Beginner looking for answers please!

[Freedomtrader2012]

Hi to all and a Happy New Year. I am researching to become a full time trader of UK Stocks with £20,000. Initially trying to decide whether to start as a day or swing trader.

I hope that you will be able to help answer my questions.

1) How do you decide the amount of each trade from the initial £20,000?

2) How do you choose where to set the stop loss on a trade?

3) What would be the best charting and live feed software to use?


Thank you for any responses as all are much appreciated.

 

[NVP]

Hi to all and a Happy New Year. I am researching to become a full time trader of UK Stocks with £20,000. Initially trying to decide whether to start as a day or swing trader.

I hope that you will be able to help answer my questions.

1) How do you decide the amount of each trade from the initial £20,000?

2) How do you choose where to set the stop loss on a trade?

3) What would be the best charting and live feed software to use?


Thank you for any responses as all are much appreciated.

Hey F

you really need to spend 6-12 months or so getting up to speed........befroe yuo put a penny down

these questions are all covered in most Free forums , websites if you search

plus you will learn all the other essential things needed

good luck
N

 

[rbrew]

Hey F

you really need to spend 6-12 months or so getting up to speed........befroe yuo put a penny down

these questions are all covered in most Free forums , websites if you search

plus you will learn all the other essential things needed

good luck
N

i'm also looking for a good starting point... is it best to start through some specific series of articles, or thread / forums?

 

[pboyles]

i'm also looking for a good starting point... is it best to start through some specific series of articles, or thread / forums?

The solution is to keep your money in the bank and forget all about trading. It's highly unlikely you'll ever make a cent and most likely you'll lose whatever you put into this. If you want extra money get a part time job.

 

[Pat494]

Put half your trading money into a seperate account for next year.
Read ALL the articles on T2W and others to find out what sort of trading suits your style. Then spend the rest of your life perfecting it.

 

[x4x]

Put half your trading money into a seperate account for next year.
Read ALL the articles on T2W and others to find out what sort of trading suits your style. Then spend the rest of your life perfecting it.

Agreed, but perhaps he should put 90% of his money into a separate account, and use 10% next year, and 10% the year after etc.

 

[Pat494]

Agreed, but perhaps he should put 90% of his money into a separate account, and use 10% next year, and 10% the year after etc.

I see your reasoning.
They skip about like new born lambs :whistling

 

[Hoggums]

£20K is not enough to make a living from trading stocks (I am assuming unleveraged stock holdings and not trading a leveraged derivative).

Plus you are only able to trade in one direction (buys). Even the best in the business can't make money this way in a falling market.

And the best in the business probably make 15% in a good year - can you survive on £3000 a year?

 

[ILikeCCI]

Hi to all and a Happy New Year. I am researching to become a full time trader of UK Stocks with £20,000. Initially trying to decide whether to start as a day or swing trader.

I hope that you will be able to help answer my questions.

1) How do you decide the amount of each trade from the initial £20,000?

2) How do you choose where to set the stop loss on a trade?

3) What would be the best charting and live feed software to use?


Thank you for any responses as all are much appreciated.

Don't day trade, its very hard - especially for beginners. Most people are attracted to day trading because they think they can make money quicker but in reality the opposite is probably going to happen. You could try day trading later down the line but there are not very many people who can stomach it even if they are experienced traders.

The amount to trade is always a percentage of your capital, usually 1% risk on each trade.

Stop loss depends on the setup you have targeted its usually above a recent high or low.

Also trade Forex instead of stocks because it trends better and there are more opportunities. Its also better for a beginner because you can trade micro lots and start getting used to it by only risking small amounts of money.

 

[timsk]

Hi Freedomtrader2012,
Welcome to T2W.

Hi to all and a Happy New Year. I am researching to become a full time trader of UK Stocks with £20,000. Initially trying to decide whether to start as a day or swing trader.

As a very broad rule of thumb, the general consensus would be to start off swing trading first and, if you do well, then try day trading. The key benefits are that you'll make fewer trades which will help with commissions and stamp duty and you'll have more time to consider the merits of each trade before hitting the buy/sell button. That said, it's horses for courses, no one can say for sure what is best for you.

1) How do you decide the amount of each trade from the initial £20,000?

This sticky will go a long way towards helping you answer this question: Essentials Of 'Risk & Money Management'

2) How do you choose where to set the stop loss on a trade?

There are as many different answers to this as there are traders. Again, what works for you won't work for someone else. If your methodology enables you to enter trades with pin-point accuracy, such that if they don't go into profit straight way you close the trade - then you can set very tight stop losses. Typically, this is what many day traders try and do. Swing traders tend not to have such finely tuned entry criteria and require a little more wiggle room for the trade to 'breathe' - and set a wider stop. Here's an article that covers a few of the most common questions about stop losses: Stop Loss - Q&A

3) What would be the best charting and live feed software to use?

Again, there is no best really - just the one that provides what you require at a price you're willing to pay. Check out this FAQ: Can You Recommend a Data Feed, Charting Software & Broker?
Tim.

 

[ForexProdigee]

I read this post just now, and I was wondering one thing.
What exactly does it take to preform well in the market? It seems like most advance traders don't expect beginners to make it. I understand most fail, but the adept traders were once beginners at one point. Is there really any hope?

 

[ILikeCCI]

I read this post just now, and I was wondering one thing.
What exactly does it take to preform well in the market? It seems like most advance traders don't expect beginners to make it. I understand most fail, but the adept traders were once beginners at one point. Is there really any hope?

Not day trading is a great way to improve your chances of making it, also only risking 1% on each trade.
Day trading amplifies the negative emotions by orders of magnitude, if you had about 4 losing trades in a row all @ 1% over just a few hours how are you going to feel? Would you feel like taking that fifth trade? I know I wouldn't.
Although I suppose you could go down to 0.5% or 0.25% risk for day trading, then you would be more likely to be able to take a string of losses in your stride.
But I much prefer end of day trading anyway because losing a couple of % over about a week is something I can take and feel OK about and I can really take my time over my planning and stalking of nice setups and just walk away.

 

[Freedomtrader2012]

Thanks for all replies they are much appreciated.

 

[Freedomtrader2012]

Some very good points for me to consider, thanks. Certainly understand the rationale of trading 1-2% of your account as a max with each trade however on an account with £20,000 how is a trade of approx £400 expected to return a profit? Surely this would require a huge price increase to return any profit at all? Buying/selling and SDRT costs will have such an impact. I am looking to trade UK Stocks only with no margin or leveraging.

 

[SimonTemplar]

I'd echo those who have said 'risk no more than 1%'. Money/risk management has to be a central part of one's trading plan, in my view, if one is to succeed in this business.

I would treat it like any other business: draft a detailed plan, covering everything from the nuts and bolts of your approach - including SL placement/management as well as how you identify setups - to some defined rules for your risk management. Psychology is, in my view, a tough aspect of this business, and the tighter your plan the more you coccoon yourself from the worst effects of this. How much exposure to the market are you happy having at any given moment? If having 5% on the table is something you are happy with, at 1% risk that would be five open trades (assuming untrailed SL levels). If you neglect this aspect of your trading plan, in my experience you increase the likelihood of making bad decisions when you hit your first pressure moment.

Say you have five open trades, then spot two five star setups. Your original five positions are all in a small amount of profit, and you had a couple of wins the week before, so you take the other two setups. Then the market bucks, and all seven trades stop out, leaving you 7% down on your account in a matter of minutes. A trading plan will hopefully either help you avoid drawdowns that take you too far out of your comfort zone, or will give you a plotted course out of that. When you take a hit, do you take a day or two off? Reduce risk on the next few trades? If so, by how much? For how long? Or do you just trade through, same risk as ever, because your backtesting/experience tell you that that is the most sensible course of action for your approach? Or any one of a number of other reactions?

This can be a psychological, emotional roller coaster, if you let it. In my view, the surest path to success is simply the mechanical execution of an effective strategy. The more detailed your trading plan, the more mechanical you can keep your trading, generally the more profitable you will be. If you find yourself having an inconsistent reaction to market variables, you will often find that you also have inconsistent trading results.

So with apologies for being preachy, I would start by drafting a detailed trading plan, then make sure that as you start trading you keep it updated. It will become second nature one day, but in the meantime I'd read it pretty regularly.

I'd echo the others who have said that I'd doubt you can support yourself from the proceeds of trading a £20k account, not least because the pressure to make an income would be likely to affect your trading decisions early on. But if you can find an alternative income, ringfence the £20k, then you should be able to trade that up to a size that can throw out a decent income.

I think that it is too easy for experienced traders to make this seem an impossible task to any newer trade, when as you have said we were all beginners once. This is a tough area to get into, trading takes a lot of work at the outset - but then that just makes it like any other career that offers this sort of reward. So I would go for it, but make sure that you have a tight trading plan, keep your trading mechanical and consistent, and don't expect to make a living from your trading right from the get go.

But I can't think of anything else that offers this much financial and lifestyle freedom without the need to work for anyone else and with no surrounding industry infrastructure to satisfy.

I would also add Forex to your trading plan, but that's just me..!

I hope that you found some of this of at least some use. If you make it work you'll be absolutely DELIGHTED with your decision to try trading!

ST

 

[timsk]

I read this post just now, and I was wondering one thing.
What exactly does it take to preform well in the market? It seems like most advance traders don't expect beginners to make it. I understand most fail, but the adept traders were once beginners at one point. Is there really any hope?

Hi ForexProdigee,
As Simon rightly points out in his post above - to become consistently profitable over the long haul takes time and effort. It's a business and needs to be treated as such. Most wannabe traders who open a spread betting account with £100 think they'll make a fortune based on on some ad' they've seen or the quagmires of brown sticky stuff that's smeared all over the net promising riches for ten minutes 'work' each day. I don't blame them - I was in this same group myself 10+ years ago! Once the newbie sees beyond the scams and the dross - they have two choices: drown their sorrows over a few pints in the pub and forget about trading - or radically revise their whole approach to the subject.

My guess is (and it is only a guess), if one was able to look at the stats of those who really applied themselves to this game and took it half way seriously, the failure rates would probably be in line with most other businesses. In fact, they'll be much, much better in so far as traders aren't saddled with most of the expensive trappings of conventional businesses such as premises, stock and marketing etc. Even so, there's still a lot of people who don't 'make it', but it's nothing like as many as the figures commonly banded about in the high nineties. As I say, that's just my opinion, I can't support it with any empirical evidence.

With regard to your question: "what exactly does it take to perform well in the market?" - this FAQ might shed some light: How Difficult is it to Trade?
Tim.

 

[the hare]

traders aren't saddled with most of the expensive trappings of conventional businesses such as premises, stock and marketing etc.
Tim.

Unless your Greg Secker, Mike Bagdady or the like. They have premises, stock, staff costs, and marketing. They also have considerable legal expenses......

Let the lulz commence..

 

[pboyles]

Hi Freedomtrader2012,
Welcome to T2W.

As a very broad rule of thumb, the general consensus would be to start off swing trading first and, if you do well, then try day trading. The key benefits are that you'll make fewer trades which will help with commissions and stamp duty and you'll have more time to consider the merits of each trade before hitting the buy/sell button. That said, it's horses for courses, no one can say for sure what is best for you.


This sticky will go a long way towards helping you answer this question: Essentials Of 'Risk & Money Management'


There are as many different answers to this as there are traders. Again, what works for you won't work for someone else. If your methodology enables you to enter trades with pin-point accuracy, such that if they don't go into profit straight way you close the trade - then you can set very tight stop losses. Typically, this is what many day traders try and do. Swing traders tend not to have such finely tuned entry criteria and require a little more wiggle room for the trade to 'breathe' - and set a wider stop. Here's an article that covers a few of the most common questions about stop losses: Stop Loss - Q&A


Again, there is no best really - just the one that provides what you require at a price you're willing to pay. Check out this FAQ: Can You Recommend a Data Feed, Charting Software & Broker?
Tim.

Timsk,

May I ask a simple question? In 2012 did you make more money trading than you would if you had taken a job in McDonalds? I ask because you seem to be giving people hope that if they read a few articles they'll be well in their way to success. Given that you are posting this sort of stuff I thought it only fair that you should state the extent of your own success.

Of course if you've made so much that your worried about the tax man getting you then I'll understand. Perhaps you can update us at a later date from Monaco when you are beyond the reach of HMRC.

 

[barryb]

Hi to all and a Happy New Year. I am researching to become a full time trader of UK Stocks with £20,000. Initially trying to decide whether to start as a day or swing trader.

I hope that you will be able to help answer my questions.

1) How do you decide the amount of each trade from the initial £20,000?

2) How do you choose where to set the stop loss on a trade?

3) What would be the best charting and live feed software to use?


Thank you for any responses as all are much appreciated.

As said before, going the private trader route; you'll need 3/4 years live experience at a minimum, you'll also probably have to blow up several small accounts and 1 medium to larger sized account, make daily sacrifices in your private and current career life, and preferably get some pointers off someone who's already achieved what you want to achieve. This is all while making no money to speak of from trading. Get through that without giving up, and you've probably got a good chance of succeeding.

 

[Freedomtrader2012]

I'd echo those who have said 'risk no more than 1%'. Money/risk management has to be a central part of one's trading plan, in my view, if one is to succeed in this business.

I would treat it like any other business: draft a detailed plan, covering everything from the nuts and bolts of your approach - including SL placement/management as well as how you identify setups - to some defined rules for your risk management. Psychology is, in my view, a tough aspect of this business, and the tighter your plan the more you coccoon yourself from the worst effects of this. How much exposure to the market are you happy having at any given moment? If having 5% on the table is something you are happy with, at 1% risk that would be five open trades (assuming untrailed SL levels). If you neglect this aspect of your trading plan, in my experience you increase the likelihood of making bad decisions when you hit your first pressure moment.

Say you have five open trades, then spot two five star setups. Your original five positions are all in a small amount of profit, and you had a couple of wins the week before, so you take the other two setups. Then the market bucks, and all seven trades stop out, leaving you 7% down on your account in a matter of minutes. A trading plan will hopefully either help you avoid drawdowns that take you too far out of your comfort zone, or will give you a plotted course out of that. When you take a hit, do you take a day or two off? Reduce risk on the next few trades? If so, by how much? For how long? Or do you just trade through, same risk as ever, because your backtesting/experience tell you that that is the most sensible course of action for your approach? Or any one of a number of other reactions?

This can be a psychological, emotional roller coaster, if you let it. In my view, the surest path to success is simply the mechanical execution of an effective strategy. The more detailed your trading plan, the more mechanical you can keep your trading, generally the more profitable you will be. If you find yourself having an inconsistent reaction to market variables, you will often find that you also have inconsistent trading results.

So with apologies for being preachy, I would start by drafting a detailed trading plan, then make sure that as you start trading you keep it updated. It will become second nature one day, but in the meantime I'd read it pretty regularly.

I'd echo the others who have said that I'd doubt you can support yourself from the proceeds of trading a £20k account, not least because the pressure to make an income would be likely to affect your trading decisions early on. But if you can find an alternative income, ringfence the £20k, then you should be able to trade that up to a size that can throw out a decent income.

I think that it is too easy for experienced traders to make this seem an impossible task to any newer trade, when as you have said we were all beginners once. This is a tough area to get into, trading takes a lot of work at the outset - but then that just makes it like any other career that offers this sort of reward. So I would go for it, but make sure that you have a tight trading plan, keep your trading mechanical and consistent, and don't expect to make a living from your trading right from the get go.

But I can't think of anything else that offers this much financial and lifestyle freedom without the need to work for anyone else and with no surrounding industry infrastructure to satisfy.

I would also add Forex to your trading plan, but that's just me..!

I hope that you found some of this of at least some use. If you make it work you'll be absolutely DELIGHTED with your decision to try trading!

ST

Thanks for your reply Simon.

I am trying to learn/research/soak up as much info as possible at this time and understand the importance of money management. Reading to risk from 1-5% of capital per trade (5% to make a meaningful amount per trade as £20,000 is a small trading account). Clearly apologies for my inexperience showing but the share price would need to rise significantly if trading on 2% of capital per trade, to just break even? Only I can decide the "right" amount to risk per trade and I will work on a trading plan that suits my attitude to risk and aims. Still working on how you even identify setups to begin with however understand that I am at the very beginning of a long term learning curve.

To explain the full picture I will have approx £62,000 in total, of which I will allocate £20,000 to £30,000 in a trading account. There may also be another source of income but not confirmed that yet.