Starting in stocks with $500

Re: $500

Still in School,
That's an amazing post. The more I read it, the more I now know that I know nothing. There's no way I could duplicate anything in your post.
Not in the near future, at least.
I make my profit on a rising market. Which is easy.
As Stefan has already noted. Any fool makes money in these conditions(me).
Hey Stefan, today I bought two books. Thanks to you. You were right!!!!
Book 1. How to Beat the Managed Funds By 20%. by Dale Gillham.
Book 2. Trend Trading By Daryl Guppy.
Now I have too find time to read them.

Still in School,
your post, I have to print that one out and pin it to my wall board.

bruham. : iamwithst and :iamwithst

Re: $500

still_in_school said:

Hi Guys,

this is an interesting topic, and really should be adding my 2 cents here, personally for me, and any trade position i usually do, is invested into bluechip stocks, where margin lending is 60% and above, but in all honestly personally for me an average trade will be between 50k - 75k per a stock holding and usually this will be around 10,000 - 20,000 units being bought at a time

....the reason being for this is, if i can buy in a stock that is moving in an uptrend and the stock can fluctuate 10 - 20 cents... a trade like this will normally give profit of about $1000-$2000, and will only be a day to a weeks holding position, but the profit side is very much more achievable to the days, when i was stingy and only buying $5000 worth of a $5-$7 stock...

also in a position like this i dont use stop losses at all, but i protect my stock holding, by hedging my positions in the case of a downside if the technical analysis is showing me that there is a potential downside in the very short term...

since using this strategy and margin lending, my profit return on my own money, after the margin facility has been taken out of consideration, has been returns of 20%+ above in very, very short time frames.

eg... AMP purchased in at $6.15 (30% down 70% LVR) sold out at 6.95 in total 10,000 units

total purchase for the amount of units (10,000) $61,500 + $300 brokerage
sold for 10,000 units at $6.95 ($69,500) + $300 brokerage

profit $8000 - $600 brokerage = total profit of $7400.00

$18,450 (30% deposit) $43,050 (70% LVR Margin Lend)

return on deposit $18,450 / $7400 = 40% return

if the position is not looking healthy, a simple hedging positions of buying puts and on selling them, is then in use to protect my holding position and any downside, but to also to make profit from a short fall.

though if hedging i will buy a sufficient amount of contracts to protect the position, though, because i trade options on a daily basis, option positions are normally bought in $5k intervals and average up, as the strike price nears, i will begin to sell, when the option price is at the money and is at a few ticks in the money already, or depending on the position, i would instead, take my capital back out and leaving my profit only at risk, and allow it to run... and sell, when downside starts to occur.

though, i have ever only done a $500 once trade before, im still holding onto that position, the reason being is, that the profit to me is personally small and due to my brokerage, i would be at loss and worse off position...

Cheers,
sis

Click to expand...

SIS,

You are shortchanging yourself by not trading the US markets...you should come and join the nightshift.

With your capital you can margin almost the whole exchange(s) @ 75% with a ton of optionable stocks....

A lot of options actually have liquidity too!!!!.....So you are often trading with other traders rather than the %@!#*%! market maker. You will generally see tighter spreads.

Added to that, there are a lot of US stocks that will move one hell of a lot more than anything optionable on the ASX.

Check it out!

Re: $500

Hey WayneL,

SIS is hard headed.. LOL i've already tried convincing him to join the dark side...

Cheers,

J.

Re: $500

Thanks Waynel & PositiveCashflow,

i have been thinking about trading US market at night time, but i honestly can see mysleft trading almost 24 hours a day... and lol... it tempting...

though, i will give it a shot in the near future, unless... if we see the australian market begin to slow down and US market speed up, i will definetly change markets...

Thanks Guys,
Cheers,
sis

Re: $500

Posted this elswhere however..any thoughts on the below..

In the Financial review-

Credit Suisse private Investor- small Companies fund 1yr= 46.47%

Maquarie Master- Property securites fund 1yr= 28.78%

Perpetual Investor choice fund- small cost share 1yr= 27.77%

Sorry, dont have the 3yr returns on hand..

How about stocks such as

General Property Trust
Centro Properties
Westfield Group
Perpetual Trust Aust ??


How about Streve Navra's Fund?

Any Thoughts??

REDWING

Re: $500

For the beginner would you recommend..

Looking at the top 15o Companies
NewsCorp
BHP
National Australia Bank
Commonwealth
ANZ
Westpac
Telstra

etc and buying into these companies that have market strength and learn from buying here, possibly selling when aa profit target you set is reached..

would this be better than buying a speculative stock than say Great Reef Mining and hoping it rises to the occasion, or possibly find a share that has a regular pattern of rises and falls and begin trading here..

The more books you read the more confusing it gets..


What, in your opinions is the best course of action for a beginner (after paper trading)

REDWING (the curious)

Re: $500

Hi Redwing,

IMHO, i wouldnt personally worry to much about the property trust sector or shares... the one there that might be good you mentioned is GPT, but overall i would try to stick away from them...

the stocks below that you mentioned.

NewsCorp
BHP
National Australia Bank
Commonwealth
ANZ
Westpac
Telstra

in all honestly, i would prefer to trade the options on these shares, the reason being is, because these companies are large blue chips, and theres plenty of price flutation each day (.10 cents - .40 cents and above), blue chips stock like this, have a predictable, forecast trend... that can be easily identified in the chart pattern... but can be well profited from intraday trading options to long dated LEAP options...

Stocks, like AMP, AWC, FGL, LHG... stocks under $7.50 more personally for me, usually you will find they are either ranging or trending... but because the prices of these stocks are much lower, on the violatility scale, it can be sometimes harder to profit from on options... (where as $10 or $20 stocks, might have .10 cents - .40 cents movement in a day, there violatility is much higher)

though the new stocks, just mentioned, and because there the cheaper blue chips, theres just more volume of money being traded in them, and again they have great liquidity... (in a market, where playing with volume, and margin.... (and for me... lol, staying in some, very solid blue chips, in a fast moving market) blue chips, may make sense....

....but its the margin and gearing effect that you get, compared to buying speculative stocks... that could double your money... though, with specualtive stocks, theres, just not that margin leverage you can get... (though depending on your broker, you could though again, be able to do this)

eg.. (will say $30k, easier for me to do the maths)

lets say you have about $30k in trading capital... and both examples are going to give you a 10% return in 10 days

Trading Capital VS Capital + Margin

and for the sake of this, will use SRA and MTT (too stocks on my radar and trading at the moment)

SRA - currently trading at .20 cents
MTT - curretnly trading at 3.12

SRA @ .20 cents @ 150,000 units = $30k
MTT @ $3.12 @ 32,051 units = $100k (70% Margined)

now both go up 10%, taking a profit and return on investment of (ROI):

SRA - $30k ($3k profit) ROI $30k / $3k = 10%
MTT - $100k ($10k profit) ROI $30k / $10k = 33% (remember we use margin to help leverage our profits)

now lets look at the other side of the equation, if we were to set a stop loss, on the last line of support.

SRA - support at .175 cents (purcahsed in at .20 cents) if stopped out 14% loss
MTT - support at $3.00 (purchased in at 3.12 cents) if stopped out 4% loss

SRA - $30k (minus 14% if being stopped out = $4,200) Capital left = $30k - $4,200 = $25,800
MTT- $100k (minus 4% if being stopped out = $4,000) (though loss on true $30k capital = $30k then divided by $4,000) Capital left = $30k - $4000 = $26,000

True Loss (capital remaining) & Loss on Investment %

SRA - $30,000 - $4,200 = $25,800 16% total loss on investment
MTT - $30,000 - $4,000 = $26,000 15% total loss on investment

** pls note...

in this example, what ive shown is, if you use leverage, it can amplify losses, but at the same time, if your investing into solid blue chip stocks, your loss, can still be less, than if you invested into a midcap or part speculative position...

though one, stock was margin and geared, the loss was still kept to a minimal and in this example, it still out preformed in being a winner, even if both stocks got stopped out.

though, if both stocks did go up in value... clearly the blue chip stock, would have out preformed the speculative position on a percent and dollar figure value....

(less risk, more bang for your dollars, but also you can sleep much better at night time)

Cheers,
sis

ps..

anyway, this is the way, i truly trade, and with some caculations, technical analysis, and instead of using stop losses, and losing capital, instead i hedge and protect positions, if i do feel my entry was wrong...

though, once the share is going up, profit targets or profit stop losses can be entered, to both protect capital and profit...

Still In School

Hi SiS,

Thanks for the post S.i.S

I entered the shares in order from the AFR top 7 of the top 150
NewsCorp
BHP
National Australia Bank
Commonwealth
ANZ
Westpac
Telstra

I've sent you those i've been looking at (and kicking myself for not buying in August), IMHO some good Blue Chips..

I like you're leveraged example..


REDWING

Re: $500

Hi Redwing,

another one i would be watching at the moment is BIL (Brambles) just jumped on the boat today... very nice pullback, but another excellent blue chip, but has excellent LVR, market exposure and liquidity...

Cheers,
sis