The Basics of Trading

Ok some basic questions.

How much time do you have to spend on this?
How much money are you prepared to lose learning?
What is your level of risk tolerance?
Can you monitor prices during the day?
Do you want to trade and fit it in round a job?

Those should help you start to narrow it down a bit

Fun isn't it?

A few hours each day, some of it during the day.

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How much money are you prepared to lose learning?

Once I get past the paper trading stage I anticipate putting aside £1000 for trading. Possibly a bit more for s/w, data feeds, more books, etc.
But herein starts my first question. What do I need to get first? As a newbie do I need to lose money from the first day I start learning about this TA trading malarky???

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What is your level of risk tolerance?

Yep, got me there again

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Can you monitor prices during the day?

Sure can, been doing it for the T2W competition...

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Do you want to trade and fit it in round a job?

Now this is the $64K question. Ultimate aim is to replace the job with full-time trading. BUT, need to get to grips with this lot first though, so the full-time job has to stay for the time being.

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Those should help you start to narrow it down a bit Fun isn't it?

Helen, thanks for this, I have gone through much of this personally, but from the sounds of it each new beginner asks the same questions in one form or another. The answers tend to differ slightly depending on who answers them.

You are right, tis fun, and somewhat cerebrally stimulating!!
Thanks

Good questions, perhaps this is really where this thread should have started for the absolute beginner.

Helen has given you the first set of questions that need to be answered before you go anywhere near a trade or a chart or anything else.

May I suggest writing them down - your hairy relative (LOL - wait til he rings me - BTW Helen knows him as well - has been through some of this, the first set of answers are never enough, hence writing them down.

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?

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.

These are really the absolute basics, but you have to clearly define them for you own sake - and that of your family/friends etc trading can be a very fraught business.

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?
b. why have I chosen specific markets?
c. what tools do I need to participate successfully?
d. what should I buy?
e. when should I buy?
f. when should I sell?
g. how can I reduce my risk?
h. can I psychologically carry out this strategy?

.. which Helen and many others that frequented TMF should recognise as the handywork of Plastic Tortoise (RIP).

This is probably the first step on a journey that will probably take the thick end of 4 years to get even close to making a decent return.

Actually a bit OT and relating to PTs board we really need to rescue the Web bit from Oonaghs site, would be a major pity to lose all that wonderful stuff.


And I'm quite sure he isn't resting in peace, he's sitting up there sticking pins in angels having a fag and cursing the fact that he's not around to have tried his hand at shorting

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?

Now listen here - just because i'm genetically related to NI is no reason to to embarrass the guy by pointing this out! After all he's only going to eventually blame me for getting him into this malarkey in the first place.

On a more serious note: I believe i've really cracked it on the psychological level with trading. The past few weeks i've been able to win, lose or stay flat and be totally calm about it. Quite an experience. Quite amazing to be able to trade and then take a significant loss, and then just shrug it off and make the next trade as if nothing happened. Capital account is beginning to recover. I'm still making TA mistakes and sometimes losing too much, but i seem now to correct these very quickly and without hassle. Beginners won't properly take this in, because they have to be engaged with all the other stuff first, but i now really appreciate from the inside why so many pros say that trading is 80% discipline.

I'm trying to keep a log of the psychological processes i've been thro with the 5th July in mind. Needless to say, i've a horrible thought that i might be eating these words in a few weeks. Still i know positive psychological change when i see it, so we'll see.

Sorry if this is a bit OT, but i had to tell you guys!

Dave,

Suggest you print off Sandy's post and commit to memory. Present yourself in 10 days at my house and recite...

WRT Sandy's reference to PT. Plastic Tortoise was the handle of a much loved moderator of a Board on TMF, called Inside Plastic Tortoise. Sadly PT died last year after a long illness. He was in his early 70's and a very experinced and successful trader. He used a combination of FA and TA. He was particularly good at getting peple to define their goals, trading and risk-managment strategies.

His message board is now defunct, ie cannot be posted to, but it has been archived at:

http://boards.fool.co.uk/Messages.as...d=51108&days=7

Its lengthy, going back a few years, but well worth the read, even if some of the stuff is advanced. There's a lot there for beginners at your stage, especially around what Sandy was saying you need to do. You will see lots of exchanges with PT where beginners are getting feedback with their learning and devlopment.

HTH,

Bruv

Not at all off topic Les.

I've only just come to accept that the seemingly boring bits of the investment tomes, risk reward ratios, capital management and disipline are the really vital parts of the whole equation.

What seems at first to be the vital part, the T/A or fundamental analysis is the icing on the cake.

And in reference to PT, his questions, which I have glossed over in the past, now regularly come back to haunt me.

Cheers