Trading advice

[Investor82]

Hi All
Ok - so Im looking for some advice from the more seasoned investors. So Ill give you a bit of my background.

I have been actively involved with property investments for the last 7 years or so and have built up quite a nice property portfolio (5 active investment properties and 3 non active). However I have recently come to a stand still because the banks refuse to lend me anymore more money (the classic cashflow short fall scenario).
I earn a very above average wage and have basically zero living expenses (I own my own home, I dont have a car, family, etc and my company pays my living).
At only 27yo I am targeting 'retirment' (ie living off passive income) by age 35. Until the last 3 months or so I have been dead on target - however - the banks aren;t playing the game.
My 'method' of purchasing property is 'conservative' in that I must meet my monthly repayments (ie I refuse to capitalise interest) - so it is a drain on my cashflow.

A couple of years ago I went to a hometrader course - and am none the wiser having now blown $4,000.

My goals are pretty straight forward. I would like to generate regular (1/4ly) cashflow from trading. My initial budget is pretty small ($20k), with any profits being used for debt reduction. As cash becomes more redily available I will increase the amount traded.
I have some experiance with purchasing shares, with mixed success. Generally however any trading has been speculative, without any direction.

So how can you help?

I would like to know where to start. To develop a system, find tools, set goals, and start trading - without blowing another $4,000 in "education".
What tools do you use?

In return if you have any queries regarding property investment or banking/finance (I worked in corporate finance for 6 years) please let me know - or PM me.

Cheers to all
Tony

 

[IFocus]

Well done on the property front

This answer maybe isn't what you will be expecting

In property its not hard to find many who have made excellent returns both long term and short term and that's taking out the big move up this decade.

One thing when I moved into trading (I was thinking like you) is that I didn't appreciate that the same success rate doesn't translate through.

After 10 plus years I know personally outside of this forum very few that trade full time, trade and make a profit each year. But I have met thousands who have tried and failed some at considerable cost.

I didn't appreciate just how hard it was to generate consistent profits.

I didn't appreciate that consistent profits meant year to year not week to week and that consistent meant not losing money rather than how much I made.

For me it was4 to 5 years to get consistent.

Trading for me and I think for many I have met who can get a return is all or nothing.

As for investing others best advise

If I had stuck at property I would have made zillions more.

From trading I have made money and continue to do so but more so I have traveled a discovery of life and changes required to do so that makes up for every thing.

Sorry about the bad news just my own experience

 

[skc]

If you are looking for consistent cashflow as a primary goal I would say short term trading strategies are more suitable. Preferably a strategy that is both long and short, and probably a market / instrument that don't have extended quiet periods.

Scalping futures and FXs is one possibility. I am no good at either of these to tell you how to get started, but there are several threads here which can provide a bit of background.

 

[Aussiest]

If you are looking for consistent cashflow as a primary goal I would say short term trading strategies are more suitable. Preferably a strategy that is both long and short, and probably a market / instrument that don't have extended quiet periods.

Scalping futures and FXs is one possibility. I am no good at either of these to tell you how to get started, but there are several threads here which can provide a bit of background.

I concur. I wouldn't trade shares with 20k, but if you focus your attention, you might be able to learn the Futures / Fx markets.

*Btw, it sounds as if you're leveraged to the hilt... a pattern some traders fall into, which can be dangerous

 

[Aussiest]

I didn't appreciate that consistent profits meant year to year not week to week and that consistent meant not losing money rather than how much I made.

What iFocus means there is that sometimes you will have to cop a loss, it is inevitable, so your overall wins need to be larger than your losses.

PS. iFocus, i agree... the journey has been great and there is very little i would "trade" it for (no pun intended!)..

 

[mazzatelli]

You should assume you will lose money/break-even at the beginning, so scrap the plans to use profits for debt reduction.

 

[condog]

Whilst I concur with the reality of the information above....At 27 yoa your obviously into breaking the moulds.....so dont let anyone tell you what you can and cannot do, because in reality, I bet most people if you had asked 7 years ago would have bet money on the fact you could not own so much property so soon.....

On the property front, I gather youve probably read most of Rich Dad Poor Dad books, and if so you have hit one of the exact barriers he hit ......

You can walk away defeated or you can go and have a half dozen more interviews with yours and other bank managers till you find out what it is they want, the language they want you to speak, the risk managment they want you to have....

Just because they are not playing ball right now does not mean they wont....

We are not allowed to give advice in here, but in my opinion you should go back to the banks and learn to speak there language and play the game within their parameters........

Your obviously a very successful property transactor, and to walk away from that because som box ticker said no is ludicrouse.....Its just a hurdle, you tripped. Get up and go again......if you trip enough times you will work out how to get over or around the hurdle...

 

[Investor82]

Thanks for the info so far.

Ifocus - thanks for the heads up. Thats some really solid advice. Even in property too many people "spruke" about their "success". I definatly have not "made it". I have the hardest hurdles in front of me. I am really looking at trading as a way of generating more regular cash flow - shares are more liquid than property.

ICK - where would (did) you start?

Assiest - thanks, why wouldnt you start with only $20k? What would your minimum capital size be? Not forgetting that this is only a start, and I will look to increase the investment as I get more comfortable with my (yet to be developed) system.
Yes - I have a lot of debt - however, unlike many of my compatriates I can afford the debt that I have, and meet all my monthly repayments. Im not capitalising any interest - so really Im no different to most people who are repaying their house - just my loan is a bit bigger. (hope that makes sense?)

Thanks Mazzetilli - Will do - Ill put debt reduction off until I have actually made some money.

Condog - Thanks - No I have not read the Rich Dad series, though I have heard a lot about them. In hindsite I didnt really know what the hell I was doing when I started. I just kind of "Jumped in the deep end" and it worked out ok. All I had was a dream, and an idea. Not to say I havent made some huge screw ups, which have (and continue) to cost me a lot of money. But hey, thats life - you live and you learn (hopefully).
I have not stoped on the finance front, but I am away at the moment, so it is in with a broker to sort out (generally I dislike brokers and avoid them where I can). In the meantime I thought I would look at some other options.
If I had a dollar for everytime someone told me I "cant" do that - I would be a very wealthy man...but alas. So yeah - people saying that "you wont, you cant etc" doesnt really put me off. I listen to their reasons, and then make a judgement call from there.

Maybe my first post was badly worded. Im not looking (or thinking) that Im going to throw $20k into the market for the next 3 months then reduce debt with what ever I make. Not the case. This for me is a much longer term proposition, a "sideline" if you will, which I can draw a couple of $$ from every couple of months (which I cant do with property). Its by no means a "get rich quick" idea...

Maybe someone wants to tell me where they started? Why they trade? Key Lessons learnt (some are listed - thanks)? good coarses, People, Books to help get started.
Im not asking what you trade (share codes), but rather how you started, How you developed your system, WHO you spoke to for lessons etc.

Thanks
Tony

 

[xygtho]

well, im new, i dont think ive even introduced myself. well, i hope i dont get banned, but I feel like contributing, and i will introduce myself real soon.

but in regards to this topic,

Ive just started trading, about a month ago, had about enough capital to play with, played, bought into dips hoping that the prices would bounce back. Worked on paper, did not work in practise. For about 9 months this year, did this on paper, worked great, first 3 weeks in practice, was up 10k, now i'm down 8 k after about 5 weeks. thats a 18k loss. talk about sweating!! nausea! feeling sick! i think i will go back to paper trading to see where i went wrong.

Now i ask myself these questions, bull and bear markets. and how everything is linked to one another in one way or another. For example, oil prices, when they go higher or lower, how they affect certain stocks.

I keep asking myself, how everything is linked to everything, how one thing affects another thing, and so on.

Good stocks, less volatile stocks, hedging, short/long.

ARGHHHH SOMEBODY KILL ME, ALL THESE VARIABLES, BOOM CRASH BLUE SCREEN OF DEATH, REBOOT, RELOAD PARAMETRES, FIX MISTAKES, REBOOT, RELOAD SOFTWARE DRIVER FOR HARDWARE.

btw im completely new to trading and the share markets. I guess buying into dips only works when theres a mega rally going on like since the the \_/ , that or someone on the other end wont let me buy into dips, picked up on my secret and has changed the rules, therefore forcing me to change my rules. I mean who buys into stock going down, thats just plain ridiculous in my opinion.

So, to be completely honest, I really am now scared to play anymore. So scared. But, what do i do, keep playing, "hoping" that my techniques work which is no better than gambling, or read books, start with low capital, technical/fundamental analysis, buying a parrot so it can forecast the stockmarket.... (bulls**t)

I'm thinking also, there are too many sharks out there, pretty much, if your not a shark yourself, your going to get bitten. So, in saying so, I dont think these sharks are going to tell you how to make money, then if they do, you might be taking a slice out of their profit. We dont want that do we.

You just cant trust anyone, or listen to anyones advice to be completely honest. I think the best way is to find out for yourself, bet low, read and profit, dont trust anybody, dont even trust people you pay for their information. go study in uni get your masters become a maths geek go study psychology, control your emotions, set the rules.

maybe start selling drugs and pay off the cops if you really want to make money from the stock market to pay off your debts.

Hope my extremist view doesnt get me banned.

p.s psychology, bloody psychology.

p.s.s im the classic novice trader story

p.s.s.s cant wait to get the hang of it!

p.s.s.s.s cant wait for the next bull run.

p.s.s.s.s.s cant wait to not lose more than i make

and the bloody list goes on and on and on. like i said, somebody kill me.

 

[xygtho]

i think i might be a bit negative.

cheers.

 

[mazzatelli]

i think i might be a bit negative.

cheers.

so according to your logic, he shouldn't listen to you either?

 

[xygtho]

forgot to add that in.

 

[cutz]

Hi xygtho,

For the benefit of other beginners how did you wind up so resentful of the markets, did it involve some sort of course ?

 

[IFocus]

Maybe someone wants to tell me where they started? Why they trade? Key Lessons learnt (some are listed - thanks)? good coarses, People, Books to help get started.
Im not asking what you trade (share codes), but rather how you started, How you developed your system, WHO you spoke to for lessons etc.

Looks like I didn't put you off

The best advice I can give you(and xygtho, timely that post) is that testing and paper trading long before you put money in the market for trading is the holy grail.

This process is largely misunderstood by most. Professionals always test a system not only to see if its profitable but also to understand when it isn't. IMHO all trading methods fail at some time knowing when and why is an edge.

For new starters like yourself xygtho gives a pretty good window into what can happen if you don't follow this process.

Testing for new starters is the start of the process for slowly changing how you understand the process of trading. Its teaching the mind good trading behaviors. Its very much a game of changing your psychology this is the hard bit testing is the start.


Hope this helps

 

[xygtho]

Yes, a course of sales that went horribly wrong because i may have reacted badly to some emotions or maybe the market just did not go in my favour, which at the end of the day, whether you like it or not, if the market turns, its not a matter of emotions or any bullcrap like that, the market turns, your stuffed unless you get out earlier enough that it doesnt do any damage.

or maybe i need to learn a bit more. experience and education will only tell.

Resentful meaning happy/whistling when i was + 10k in 3 weeks, to extremely pissed off when i was down that 10 + another 8 of my own money. But I quickly told myself to not worry, all part of the learning and fun time. I immediately felt alot better when i told myself not to worry. Back to whistling again and now, im even more determined to beat the market.

I think though, the best way to make money from the stock market is when it crashes. Simple.

Market crashes, buy at the bottom, make your 400% in year or two and then thanks alot markets. thats all its good for. haha

 

[Investor82]

Looks like I didn't put you off

Takes more than that to put me off :

The best advice I can give you(and xygtho, timely that post) is that testing and paper trading long before you put money in the market for trading is the holy grail.

Roger that - thanks - very helpful

Testing for new starters is the start of the process for slowly changing how you understand the process of trading. Its teaching the mind good trading behaviors. Its very much a game of changing your psychology this is the hard bit testing is the start.

Can I ask - by testing do you mean back testing? Or do you develop your system, then paper trade the system for a while to test your success? If you back test how do you do it? i know there are companies which will back test for you, do you use one, or do it yourself? (with which programme).

Hope this helps

You bet it does!

Sorry to quizz you so hard, but these are the answers I am chasing.

 

[Investor82]

which at the end of the day, whether you like it or not, if the market turns, its not a matter of emotions or any bullcrap like that, the market turns, your stuffed unless you get out earlier enough that it doesnt do any damage.

xygtho - a $30 book will teach you the first rule of trading is risk management. If you cant manage the risks you wont be in the market for long.
(See ppl I have learnt that much already and Ive only been doing this for a week )

or maybe i need to learn a bit more. experience and education will only tell.

Education should come before experiance should it not?

Resentful meaning happy/whistling when i was + 10k in 3 weeks, to extremely pissed off when i was down that 10 + another 8 of my own money. But I quickly told myself to not worry, all part of the learning and fun time. I immediately felt alot better when i told myself not to worry. Back to whistling again and now, im even more determined to beat the market.

Geez, not worried about being $8k down. You either have a lot more money than I do, or your balls are made of steel and significantly larger than mine.
A friend of mine once told me "you never lose money taking a profit". Rules for any investment - Know when to get in (sounds like you have that down pat), know when get out (I think you need work on this area) and know how much you are risking (this bit needs some work too).

Good luck to you my friend.

 

[ceasar73]

Read 'How I made 2 million in the stock market'. by Darvas.

 

[IFocus]

Can I ask - by testing do you mean back testing? Or do you develop your system, then paper trade the system for a while to test your success? If you back test how do you do it? i know there are companies which will back test for you, do you use one, or do it yourself? (with which programme).

Trading / investing generally is about trying to exploit pattern recognition. Any method you care to name will likely come back to this simple fact.

I always smile when the debate comes up about fundamental vers technical / charting all are pattern methods.

Time frames can vary from instant to years still patterns.

Mechanical trading methods use testing by means of running various scenarios using some form of software, a good public example is tech trader over on the Chartist. Plenty of help over there if you wish to go down this road.

I use discretionary methods based on some form of price / volume action / pattern. Some of the general thinking I use for trading I got from Nick Rage you can sign up for a month to his service very educational and highly recommended.

I still use Nicks service as I find he is a excellent market barometer and a long time market professional. I often find my own analysis at odds with Nicks but when I put the two together I generally stay on the right side of the market this is simply the most important thing I can do as a trader.

These days because I look at so many charts I see the patterns sweep through the markets. I still test / paper trade but its more to do with different instruments / markets (i.e. forex / futures) and shorter time frames.

When I started down the testing path I went back to basics, trend following, simple patterns. The patterns had to be a price consolidation with clear support and resistance areas, buy the breakout in up trends sell the failure in down trends. Simple but it works and a great place to start IMHO.

I found as many as I could that worked by scanning thousands of charts and playing what ifs. After that I go back and find all the failures and play what ifs. There are a million nuances when looking at charts and working markets I found through this process I started to understand some of them and developed an edge.

I had been trading for a while but just treading water or gathering small losses bleeding to death. So when I started basic testing as above I also start to see my bias i.e. only seeing profitable trades etc.

At this level nothing works all the time....nothing. Understanding a method and the market conditions in which it works and when it fails is what testing is all about.

After this comes paper trading, I have been trading for more than ten years I still paper trade ideas before using money. These days there is no excuse many accounts now have simulators so its really easy when I started out you had a pen and paper and could cheat.

Your quote "you never lose money taking a profit" unfortunately in markets this is generally why trading neophytes do fail. Trading is only ever about taking smaller losses and bigger profits. Testing will likely show you that its not normally a high win / loss ratio that determines this (scalpers excepted).

This is pretty general hope it helps

 

[So_Cynical]

I'm not buying this thread...it feels like there's a sales pitch coming.