The Basics of Trading

This is a discussion on The Basics of Trading within the First Steps forums, part of the Reception category; Damn ! Someone has recognised the family resemblance...

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Old Mar 17, 2003, 3:16pm   #171
 
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Damn !

Someone has recognised the family resemblance
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Old Mar 17, 2003, 5:01pm   #172
 
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FB
Sorry, this may be a bit OT. There does not seem to be another place to post this stuff. Please continue your thread as it is still proving very helpful.



Helenqu and TBS
(and of course anyone else who wishes to join in)


Firstly thanks for the references to PT thread. I have been working through it, it’s good stuff and just the sort of thing I need right now.

I have been thinking long and hard over these questions. Here is my first stab at defining what I wish to do with trading. Sorry it is a bit long


Quote:
How much time do you have to spend on this?
At present a few hours a day, medium-term I expect to have about one hour a day during the week and a few more hours over the w/e.

Quote:
How much money are you prepared to lose learning?
If this is for learning purposes only (i.e not trading for a living) then I would guess around £1000 for the trading account. If a few hundred more will allow me to use a different trading method/style then I am open to suggestions. I do not envisage earning a living from such a small capital base and would look to start ‘real’ trading with several thou.

Quote:
What is your level of risk tolerance?
I am not sure what you mean by this. The amount I am prepared to lose on a trade, on setting up trading as a business, etc

Quote:
Can you monitor prices during the day?
I could, but to be practical not constantly with a full-time day job. So this would have to be a no during the day but yes in the early evening.
This question may be leading on to day-trading, which I am not sure I am ready for, or indeed would suit me. Then again does one learn/train into the desired trading style you intend to go for
At my stage, as I am not certain of the trading style, I would rather get to know the ins and outs of the various styles, methods and markets and what is required to trade in these circumstances before I make this decision

Quote:
Do you want to trade and fit it in round a job?
Initially yes. Ultimately, once trading proves it has the potential to replace the day job (this sounds terrible,-so you have a NIGHT job, really now, what can THAT be I imagine ), this will hopefully become the day job.

Quote:
And more to the topic, looks to me like Spreadbetting UK stocks with a D4F account and a swing trading strategy would stand you in good stead. A subscription to Sharescope and later on Pfscan would be all your would need to do a good job, you can monitor prices for free on ADVFN.

How does that sound?
Mostly sounds OK. I know what SB is now, I have a good idea what D4F is, although I have yet to look at the site, but PLEASE what is a swing trading strategy when it's at home


Quote:
Some other questions:

1. What do you want to get out of this? - I know you have a target of replacing the day job, but in purely physical terms, how much hard cash do you have to make per year?
I reckon as a minimum I need to earn about £150 per day on average. This would sustain an existing lifstyle and anything more than this would not go amiss, I assure you!!

Quote:
2. Time/risk/reward - Understanding this ratio is part of the mey to deciding what markets you can trade (rather than want to trade). This includes the physical time you can spend in front of the screen and the specific hours of the day that you have available. It would be no use trading fast moving Dax futures if all you have is an hour at lunchtime. Helen has already mentioned risk levels. With £1000 you would not be able to trade futures, but would be able to use a spreadbetting firm - which has its own pitfalls.
I now realise the risk/reward/time dynamics as even spending a few hours here and there on the T2W competition have proven frustrating. There are several other factors, I guess , which come into play here. Not least of all family pressure for time and reliance on steady income.

However, one of the questions I have for full-time traders relates to the point at which you gave up your day jobs. At that moment did going full-time expand the market, your trading strategies, your methods and trading styles at all???

Ignore for now the £1000 for trading. As I’ve said, I would view this as money spent on setting up a business (training, equipment, etc), or as Les would say on ‘education’ costs.


Now, I can answer what I regard IMHO as the most significant question. Reason being is that I feel if I am not sufficiently motivated enough I will not see out a 2 – 4 year learning period. And, I guess, this may be a main reason why 95% of traders give it up.

Quote:
Once you have come back with those answers then you can start to put together a plan of action which will start to form around these sorts of questions:

a. why have I decided to play the markets?
For several years I have been trying to find the opportunity to start my own business. One in which I am my own boss and the success or failure of the business is down to me and me alone. My current profession has been a mix of boring, stressful (NOT due to hard work) in terms of being away from family for long periods of time, and not least the type of shysters that I have had to deal with. (Yes, I know they are in all traits of life, but with particular concentrations in my industry ).

So, it is like having an itch in the middle of your back. One you cannot reach and one that is intensely annoying, a Nasty Itch if you will.

Dear Bruv had been fiddling around in trading for some time and it got me thinking. I had always had shares using the LTBH method, but this was not mentally very stimulating, certainly very little fun and did not yield enough income (unless of course you had £0.5 M++ to play with). I have always been curious, and perhaps a little afraid of the markets (still am !), and have shied away from anything more than shares, unit trust, PEPS and the like. Hence my ‘investigation’ into more serious trading.

If you have reached this point, well done and thank you for persevering this far.

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Old Mar 17, 2003, 5:14pm   #173
 
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Hi NI,

A swing trading strategy usually involves holding stocks for 2-3 days but you do get some strategies both longer and shorter term than this. Basically you are looking for stocks on pullbacks or those which have gone too far too fast and are due to retrace. It's a good way of learning the skills that you cna use in shorter timeframes at a low cost and risk exposure.
The advantage of using D4F is that you can set stops and limits and move them as much you like. No costs and spreads as long as you don't trade first thing in the morning are generally the market spread for FTSE100 stocks. Winnings are not taxable and you can open an account with £1000K.

Try the following sites for swing trading stuff:

www.mrswing.com
www.hardrightedge.com

HTH
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Old Mar 17, 2003, 5:40pm   #174
 
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Smile I wish!

<i>Winnings are not taxable and you can open an account with £1000K.</i>

Wish I had a £1000K

JonnyT
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Old Mar 17, 2003, 5:41pm   #175
 
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Ok you know what I meant
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Old Mar 17, 2003, 6:14pm   #176
 
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Thanks for this and I will take a look at the sites.

BTW what did you mean by:?
Quote:
Originally posted by Helenqu
Hi NI,
No costs and spreads as long as you don't trade first thing in the morning are generally the market spread for FTSE100 stocks.
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Old Mar 17, 2003, 6:16pm   #177
 
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What I mean is that you can generally trade FTSE100 stocks at the market price, no extra points spread added on. And dealing is free unlike trading the real shares and no tax to pay.
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Old Mar 17, 2003, 6:43pm   #178
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Hi Ni, some good thoughts:


[QUOTE]Originally posted by NastyItch
FB




At present a few hours a day, medium-term I expect to have about one hour a day during the week and a few more hours over the w/e.



This immediately limits the markets you can safely trade with, unless you are prapared to take some very long term views - and be prepared to fund an account to cope with moves against you.

I would suggest that futures/indices are out, an hour a day doesn't give you time to get a handle on what the market has been up to during your absence, and trade successfully.

This leaves you with stocks or options, as Helen has suggested maybe swing trading, where positions are kept for a couple of days and traded to a specific set-up. Options are another way of trading either stocks or indices, again they tend to be 'longer term trades', not dissimilar to swing or trend trading... unless of course yu want to go back to longer term share holdings (which shuld be considered)


If this is for learning purposes only (i.e not trading for a living) then I would guess around £1000 for the trading account. If a few hundred more will allow me to use a different trading method/style then I am open to suggestions. I do not envisage earning a living from such a small capital base and would look to start ‘real’ trading with several thou.


Sensible to have a learning 'pot', with the time constraints it should be enough to start with until you decide what kind of trading 'style' suits you.


I am not sure what you mean by this. The amount I am prepared to lose on a trade, on setting up trading as a business, etc


Basically how much you are prepared to lose in a trade - this determines what size of positions you are able to hold, and ultimately how long you will be 'in the game' - either positively or negatively.

Monotoring prices:

I could, but to be practical not constantly with a full-time day job. So this would have to be a no during the day but yes in the early evening.

This question may be leading on to day-trading, which I am not sure I am ready for, or indeed would suit me. Then again does one learn/train into the desired trading style you intend to go for.

At my stage, as I am not certain of the trading style, I would rather get to know the ins and outs of the various styles, methods and markets and what is required to trade in these circumstances before I make this decision


Again this is the time constraints coming into play, plus, if you cannot monitor prices successfully during the day it means that you trade plans have to be right, physically and mentally, before you go anywhere near the actual trade - hence much of your time during the week or weekend will be spent preparing scenarios and picking the trades.



Mostly sounds OK. I know what SB is now, I have a good idea what D4F is, although I have yet to look at the site, but PLEASE what is a swing trading strategy when it's at home


Swing trading is a methodology of selecting trades that are liable to move in the same direction for a couple of days. There are various set-ups that are described as 'swing strategies' - basicaly they are TA strats that have been re-highlighted, a re-invention of the wheel!



I reckon as a minimum I need to earn about £150 per day on average. This would sustain an existing lifstyle and anything more than this would not go amiss, I assure you!!



So c£37k p.a. - bearing in mind that you may get away with less if you can mitigate some or part of the tax burden


I now realise the risk/reward/time dynamics as even spending a few hours here and there on the T2W competition have proven frustrating. There are several other factors, I guess , which come into play here. Not least of all family pressure for time and reliance on steady income.


Family pressure could be huge, especialy if you have a young family to chase after, and they start to cut inot your alloted 'trading time'.


However, one of the questions I have for full-time traders relates to the point at which you gave up your day jobs. At that moment did going full-time expand the market, your trading strategies, your methods and trading styles at all???


For me, the amount of markets I traded expanded - and eventually completely changed, although the overall methodology didn't. (The markets I trade continues to change even now)


Ignore for now the £1000 for trading. As I’ve said, I would view this as money spent on setting up a business (training, equipment, etc), or as Les would say on ‘education’ costs.


I suspect that you limiting factor is not going to be the money per se, but the time constraints - from the 'profile' the immediate thing that springs to mind is options trading, but that is just an initial thought.


Now, I can answer what I regard IMHO as the most significant question. Reason being is that I feel if I am not sufficiently motivated enough I will not see out a 2 – 4 year learning period. And, I guess, this may be a main reason why 95% of traders give it up.


It certainly is - rushing in unprepared is also the main reason that they get hammered too.



For several years I have been trying to find the opportunity to start my own business. One in which I am my own boss and the success or failure of the business is down to me and me alone. My current profession has been a mix of boring, stressful (NOT due to hard work) in terms of being away from family for long periods of time, and not least the type of shysters that I have had to deal with. (Yes, I know they are in all traits of life, but with particular concentrations in my industry ).



Personally, I think you should always treat trading as a business - whether you do it 'for fun' or full time. If you get up and running you may wish that the family were elsewhere! Trading is also a mixture of boring and stressful (not due to physical work, but mentally) - and believe me, anyone who takes your money on a losing trade is always a shyster


So, it is like having an itch in the middle of your back. One you cannot reach and one that is intensely annoying, a Nasty Itch if you will.


This was basically the exact reason I gave when I left 'gainful' employment!


Dear Bruv had been fiddling around in trading for some time and it got me thinking. I had always had shares using the LTBH method, but this was not mentally very stimulating, certainly very little fun and did not yield enough income (unless of course you had £0.5 M++ to play with). I have always been curious, and perhaps a little afraid of the markets (still am !), and have shied away from anything more than shares, unit trust, PEPS and the like. Hence my ‘investigation’ into more serious trading.


The hairy one should have had a good day today (he was going long SP's at c835 when I spoke to him earlier) - but then anyone should have had a good day today - even if you started out short of the market.
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Old Mar 17, 2003, 6:48pm   #179
 
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I think Options are way too complicated for a beginner. Not only have you got the chart stuff but you also have the added time factor and all the silly language that goes with it. KISS.
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Old Mar 17, 2003, 7:12pm   #180
 
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Tch, brotherly love......., I think the fact that NI uses your portrait as his login logo rather touching....
You do huh?

You realise this comment gives him the ammo he's wanted for years. However, look closer. I believe the beast concerned cradles a certain grey rodent in its matt.

If i were you i'd excersize caution....

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