have it!

I was looking for any techical stuff...for moment there is sounded as though you were beginning to sway you to the dark side

 

[It's Snake Pliskin]

My feedback from the info given.

(1) Trading to often (to many trades),Hence too much costs
(2) With around a 25% win rate Id say your attempting to pick bottoms--stop trying to do that.
(3) Without knowing how you would have gone had you traded to plan--it is possible that your plan is flawed.--obviously the one you used (The one that wasnt the plan) certainly is.
(4) Not letting profits run.
(5) Over leveraged--you WILL blow up!

Other than that your Luckily still in the game!

Step back and consolidate ideas.

Tech, it's "too" not "to", and "too many costs". Good comments though.

 

[tech/a]

Thanks Snake its actually s-l-a-c-k!.

Julia
$35----$30 is around 15%---.

If trading short term then that 15% could well be your entire profit.
Longterm your $30 stock could well go to $60 at which point the money has been earned from time IN the trade not TIMING the trade!
The Two Styles are different.

You are correct in saying "Its not Rocket Science" and for longer term trading it doesnt have to be.From our discussions over time I'm sure you'd agree that short term finessing both Fundamental and technical is at least entry level science!

 

[wayneL]

Thanks Snake, it's actually s-l-a-c-k!. <= No full stop required

 

[tech/a]

I see I've made my point again.

Jetlag!

 

[wayneL]

I see I've made my point again.

Jetlag!

I'll have to watch my own bloody punctuation now.

 

[Julia]

I was looking for any techical stuff...for moment there is sounded as though you were beginning to sway you to the dark side

Not quite sure exactly what the "dark side" constitutes? ??
However, there are plenty of successful fundamental investors who would never look at a chart at all.

Do you think a technical approach is mandatory to successful investing, Gorilla?

 

[Trembling Hand]

Do you think a technical approach is mandatory to successful investing, Gorilla?

Oh! Not that old Gem again!