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[ivanyo]

Hey guys,

I made a thread a while ago stating my intentions, and got some advice from a few members. I have come back I've decided to begin my journey

I will be opening an account with IB later this week in order to take advantage of cheaper brokerage than Commsec. I have around 10K-12K to play around with. I consider this to be a decent amount of money, seeing as I'm only 19 years of age, and I'm trying to juggle a part-time job and full-time university studies. (If it matters to you, I am studying a Bachelor of Business Degree with a Major in Finance, and Sub-Majors in Econometrics and Statistics)

I actually made my first official trade back in March - but since then I've only made a few more transactions and I've been holding. They are blue chip shares so the going will be slow.

My trading plan is to enter the market with 7.5K invested across all sectors, with around a 25% focus on mining - and the rest spread evenly amongst the other sectors. I do NOT plan to go all in straight away. Rather I'm going to wait until the time I believe is right to buy each stock.

The other 2.5K I plan to use in a high-medium frequency trading manner - somewhat 'gambling' in some people's eyes.

My questions to you more experienced members are this -

1 - Seeing as I will be on the road a lot with work and uni, is there anything I can get on my phone which will help me execute trades with IB? I know there is such an App for Commsec on the iPhone - it would be really great if there was one for IB but I can't seem to find anything

2 - What type of precautions should I be taking for trading stocks? Could somebody give me an example of where they would sell in order to avoid holding onto a company that is going down? How would this differ between the stocks I'm planning to hold, and those which I'm going to trade at a high-medium frequency? (More specifically, what %age loss should I be looking at before I should really be paying attention? - Really just looking for some examples here. I know not everyone will want to reveal their trading methods)

3 - How do I go about transferring my current holdings from Commsec to IB? The ridiculous brokerage at Commsec is making me hold, when my capital gain is >20%! (you can tell I'm not investing that much, and I'm still just a newbie haha...)

4 - How extensively are successful brokers researching? Are they truly reading the papers/announcements of each and every stock they are watching on a daily basis? I'm asking this because I need to know how much time I will need to put into keeping my portfolio in the 'green'. Juggling Uni+Work will make this a challenge, but I'm willing to accept it.

5 - Any websites or links that would help me out are kindly appreciated!

Many thanks in advanced to those who will give me some responses

Regards,

Ivan

 

[burglar]

...Many thanks in advanced to those who will give me some responses ...

With regards to transfer from Commsec to IB
No expert, mind, but believe with some brokers there is a transfer fee.
I have heard $50-$100, you'll need to ask at Commsec.
Cheaper to sell with one broker and re-buy at the other! But that would involve brokerage and, of course, CGT implications.

With regards to how closely you watch them. It all depends. Are you averse to risk?
If so you'll want to insure against heavy losses with some form hedging or stoploss. Just look at Rio's 5 year chart if you think blue chips are relatively safe.

It's gambling only if you lose! It's winning when you win!
Good Luck!

 

[Sir Osisofliver]

Hey guys,

My questions to you more experienced members are this -

1 - Seeing as I will be on the road a lot with work and uni, is there anything I can get on my phone which will help me execute trades with IB? I know there is such an App for Commsec on the iPhone - it would be really great if there was one for IB but I can't seem to find anything

Can't answer this question - don't use IB

2 - What type of precautions should I be taking for trading stocks? Could somebody give me an example of where they would sell in order to avoid holding onto a company that is going down? How would this differ between the stocks I'm planning to hold, and those which I'm going to trade at a high-medium frequency? (More specifically, what %age loss should I be looking at before I should really be paying attention? - Really just looking for some examples here. I know not everyone will want to reveal their trading methods)

With only 2.5k to invest in this activity you are making it difficult for yourself to achieve success. Not impossible mind you...just extremely difficult. This is due to the difficulty you will face in correct positional sizing, and that you have selected stocks with which to trade as opposed to other instruments which may be better suited to small dollar value positions. I'll talk about two different types of trading strategies to give you an example.

I can only pass on what has worked for me, depending upon your risk tolerance and other factors, what works for you may well be very different. One of the trading systems I use incorporates a set of trading rules. I normally go into a trade with a certain expectation, a price target, with a win/loss ratio of greater than 2:1. I use technical analysis to determine this expectation. If I don't think the trade will net me more than 2:1 I don't enter. I usually use a 5% trend band as a trailling stop, with the exception to this occurring where I get clear pivot points in the price action, giving me an exit figure. (I usually use a 5% band on this as well). Be clear though that this type of trading incorporates correct positional sizing. I risk no more than 2% of my account with any one trade. With only 2.5k to use the maximum you would be able to use as a position would be roughly $750.00. You would need the position to move a long way to make up both the brokerage and create a profit. What this has meant in my case is that I get a win/loss ratio of 65% (65 % of my selections net me a profit) and I have a CG:CL (cents gained versus cents loss ratio) of 4.27:1, so I'm winning over 4 times what I lose. Note however that at any one time I have an average of 15 positions at once, something that you would not be able to do.

One thing that might be more suited to you and note that this is not a recommendation in any sense is to look at dividend stripping or dividend momentum strategies. The principle behind these kinds of strategies (which tend to work better in sideways trending markets), is to track which shares will go ex-dividend in the next three to four weeks and ride the upward momentum the near-term dividend causes in the share price. The advantage with this type of system is that you can effectively leverage your funds without the use of leverage. IE you will turn over your funds multiple times during the course of a year. The more rotations you get the better. Once again your low dollar amount may mean that you are unable to correctly diversify such a system in the near term. (I usually use a 4-5 position rotation - and use a simple stop-loss in the position).

Hope that is helpful as an example of the different kinds of trading systems that you can try.

3 - How do I go about transferring my current holdings from Commsec to IB? The ridiculous brokerage at Commsec is making me hold, when my capital gain is >20%! (you can tell I'm not investing that much, and I'm still just a newbie haha...)

Ask the receiving broker to do a broker to broker transfer of HIN (Holder Identification number). There generally should not be a charge for this activity but I am unaware if IB does so.

4 - How extensively are successful brokers researching? Are they truly reading the papers/announcements of each and every stock they are watching on a daily basis? I'm asking this because I need to know how much time I will need to put into keeping my portfolio in the 'green'. Juggling Uni+Work will make this a challenge, but I'm willing to accept it.

How long is a piece of string? No research analyst is an expert at every stock in the market. They tend to specialize and produce reports on half a dozen different stocks, three of which will be their primary targets, where they are very comprhensively aware of all material events that will impact the share, and three that they do not spend as much time on. Be aware that this kind of research (which is fundamentally value investing based) can still be very subjective...and they do get it wrong...frequently. They will also be very forward looking, which may not suit a short-term trading style of activity.

Bottom line is that you will get out of your portfolio what you put in.

5 - Any websites or links that would help me out are kindly appreciated!

There's a ton of information available on the net...the trick is to find the useful stuff amongst all the dross...perhaps if you ask some specific questions I can help direct you to sme free sources of info.

Many thanks in advanced to those who will give me some responses

Regards,

Ivan

Cheers

Sir O

 

[captain black]

1 - Seeing as I will be on the road a lot with work and uni, is there anything I can get on my phone which will help me execute trades with IB? I know there is such an App for Commsec on the iPhone - it would be really great if there was one for IB but I can't seem to find anything

There are several mobile apps for IB:

http://individuals.interactivebrokers.com/en/pagemap/pagemap_mobiletrading.php

 

[ivanyo]

Let's see if we can get this IB account set up first.

Does anybody know if I'm doing a Commonwealth NetBank International Transfer, is it 'wired' or 'ACH'?

So lost right now haha...

 

[warennie]

Just a work of advice from my experience:

Its great to have diversification in your portfolio, but when your investing small amounts this isn't really achievable. I'd never make a trade for less that 2500 due to brokerage.

Out of interest and laziness, what is minimum brokerage with IB? I use commsec and have $19.95 trades, I thought that was pretty good.

 

[ivanyo]

Just a work of advice from my experience:

Its great to have diversification in your portfolio, but when your investing small amounts this isn't really achievable. I'd never make a trade for less that 2500 due to brokerage.

Out of interest and laziness, what is minimum brokerage with IB? I use commsec and have $19.95 trades, I thought that was pretty good.

$6 trades - You cannot beat it...haha

However, setting up the account is very hard. I'm still in the process of doing so myself.

 

[warennie]

I use commsec and have $19.95 trades, I thought that was pretty good.

$6... I thought wrong.

 

[burglar]

$6... I thought wrong.

Hi warennie,
Yes. The joke is on us!

To the best of my knowledge, the cost per transaction payable by brokers to the ASX is in the region of $5.27 and coming down.

If anyone knows different, I'd be glad to know!

 

[skyQuake]

Hi warennie,
Yes. The joke is on us!

To the best of my knowledge, the cost per transaction payable by brokers to the ASX is in the region of $5.27 and coming down.

If anyone knows different, I'd be glad to know!

More like 0.5~1 bp on value of trade. The ASX really doesn't get that much out of it.

 

[ivanyo]

My apologies...I thought he meant what is the minimum amount of stocks he needs to purchase at any one transaction...

 

[Julia]

My apologies...I thought he meant what is the minimum amount of stocks he needs to purchase at any one transaction...

So where did you answer this question, and what is the answer?

 

[So_Cynical]

$6... I thought wrong.

Apples and oranges...with comsec you own the shares with IB you dont.

 

[ivanyo]

Can't answer this question - don't use IB

With only 2.5k to invest in this activity you are making it difficult for yourself to achieve success. Not impossible mind you...just extremely difficult. This is due to the difficulty you will face in correct positional sizing, and that you have selected stocks with which to trade as opposed to other instruments which may be better suited to small dollar value positions. I'll talk about two different types of trading strategies to give you an example.

I can only pass on what has worked for me, depending upon your risk tolerance and other factors, what works for you may well be very different. One of the trading systems I use incorporates a set of trading rules. I normally go into a trade with a certain expectation, a price target, with a win/loss ratio of greater than 2:1. I use technical analysis to determine this expectation. If I don't think the trade will net me more than 2:1 I don't enter. I usually use a 5% trend band as a trailling stop, with the exception to this occurring where I get clear pivot points in the price action, giving me an exit figure. (I usually use a 5% band on this as well). Be clear though that this type of trading incorporates correct positional sizing. I risk no more than 2% of my account with any one trade. With only 2.5k to use the maximum you would be able to use as a position would be roughly $750.00. You would need the position to move a long way to make up both the brokerage and create a profit. What this has meant in my case is that I get a win/loss ratio of 65% (65 % of my selections net me a profit) and I have a CG:CL (cents gained versus cents loss ratio) of 4.27:1, so I'm winning over 4 times what I lose. Note however that at any one time I have an average of 15 positions at once, something that you would not be able to do.

One thing that might be more suited to you and note that this is not a recommendation in any sense is to look at dividend stripping or dividend momentum strategies. The principle behind these kinds of strategies (which tend to work better in sideways trending markets), is to track which shares will go ex-dividend in the next three to four weeks and ride the upward momentum the near-term dividend causes in the share price. The advantage with this type of system is that you can effectively leverage your funds without the use of leverage. IE you will turn over your funds multiple times during the course of a year. The more rotations you get the better. Once again your low dollar amount may mean that you are unable to correctly diversify such a system in the near term. (I usually use a 4-5 position rotation - and use a simple stop-loss in the position).

Hope that is helpful as an example of the different kinds of trading systems that you can try.

Ask the receiving broker to do a broker to broker transfer of HIN (Holder Identification number). There generally should not be a charge for this activity but I am unaware if IB does so.

How long is a piece of string? No research analyst is an expert at every stock in the market. They tend to specialize and produce reports on half a dozen different stocks, three of which will be their primary targets, where they are very comprhensively aware of all material events that will impact the share, and three that they do not spend as much time on. Be aware that this kind of research (which is fundamentally value investing based) can still be very subjective...and they do get it wrong...frequently. They will also be very forward looking, which may not suit a short-term trading style of activity.

Bottom line is that you will get out of your portfolio what you put in.

There's a ton of information available on the net...the trick is to find the useful stuff amongst all the dross...perhaps if you ask some specific questions I can help direct you to sme free sources of info.

Cheers

Sir O

Hi there Sir O,

It's been a while since I visited these forums, since I have been studying for my mid-semester exams. I like the idea of trading using the momentum generated by dividends.

Being a student, I'll honestly admit that I have only basic knowledge of what you have given me. Things such as "5% band trailing stop" I have absolutely no idea what it actually means...haha. Could you explain it in a little more detail please?

What I've gathered so far though,

You wouldn't risk more than 2% of your capital in any one transaction. (Hard in my case, with only $10K, thats only $200 per trade...but if I did trade this way, there would be a lot of trading going on - low profits, possibly hard to make good money thanks to brokerage)

You ride the momentum of the price increase, when a company announces a dividend (and sell just before they hand it out?). Furthermore, it's going to be hard for me when I am only willing to take $2.5K into trading this way. What if I was to place $5K on this type if trade, ($1K into 5 companies, turning over every time I make my brokerage+profit and buying into a new company that has announced dividends)

One last question - what do you mean by a 4-5 position rotation with a stop-loss in position?

 

[Sir Osisofliver]

Hi there Sir O,

It's been a while since I visited these forums, since I have been studying for my mid-semester exams. I like the idea of trading using the momentum generated by dividends.

Being a student, I'll honestly admit that I have only basic knowledge of what you have given me. Things such as "5% band trailing stop" I have absolutely no idea what it actually means...haha. Could you explain it in a little more detail please?

I'll throw up some diagrams on Monday to show you what I mean.

What I've gathered so far though,

You wouldn't risk more than 2% of your capital in any one transaction. (Hard in my case, with only $10K, thats only $200 per trade...but if I did trade this way, there would be a lot of trading going on - low profits, possibly hard to make good money thanks to brokerage)

Sorry that's not correct. The amount I am prepared to risk IE what I can lose before I close the position is 2% of my capital (and this is with a specific set of trading rules). So it's not the size of the position, it's the trigger for an exit. You will determine your position size depending upon what sized risk you want to take. Clear?

You ride the momentum of the price increase, when a company announces a dividend (and sell just before they hand it out?).

Correct

Furthermore, it's going to be hard for me when I am only willing to take $2.5K into trading this way. What if I was to place $5K on this type if trade, ($1K into 5 companies, turning over every time I make my brokerage+profit and buying into a new company that has announced dividends)

One last question - what do you mean by a 4-5 position rotation with a stop-loss in position?

In other words if I wasn't using leverage to assist me in the position size, I would do this with 4-5 different selections that sit around a target date. I'd be using a $20,000 account to do this.

Will post more on Monday (if I'm not too busy).

Cheers

Sir O

 

[Wysiwyg]

An alternative is avoid the waffle and play it by ear so to speak. You need a lot of capital to "trade" stocks. To be able to take more hits than Abba and turn up next day takes a lot of capital. Never mind, play the percentage and statistical b.s. game. All newbies do along the way.